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Monday 02.16.2015

Hackers Steal Up To $1 Billion From Banks
A hacking ring has stolen up to $1 billion from banks around the world in what would be one of the biggest banking breaches known, a cybersecurity firm says in a report scheduled to be delivered Monday. The hackers have been active since at least the end of 2013 and infiltrated more than 100 banks in 30 countries, according to Russian security company Kaspersky Lab. After gaining access to banks' computers through phishing schemes and other methods, they lurk for months to learn the banks' systems, taking screen shots and even video of employees using their computers, the company says. Once the hackers become familiar with the banks' operations, they use that knowledge to steal money without raising suspicions, programming ATMs to dispense money at specific times or setting up fake accounts and transferring money into them, according to Kaspersky. The report is set to be presented Monday at a security conference in Cancun, Mexico. It was first reported by The New York Times.

Could Oil Still Drop To $20?
Last week analysts at Citigroup slashed their forecast for crude oil to $20 a barrel before prices begin to recover. They see prices dropping to that point by the end of the first quarter or the beginning of the second quarter. The forecast is based on two points: the amount of crude oil in storage and the end of OPEC’s role as the so-called swing supplier. WTI crude oil for March delivery closed at around $44 a barrel on January 29th and at $52.65 this past Friday, about where it traded before Citi’s forecast was published. Crude dipped to around $49 last Wednesday before climbing back up on Thursday and Friday. U.S. crude in storage remains at an 80-year high and there have been reports that foreign producers have been leasing tankers to sail around in circles with cargoes of crude waiting for the price to rise. No one, apparently, wants to be the first to cut production, preferring instead to take a “wait-and-see” approach.

Coming soon: A change in who gets overtime pay
The move could affect millions of workers. It is aimed at addressing what the White House says is an erosion of the rules that established the 40-hour workweek -- a "linchpin of the middle class." The way it works now, companies can avoid paying OT to any full-time workers making as little as $23,660 -- or $455 a week -- by classifying them as "exempt" and paying them as salaried employees, rather than hourly. That means when they don't get overtime pay even if they work more than 40 hours a week. And it's not just managers in lower-paid jobs in this bucket. Exempt positions also include administrators and sales employees, among others. The expectation among policy experts is that the Department of Labor will propose raising the $23,660 income threshold, most likely to somewhere between $42,000 and $52,000. The agency may also amend how "exempt" duties are determined. What advocates want: The liberal Economic Policy Institute estimates that 3.5 million more workers would become eligible...

John Williams-Odds High Hyperinflation Begins in 2015

Japan comes out of recession but growth still disappoints
Japan came out of recession in the fourth quarter of last year, but the world's third largest economy grew at a slower than expected pace. The economy expanded by an annualised 2.2% in the three months to December in a preliminary reading, compared to forecasts for a 3.7% increase. Japan's growth in the fourth quarter comes after the economy contracted for the two previous quarters. Japan has been recovering from a sales tax hike, which dampened spending. The economy grew 0.6% in the period from the previous quarter, but that also fell below forecasts of 0.9% growth. The data showed a fragile recovery in the country where consumer sentiment remains soft even after Prime Minister Shinzo Abe delayed a second increase to the sales tax that was scheduled for October this year. Private consumption, which accounts for about 60% of the economy, increased 0.3% in the fourth quarter, less than the 0.7% rise expected by economists.

ISIS Video Purports to Show Execution of Christian Men in Libya
A video released today by a group claiming allegiance to ISIS purports to show the beheading of a group of Coptic Christian men who were kidnapped in Libya last month. The horrific 5-minute video is evidence of ISIS' continued expansion from the terrorist group's "caliphate" from Syria and Iraq into neighboring regions. The group, Tripoli Province, claimed it had kidnapped the men and published three pictures of them on January 12. In the video, a group of men in orange jumpsuits are led along a beach, each accompanied by a masked militant. As the men in the jumpsuits kneel, one of the militants speaks to the camera in English, and then all of the kneeling men are beheaded. After the release of the video, Egyptian President Abdel Fattah el-Sissi banned all travel by Egyptian citizens to Libya, promised to evacuate all Egyptians who are currently in the country. He also said he would send his foreign minister to New York, calling for an emergency U.N. Security Council meeting...

Is There an Auto Bubble?
For all the progress the U.S. economy has been making, a nagging question comes up from time to time: Might the growth be a bit too dependent on credit-fueled auto sales? Over the past several years, auto loans have been playing a role reminiscent of mortgages in the last U.S. economic expansion. The economists Atif Mian and Amir Sufi have noted, for example, that auto lending has been rising most sharply in the same U.S. zip codes that experienced the highest default rates during the mortgage bust -- and that the lending appears to be having as powerful an effect on auto sales as mortgage credit did on appliances, furniture and home improvement before the 2008 recession. So how big of a deal might this be? The latest retail sales data from the Census Bureau offer a clue: As of January, automobiles and other motor vehicles accounted for 20.5 percent of total retail sales. That's up from 16.6 percent when the economy hit bottom in mid-2009, but still below the level that prevailed in the early 2000s.

Study: 45,000 suicides each year can be tied to unemployment
One out of every five suicides in the world can be associated with unemployment, according to a new study published in The Lancet Psychiatry, via CBS DC. The study, which was funded by the University of Zurich, analyzed mortality data from the World Health Organization in 63 countries from 2000 to 2011. Of the approximately 233,000 suicides examined for each year, around 45,000, or 20%, were linked to unemployment, the study shows. What's more is the study found that there was an uptick in suicides following the 2008 financial crisis. In 2007, there were 41,148 suicides associated with unemployment. For comparison, in 2009, there were 46,131 suicides tied to unemployment–an increase of 4,983 following the economic downturn. That said, there needs to be an emphasis on prevention, especially during period of economic decline, the study noted. "This finding means that there is a continuous need to focus on preventing suicides, even more so in economically prosperous...

Feds may open arctic Alaska to drillers
The U.S. Interior Department said it's closer to opening the Chukchi Sea off the Alaskan coast to energy explorers after a lengthy court battle. The federal government published its final environmental impact statement on a lease plan first unveiled in 2008. The lease was tied in up the court system amid complaints about the extent of environmental vetting. "We remain committed to taking a thoughtful and balanced approach to oil and gas leasing and exploration in this unique, sensitive and often challenging environment," Interior Secretary Sally Jewell said in a statement. The U.S. 9th Circuit Court of Appeals in San Francisco ruled early last year the Interior Department did not properly evaluate the scale of oil production that could result in the Chukchi Sea when it sold more than $2.6 billion in development leases in the environmentally sensitive area in 2008. The ruling stemmed from a lawsuit challenging the leases filed by a coalition of environmental and Alaska Native groups.

Thousands in Greece rally in solidarity with government

Consumers' View of Economy Slips From 11-Year High
U.S. consumer sentiment unexpectedly fell in February from an 11-year high amid worries over slowing economic growth, suggesting a recent weakness in spending might last for a while. The ebb in sentiment came despite strong job gains over the last three months, signs of an acceleration in wage growth as well as cheaper gasoline prices, factors that economists had expected would buoy consumer spending in the months ahead. "As it stands, the pullback in confidence, along with the early year decline in retail sales, hints of slower consumer spending growth in the first quarter," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. The University of Michigan said Friday its consumer sentiment index slipped to 93.6 in early February from a reading of 98.1 in January. Still, the index was at the second highest level since January 2007. Economists had expected the sentiment index to hold steady. Households early this month were less optimistic about current economic conditions as well...

Is Gold’s Pullback Another Buying Opportunity?
There are reasons in the technical charts, in the fundamentals, and in investor sentiment, to believe gold is ready for at least a tradable bear market rally. In a January column, I noted that gold plunged 48% from its record high above $1,900 an ounce in 2011, to its low late last year, and was one of last year’s worst performers, down 15% for the year. Not surprisingly, that had investors very bearish on gold’s prospects. Bullion Vault tracks online investor buying and selling of gold via its Gold Investor Index. It reports, “Gold investing sentiment fell to a five-year low among private individuals as 2014 ended”. We all know the history of investor sentiment, excessive bullishness and confidence at market tops, and excessive bearishness and fear at market lows. The problem is that extremes of sentiment only indicate there is potential for a change in market direction. There is no way of knowing what will constitute the ultimate level of either bullishness or bearishness in each cycle.

An Important Lesson About Banking From the Panic of 1873
The cliche that "offense wins games, but defense wins championships" is just as applicable to banks as it is to sports. This follows from the fact that in order to maximize returns over multiple credit cycles, it isn't enough that a bank avoids making mistakes itself; it must also protect itself from the errors of others. While you can see this by looking at any banking panic of the past two centuries, the Panic of 1873, which incited an economic depression lasting twice as long as the Great Depression of the 1930s, is particularly revealing on this point. To an observer today, the early 1870s wouldn't be entirely unfamiliar. Like the Internet bubble of the late 1990s, or the housing bubble prior to the financial crisis of 2008-2009, the United States at the time found itself in the midst of a surge in economic activity fueled by the furious expansion of railroads. At the helm were some of America's greatest industrial magnates. Instead of Mark Zuckerberg, we had Cornelius Vanderbilt.

Department of Homeland Security Facing Shutdown
House Speaker John Boehner has announced that the Department of Homeland Security may be facing a shutdown as soon as the end of the month. Democrats and Republicans are blaming each other if the department shuts down due to a dispute over its budget. The debate over the budget is caught in the balance of a larger conflict over President Obama’s immigration procedures. A bill has been passed in the House of Representatives that would extend funding through September 30. It also contains a controversial clause that would overturn Obama’s policies on the deportation of illegal immigrants. Although most Republicans in the Senate are in favor of repealing the president’s immigration policies, Democrats have been able to block further discussion on the bill in the Senate. Boehner told Fox News Sunday that the House had done what it set out to do when it passed the bill. However, Democrats are calling for a “clean” version of the bill, without any language regarding immigration.

Will quantitative easing work?

With port talks gridlocked, White House move ramps up pressure for a deal
With idled cargo ships piling up along the coastline, President Obama ordered his labor secretary to California to try to head off a costly shutdown of 29 West Coast ports. Obama dispatched Tom Perez on Saturday to jump-start stalled labor talks between shipping companies and the dockworkers' union. The move ramps up pressure to resolve a dispute that stranded tens of thousands of containers on cargo ships over the holiday weekend. The Los Angeles and Long Beach ports account for some 40% of the nation's incoming container cargo, with $1 billion in goods moving through daily. A prolonged shutdown could hobble some Southland businesses and ripple across the U.S. economy. On Saturday morning, 32 massive ships were anchored outside the ports, unable to unload thousands of cargo containers filled with auto parts, electronics and clothes destined for store shelves across the country. "Any company that imports supplies, inventory or parts is going to feel it,"...

John McCain: Don't handcuff president
Sen. John McCain said Sunday he opposes any ISIL war resolution that puts limits on the power of the president, saying on “Meet the Press” that such restrictions were “unconstitutional.” “To restrain him in our authorization of him taking military action, I think, frankly, is unconstitutional and eventually leads to 535 commanders in chief,” the Arizona Republican told host Chuck Todd. McCain’s remarks highlight the delicate line the Obama administration has been walking in developing and selling an authorization of military power against the Islamic State of Iraq and the Levant, between those who fear Congress would be granting President Barack Obama too much power and those who fear Congress would be improperly handcuffing the president. On ABC’s “This Week,” Rep. Adam Schiff (D-Calif.) spoke for the former group, saying it was “very important to not write another blank check.” “This authorization goes beyond the term of this president — we don’t know who the next president will be...

Apple studies self-driving car, auto industry source says
Technology giant Apple is looking beyond mobile devices to learn how to make a self-driving electric car, and is talking to experts at carmakers and automotive suppliers, a senior auto industry source familiar with the discussions said on Saturday. The Cupertino, California-based maker of phones, computers and, soon, watches is exploring how to make an entire vehicle, not just designing automotive software or individual components, the auto industry source said. "They don't appear to want a lot of help from carmakers," said the source, who declined to be named. Apple is gathering advice on parts and production methods, focusing on electric and connected-car technologies, while studying the potential for automated driving, the source said. "Fully automated driving is an evolution. Carmakers will slowly build the market for autonomous cars by first releasing connected and partially automated cars," the auto industry source said. "Apple is interested in all the potential ways you can evolve the car...

U.S. boots on the ground to fight ISIS?

David Stockman: The Global Economy Has Entered The Crack-Up Phase
Few people understand the global economy and its (mis)management better than David Stockman -- former director of the OMB under President Reagan, former US Representative, best-selling author of The Great Deformation, and veteran financier. David is now loudly warning that events have entered the crack-up phase, which he predicts will be defined by the following 4 developments: Increasingly desperate moves by the world's central banks. Increased market volatility and losses. Deflation in industrial and commodity prices. Decreasing demand due to Peak Debt. As the crack-up phase gains momentum, he predicts an increasing number of "financial breaks" that will add to the unpredictability and instability of the environment for investors. Even 'dancing close to the door' sounds excessively risky at this point. We’re in the crack-up phase. I think there are four big characteristics of that which are going to shape the way the economy and the markets unfold as we go forward.

American: Bin Laden asked him in '90s to use plane as weapon
In the terrorism trial of a man accused of being one of al-Qaida's early leaders, an American described being asked in 1995 by Osama bin Laden to kill Egypt's president by ramming his plane with his own in midair. "It took me by surprise," Ihab Mohammad Ali testified recently in New York. "I responded, `Well, wouldn't I be killing myself?'" Ali, 52, said bin Laden answered: "Well, then you would be a martyr.'" The glimpse into the early days of al-Qaida when bin Laden had a private jet and was barely known to law enforcement officials came amid the government's presentation of evidence over the past three weeks against Khaled al-Fawwaz, a man portrayed by prosecutors as a key player in the terror group when it was in its infancy. Al-Fawwaz has pleaded not guilty to conspiring to kill Americans in the 1998 bombings of two U.S. embassies in Africa. The attacks killed 224 people, including a dozen Americans. The government rested Thursday. Ali testified he met bin Laden 25 years ago...

One Hundred Years of Austerity
People have been preaching austerity for a very long time. Ancient Greek philosophers, Jesus’s disciples, Benjamin Franklin—they’re all part of a chorus of voices over the centuries who’ve warned us against the dangers of debt and profligate spending. Fiscal austerity, though, is a modern invention. It wasn’t until after World War I that governments started making serious efforts to address debt and other problems by cutting their spending. One reason is that, until the early 20th century, most countries had such small budgets that there wasn’t much to cut. (The U.S. federal budget on the eve of World War I equalled about 2.5 percent of the national economy; now, it’s around 20 percent, and that in turn is much lower than the figure in some other countries.) Nowadays, fiscal austerity is often associated with the International Monetary Fund, which has required budget cutting as a condition for bailouts in scores of troubled economies. In other cases, though, governments have embraced austerity...

HSBC bank publishes apology over accusations it helped clients evade taxes
London-based bank HSBC issued an apology Sunday in the form of a full-page advertisement following allegations that the institution helped clients evade taxes. The apology was directed at the bank's employees and customers. HSBC's chief executive Stuart Gulliver said the "media focus has been on historical events that show the standards to which we operate today were not universally in place in our Swiss operations eight years ago. We must show we understand that the societies we serve expect more from us. We therefore offer our sincerest apologies." The statement follows reports last week based on information leaked in 2007 by computer expert Herve Falciani, who worked for HSBC in Geneva, Switzerland. The information indicated that the bank had purposefully offered clients ways around taxes. HSBC previously admitted some of its clients had taken advantage of bank secrecy to create undeclared accounts in offshore locations, including in its Swiss private bank.

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