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Wednesday 10.22.2014

Warren Buffett loses $2 billion in two days
Buffett is known for shunning the quick buck and focusing on the long-term performance of his investments. He'd best not change that this week. His Berkshire Hathaway (BRKB) investment house holds big pieces of Coke and IBM, both of which have taken a drubbing in the past two days. He took a $1 billion hit on Coke (KO), which fizzled 6% on Tuesday after the company reported earnings that didn't live up to expectations. Even worse, Coke said it doesn't expect a much better 2015. Coke is one of Buffett's largest investments. He holds 400 million shares and his son Howard sits on the beverage company's board. And he likes the products too. Buffett is often seen enjoying Cherry Coke. The pain started on Monday for Buffett. IBM (IBM, Tech30), another top holding, lost $1.3 billion as the stock plunged. The company is looking for a reboot after reporting disappointing earnings and shedding its chip unit at a major loss. The stock dropped 7% on Monday after then news was announced and slid again on Tuesday.

Drowning In Oil Again
For 4 years, the oil price (Brent) has been range bound between $90 and $130 per barrel (Figure 2). This is where it settled after the convulsions of the $148 per barrel peak in 2008 followed by the financial crash. Recently it has dipped to around the $80 mark and although we have seen a slight recovery many analysts believe it could break lower. With the world in turmoil, including OPEC producers Iraq and Libya ± Iran, and Russia cast out by the West, one might expect the oil price to be quite perky. But the opposite is true. This post takes a look at some of the key production indicators from OPEC, Europe, N America and Russia. But I believe one needs to look no further than Figure 1 to understand the weakness in the oil price. Rampant production in the USA, the world’s largest oil producer and importer, means that competition for supplies on the international markets is weakening. The world is once again drowning in oil.

Another U.S. city protesting influx of refugees
The mayor of Athens, Georgia, has joined a growing chorus of mayors across the U.S. who are concerned about the federal government’s resettlement of foreign refugees in their cities and the resulting drain on public services. The refugees come from war-torn countries in Africa, Asia and the Middle East and require a plethora of government services to help them overcome language and cultural barriers. They have little or no job skills that translate into trades in a modern economy such as the U.S. Athens has been targeted as the latest refugee city of destination by New York City-based International Rescue Committee Inc., which provides resettlement services for the federal government on a contract basis. IRC wants to transplant 150 refugees who are fleeing Iraq, Syria, the Democratic Republic of Congo and Burma. Athens Mayor Nancy Denson recently sent a letter asking the IRC to delay the resettlement until it can put together a “formal refugee integration plan.”

Officials warn 500 million financial records hacked
Federal officials warned companies Monday that hackers have stolen more than 500 million financial records over the past 12 months, essentially breaking into banks without ever entering a building. "We’re in a day when a person can commit about 15,000 bank robberies sitting in their basement," said Robert Anderson, executive assistant director of the FBI’s Criminal Cyber Response and Services Branch. The U.S. financial sector is one of the most targeted in the world, FBI and Secret Service officials told business leaders at a cybersecurity event organized by the Financial Services Roundtable. The event came in the wake of mass hacking attacks against Target, Home Depot, JPMorgan Chase and other financial institutions. "You’re going to be hacked," Joseph Demarest, assistant director of the FBI’s cyberdivision, told the business leaders. "Have a plan."

Michael Snyder- Deflation then Inflation Through the Roof

Traffic costs average U.S. household $1,700 a year
We all know time is wasted sitting in rush hour traffic, but how much do traffic jams hurt your pocketbook? A new study by INRIX and the Centre for Economics and Business Research suggests it costs a lot. The study concluded that Americans wasted $124 billion sitting in traffic in 2013 and traffic cost the average household $1,700 a year. Currently, INRIX estimates the average American wastes 111 hours per year in traffic. Those expenses are based on direct costs like people's wasted time and fuel, and indirect factors like the higher price of goods that congestion causes, according to INRIX, a Kirkland, Wash.-based company that provides traffic intelligence software. Los Angeles is the U.S. city with the worst traffic. L.A. accounted for nearly 20% of the total cost of congestion in the U.S. last year.

Special Treatment for Small Eurozone Banks
Germany secured a partial victory in its bid to shield its smaller banks from paying fees to the euro area’s new crisis fund, as the European Commission set a cap on the contributions. In the system laid out today by the commission, the European Union’s (EU's) executive arm, larger banks will pay the lion’s share of levies to fill the planned 55 billion-euro (US$70 billion) common resolution fund based on their size and risk-taking. Smaller banks will pay according to a scale of flat fees. “These new rules pave the way for an operational Single Resolution Fund,” Michel Barnier, the EU’s financial-services chief, said by email. “The approach chosen is fair, as each bank will contribute in proportion to its size and risk profile. It is also proportionate, as the smallest banks have their own adjusted regime of contributions.”

Arizona Dem Gov Candidate Had House Foreclosed
Arizona property records show that a condominium purchased by Democratic gubernatorial candidate Fred DuVal was foreclosed less than a decade after it was bought. DuVal, along with his parents, Merlin and Carol DuVal, purchased a unit in a Phoenix, Arizona, condominium complex in October 1983, according to County of Maricopa property records. Documents show that the family took on debt of over $44,000 for the purchase. Just seven years later in 1990, the DuVals received a notice that the property was being foreclosed after they failed to make their mortgage payments. On Dec. 21, 1991, the DuVals were notified that the property would be sold at a public foreclosure auction to the highest bidder. They still owed $41,832.51 from the initial $44,000 for the property, according to a copy of the notice of trustee’s sale obtained by the Free Beacon.

Why Airfares Are Rising Despite Lower Fuel Costs
Airlines’ profits have been, yes, taking off this year, and the industry doesn’t seem inclined to change that flight path. The big carriers announced a $4 per ticket price increase Tuesday, even as falling jet fuel prices were delivering an unbudgeted bonus. Although it’s not unusual for a carrier’s announced price increase to get withdrawn when a competitor decides not to play ball, there doesn’t seem to be much resistance to Tuesday’s news. Were you expecting the carriers to have mercy on you, given that flights are stuffed, there are upcharges for everything from baggage to overhead space to boarding early, and passengers are staging midair cage fights over knee room? Get real. As one airline consultant told me about a year ago, the semi-romantics who used to run the airlines are long gone. Instead, the folks in charge today play hardball. They are running a business, not their advertising agency’s image of air travel.

Federal Government Awash in Waste: Rabbit Massages, Paid Vacations, Billions Lost to Fraud
Sen. Tom Coburn (R-Okla.) on Wednesday released a grim report that finds the federal government guilty of wasting billions of dollars of taxpayer money each year — in many cases, the report argues, because federal agencies have completely lost sight of their missions. Coburn’s fifth Wastebook Report will be his last as a sitting senator, as he will retire at the end of the current Congress. But he’ll leave after handing Congress another blueprint on how to save money, if anyone cares to implement it. “Washington politicians are more focused on their own political futures than the future of our country,” Coburn wrote in the introduction to the report. “And with no one watching over the vast bureaucracy, the problem again isn’t just what Washington isn’t doing, but what it is doing.” Coburn noted that as the world becomes more dangerous and chaotic — due to Russia’s military aggression...

(What’s Left of) Our Economy: Don’t Forget! U.S. Manufacturing Output Could be Overcounted!
I’m chagrined to admit that, in the rush to blog in a timely way about economic data, I’ve lost sight of a big orange flag that needs to be waved regarding the U.S. Government’s manufacturing production statistics. These data deserve special importance, in my opinion, both because of industry’s special importance in creating a genuinely durable American prosperity, and because they represent a gauge of manufacturing’s health that should be relatively uncontroversial (unlike, for example, manufacturing employment, which generates heated debate over whether it’s mainly been falling for worrisome reasons, like declining competitiveness, or ultimately heartening reasons, like productivity growth). But that doesn’t mean that the manufacturing output figures put out each month by the Federal Reserve are problem free. In recent years, researchers have marshaled impressive evidence that...

10 Things About The U.S. News Media That They Do Not Want You To Know
Do you trust the news media? Do you believe that the information that they are giving you is true and accurate? If you answered yes to either of those questions, that places you in a steadily shrinking minority. Yes, on average Americans watch approximately 153 hours of television a month, but for their news they are increasingly turning to alternative sources of information such as this website. Big news channels such as CNN, MSNBC and Fox News are losing hordes of viewers, and they are desperately searching for answers. Things have gotten so bad at CNN that they have been forced to lay off hundreds of workers. The mainstream media is slowly dying, but they will never admit it. They are still convinced that they can find some way to turn this around and regain the trust of the American people. But it simply is not going to happen. The following are 10 things about the U.S. news media that they do not want you to know...

Texas hospital exec: 'We fell short' with Ebola...

Wait, Americans Spend How Much on Halloween?
U.S. retail sales were disappointing in September, worrying analysts that consumers may be feeling stretched or cautious as the biggest shopping season of the year rolls around. Some retailers make up as much as 30 percent of their yearly sales numbers from October to December. Kicking off the end of year spending season is Halloween. Just how much do Americans spend on trick-or-treating and other Halloween festivities? The National Retail Federation (NRF) forecasts total Halloween spending—including candy, costumes, and decorations—to come in at $7.4 billion this year. Halloween candy alone has run up a $2 billion tab every Halloween for the past three years, though the candy industry says that bad weather can lower the numbers slightly. "We are predicting a slight bump in Halloween confectionery sales this year (1.9 percent)," said Jenn Ellek of the National Confectioners Association.

The credit crunch for American homebuyers is unlikely to loosen anytime soon
It has been hard for US homebuyers to get a mortgage lately, but there are signs that this might change. Eventually. Banks will have less reason to fear the that the government will demand they buy back loans that go sour, the country’s top housing finance official announced yesterday. Absent misrepresentations or lapses in legal title, officials won’t force lenders to repurchase dud loans that they sell to mortgage-finance giants Fannie Mae and Freddie Mac, which between them guarantee two-thirds of US home loans. That’s according to Mel Watt, the director of the Federal Housing Finance Agency, who was speaking at a meeting for bankers in Las Vegas. “We know that this issue has contributed to lenders imposing credit overlays that drive up the cost of lending,” Watt said, according to a prepared text of his speech. The so-called overlays also “restrict lending to borrowers with less than perfect credit scores or with less conventional financial situations,” he added.

McDonald's CEO acknowledges image problems after tough results
McDonald's Corp (MCD.N) Chief Executive Officer Don Thompson owned up to some corporate image problems on Tuesday after it posted a nearly one-third drop in quarterly profit and warned that its global restaurant sales would fall again this month. Stock in the fast-food chain, which Thompson conceded is sometimes seen as little more than "a manufacturing plant," was down 0.6 percent at $91 in afternoon trading after reporting a 30 percent fall in third-quarter net income to $1.07 billion and traffic declines in every major region. Thompson, who has been CEO for just over two years of his 25-year career at McDonald's, said the company that now serves some 70 million customers a day worldwide has at various times during its history faced questions about whether it is still relevant to consumers, who are now craving more fresh, unprocessed food. "McDonald's is in the business of satisfying customers and that will never fall out of favor.

Ukraine elections likely to fuel tension between Kyiv and Moscow

Demand Jumps for Protective Equipment as Ebola Cases Spur Hospitals Into Action
At manufacturing plants in North Carolina, Mexico and Honduras, the machines are standing ready. The plants, which make gowns and other protective equipment that medical staff need to treat Ebola patients, have hired extra workers to make sure the machines can run all night. Some already are. “We are not at our maximum capacity yet,” said Judson Boothe, the senior director of products supply for Halyard Health, a unit of Kimberly-Clark that operates the plants (it is soon to be spun off from its parent). “But we’re getting closer every day,” he said, adding that Halyard did hit its cap during the SARS outbreak. Major manufacturers of personal protective equipment say they have already experienced a significant spike in demand for their products, as hospitals across the country brace for potential new cases of Ebola, which has already killed more than 4,500 people.

Chinese and Indian gold buyers back in market in a big way
What has been particularly strange about the gold market over the past two years is that the stronger the physical demand appearing for gold, the weaker the gold price has tended to get. In the past few months, the gold price has fallen back from around $1,340 down at one time to $1,190 and now hovering back seemingly trying to breach $1,250 on the upside again, yet by all accounts demand in the two biggest consuming nations has been soaring and they are, between them, taking in virtually everything the world’s gold mines can produce. The two countries are India and China. A mild relaxation of some of the import controls put on gold in the former saw gold imports rise to around 95 tonnes in September, while the weekly withdrawal statistics from the Shanghai Gold Exchange show that gold demand has latterly also picked up extremely well in China after a good start to the year, but then a marked downturn from March to August.

New Warning From the FBI: You Will Be Hacked

Apple warns of new iCloud threat
Apple has posted a new security warning for users of its iCloud online storage service amid reports of a concerted effort to steal passwords and other data from people who use the popular service in China. “We’re aware of intermittent organised network attacks using insecure certificates to obtain user information, and we take this very seriously,” the company said in a post on Tuesday on its support website. The post said Apple’s own servers had not been compromised. Apple’s post did not mention China or provide any details on the attacks. But it was reported on Tuesday that some Chinese internet users have begun seeing warnings that indicate they had been diverted to an unauthorised website when they attempted to sign into their iCloud accounts. That kind of diversion, known to computer security experts as a “man in the middle” attack, could allow a third party to copy and steal the passwords that users enter when they think they are signing into Apple’s service.

Ebola is an Economic Catastrophe
Everyone has it wrong. Americans are frightened to death of the medical implications of Ebola- as well they should be. I’ve never in my lifetime seen a disease that has infected and killed so many stock market crash. Unfortunately I might have also been the first American to experience damage from Ebola to my “personal economy” 2 weeks ago. As a branding expert, I speak at business conventions and conferences all over the world. I had already been booked for weeks as the keynote speaker for an event in Dallas in early November. Then came the announcement that Thomas Duncan was being treated for Ebola in a Dallas hospital. Within days of this announcement, I got the phone call that the event I was speaking at was cancelled, because so many attendees refused to travel to Dallas. Many who cancelled called it “the epicenter of Ebola in the United States.” They were all frightened that Ebola could spread in Dallas like wildfire by November.

Detroit to make $25M from scrapping its own copper
Detroit is turning to a source to make money post-bankruptcy: Its own supplies of copper. The city is privatizing and decommissioning its electricity delivery services, and over the next six years expects to make at least $25 million from the sale of copper in underground and overhead electricity lines, a top financial consultant to the city testified this morning in Detroit's bankruptcy proceedings. The sale of copper would represent a turnabout for Detroit, for years plagued by scrappers who steal copper from public lighting and electricity lines. The city estimated it was losing as much as $1 million a year because of illegal copper scrapping. Detroit owns an estimate 13.5 million pounds of copper, the consultant, Guarav Malhotra of Ernst & Young, said in confirmation hearings this morning before U.S. Bankruptcy Judge Steven Rhodes. The city ultimately could fetch as much as $40 million from the copper, Malhotra said.

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