International Forecaster Weekly

The Size And Strength of Banks Is Detrimental

Taxes and bonds to pay for retirements, as well as all the debt and mismanagement, Apple goes offshore to hide its riches from paying taxes,  Europe in a new age of austerity, Banks exerting more power than ever, manufacturing cooling as investment eases.

Bob Chapman | May 2, 2012

Real estate investors competing to buy Manhattan apartment buildings have sent prices to record highs as rental demand surges, reducing yields on the properties to the lowest in more than six years.  The capitalization rate, a measure of investment return that declines as prices rise, averaged 4.4% for Manhattan multifamily buildings in first three months of this year…  ‘It’s the strongest of all asset classes,’ said Doug Harmon, senior managing director at Eastdil Secured LLC… ‘There is still plenty of room to run on rents, and I see absolutely no reason why this action will or should stop anytime soon.’”

“Illinois residents, whose income taxes rose by a record last year to help close a budget deficit, are paying the price again for the state’s fiscal mismanagement.  With its pile of unpaid bills growing about 30% this year, the weakest pension-funding ratio among states and falling federal aid, Illinois and its municipalities are paying a penalty above AAA debt that’s twice their five-year average.  Illinois plans to issue $1.8 billion of debt as soon as next week…”

“U.S. municipalities from California to Florida are selling the most debt in three years to pay for their workers’ retirements in a bet that investment returns will exceed borrowing costs.  Fort Lauderdale, Florida, is among issuers considering a sale this year, following an offer by Pasadena, California, last month. Illinois borrowed a combined $7.2 billion in 2010 and 2011. The governments are placing taxpayers at risk by papering over pension deficits with taxable securities. The strategy can backfire if the proceeds don’t earn enough to pay off the bonds.

Business activity in the U.S. expanded in April at the slowest pace since November 2009, a sign that manufacturing may be cooling as business investment eases.

The Institute for Supply Management-Chicago Inc. said today its barometer decreased to 56.2 during the month, lower than the most pessimistic forecast in a Bloomberg News survey, from 62.2 in March. Readings greater than 50 signal growth. Economists projected the gauge would fall to 60, according to the median of 55 estimates in the survey.

A slowdown in demand may prompt companies in the U.S. to limit the rate of inventory accumulation, while exports to Europe and Asia may cool. At the same time, auto purchases may prevent a prolonged deterioration in the industry that spurred the recovery that began almost three years ago.

“We could see manufacturing slow a notch,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. Fewer inventories “will likely cause production to slow,” he said.

            A published report says Apple Inc. uses subsidiaries in Ireland, the Netherlands and other low-tax nations as part of a strategy that enables the technology giant to cut its global tax bill by billions of dollars every year.

The New York Times on Sunday outlined legal methods used by Cupertino, California-based Apple to avoid paying billions of dollars in federal and state taxes.

One approach highlighted in the report: Even though the company is based in California, Apple has set up a small office in Reno, Nevada, to collect and invest its profits. The corporate tax rate in Nevada is zero. In California, it's 8.84 per cent.

While many major corporations try to reduce their tax bills, technology companies like Apple, Google Inc., Microsoft Corp. and others have more options to do so.

That's because some of their revenue comes from digital products or royalties on patents, which makes it easier for them to move profits to tax-friendly states or countries, the Times said.

In contrast, it's tougher to shift the collection of profits from the sale of a physical product — like groceries or a car — to a tax-friendly haven.

The 71 technology companies in the S&P 500, including Apple, Google, Yahoo Inc. and Dell Inc., reported paying global cash taxes over the past two years at a rate that's, on average, one-third less than other S&P 500 companies, the Times said.

Apple has legally allocated about 70 per cent of its profits overseas, where tax rates are often much lower than in the U.S., according to company filings.

The Times cites a study by former Treasury Department economist Martin A. Sullivan that estimates Apple's federal tax bill would have been $2.4 billion higher last year without such tactics.

The newspaper says Apple paid $3.3 billion in cash taxes globally on $34.2 billion in profits last year. That's a tax rate of 9.8 per cent.

In a statement, Apple told the Times that it has complied with all laws and accounting rules, and says that its U.S. operations generated nearly $5 billion in federal and state income taxes in the first half of fiscal 2012.

Wall Street analysts predict Apple could earn up to $46.9 billion in its current fiscal year, according to FactSet.

The Yale economics professor…“Squawk Box Europe” that the world is in a “new age of austerity.”

“Quantitative easing is not as prominent a policy as austerity ... the effect of austerity is not crystal clear because it depends how people react to it,” Shiller said. “It might help, but I don’t know if it’s going to overwhelm the general mood of austerity which is affecting the housing market.”

 

Bob Chapman - Pastor Butch Paugh - April 25, 2012

http://www.youtube.com/watch?v=ZQ5wu9X6uPs&feature=email

 

Bob Chapman - The Power Hour - 30 Apr 2012

http://www.youtube.com/watch?v=rodQcyp0JuE&feature=email

 

Bob Chapman - Radio Liberty - 30 Apr 2012

http://www.youtube.com/watch?v=Vxx00tIs1Qo&feature=email

 

Bob Chapman - USAprepares (1/2) - May 1, 2012

http://www.youtube.com/watch?v=9AD6uxeLgLc&feature=email

 

Bob Chapman - USAprepares (2/2) - May 1, 2012

http://www.youtube.com/watch?v=Pa9yjBwbnHU&feature=youtu.be

 

[CPI & Core, prepare for blast off!]

Real estate investors competing to buy Manhattan apartment buildings have sent prices to record highs as rental demand surges, reducing yields on the properties to the lowest in more than six years.

The capitalization rate, a measure of investment return that declines as prices rise, averaged 4.4 percent for Manhattan multifamily buildings in first three months of this year, the lowest since the third quarter of 2005, according to New York- based data firm Real Capital Analytics Inc.

Now that Kevin Warsh is no longer a Fed official, he can be more honest about the oligopoly of big zombie banks. Warsh opined last week that the elites are keeping the big banks afloat to the detriment of the country, as well as small and big banks.

The former Fed governor also implies the big banks are being less that forthright about their condition when he asserted that big banks should provide more disclosures.

The NY Times’ Gretchen Morgenson: Big banks are bigger than ever, and they exert enormous power over regulators and lawmakers. Increasingly, smaller institutions can’t compete.

So it was refreshing last week to hear Kevin M. Warsh, a former Fed governor, speak candidly and critically about the government backing that continues to support our largest banks. Equally refreshing were his prescriptions for eliminating the too-big-to-fail problem.

“We cannot have a durable, competitive, dynamic banking system that facilitates economic growth if policy protects the franchises of oligopolies atop the financial sector,” Mr. Warsh told an audience at the Stanford Law School on Wednesday night. “Those ‘interconnected’ firms that find themselves dependent on implicit government support do not serve our economy’s interest.” …

Mr. Warsh does not prescribe breaking up giant institutions. Rather, he says their disclosures must be subject to new and ramped-up transparency requirements so investors can differentiate strength from weakness… “The policy has favored large global banks and disfavored small and medium-sized banks,” he said. “So I’m not surprised that real economic and job growth that should come from these enterprises is still lacking. Our failure to have a dynamic competitive banking system is a partial explanation for the weakness we are seeing.

All that excess liquidity that the Fed keeps producing must flow somewhere. With bonds approaching mathematical absolute limits investors will increasingly buy ‘things’ instead of paper.

Rasmussen” Majority Says GM Ownership Should Have Been Left to Private Sector. 56% of American Adults believe it would have been better if GM had used the regular bankruptcy procedures and left ownership in the private sector. Thirty-two percent (32%) believe it was appropriate for the government to use the special bankruptcy process in exchange for bailout money. Twelve percent (12%) are not sure…

It’s now been nearly ten months since the Dow Jones Transportation Average hit its bull-market high. Its persistent weakness stands in marked contrast to the behavior of the better-known indices, such as the Dow Jones Industrial Average and the S&P 500 Index — each of which in early April hit a new bullmarket high and is now close to hitting yet another.

As a result, the Transports are now 7% below their bull-market high set last July 7…