LyrArc Article Gist
Banco Santander SA will buy the remaining 10% of Banco Espanol de Credito SA, or Banesto, for 263 million euros by May 2013. This is part of the restructuring in the banking industry in Spain with Banco Santander replacing the Banesto brand and the private banking Banif brand and replacing it with the Santander brand. Santander will close 700 branches of the total of 4600 branches it, Banesto and Banif have in Spain. Spain's banking network will decline by 35% from 2008 to about 30,000 branches. This is also part of the consolidation of banks in Spain to five or six stronger and larger banks. Bankia SA which was required as part of the 40 billion euro bailout from the EU to Spain's banking sector to cut staff and branches, will cut 6000 staff, close over 1000 branches, and shut down real estate lending. Santander's move was intended to save 420 millon euros annually by reducing costs through consolidation. Santander is not one of the banks being bailed out.

LyrArc Article Gist
Issuance of junk bonds in 2012 reached $274 billion in 2012, an increase of 55% over 2011, according to Dealogic. This is double the levels observed before the financial crisis of 2008. Yields on low rated junk bonds have declined to about 6% as prices move up. Also observed is an increase in covenant lite corporate loans. These types of loans relax lending standards- this increased from $8.5 billion in 2010 to $36.5 billion 2011, and $58 billion in 2012, according to Dealogic. This has drawn the attention of Fed Governors Jeremy Stein and Richard Fisher of the Dallas Fed, who have raised a warning about the rapid increase in credit and financial risks.

LyrArc Article Gist
For senior executives of financial firms investing in August 2011- following weeks of extreme volatility in the U.S. stock market- is all about capital preservation. Executives interviewed here have moved all their money to high grade bonds and cash. This is happening even as the advisors of financial firms are telling the public to stay in the stock market for the long term, and even as many middle class investors have seen their savings shrink from the crash of 2008. It is the crash of 2008 that has made the executives interviewed here turn highly cautious.

LyrArc Article Gist
The median household headed by a person 60-62 years of age with a 401(k) account has less than one fourth of what is needed to maintain a standard of living at retirement, according to data from the Federal Reserve and analyzed by the Center for Retirement Research at Boston College for the Wall Street Journal. Including Social Security and any pensions or other savings, the savings are way short of what is needed for retirement. Households used in this data had a median income of $87,700 in 2009. The 85% needed for a decent standard of living upon retirement is $74,545. Social Security would provide an estimated 40% of pre-retiremment income, or $35,080 for that median family, leaving $39,465 that has to come from other sources. The median 401(k) account has $149,400 which would only provide a fixed income each year of $9,073- only one fourth of the $39,465 needed. To generate that $39,465, households have to have $636,673, and only 8% of American households approaching retirement have that amount. Half of the families have other pension income of $26,500 a year, which added to $9,073 in 401(k) income gets the total income up to $35,573. Other studies using different data by the Employee Benefit Research Institute show results that are largely similiar. The Employee Benefit Research Institute, is supported by 401(k) providers. Its estimate of the median person is based on individuals in the 60's who have worked at the same company for more than 30 years. This data shows an estimated median person having about $158,754, not much different from the Fed data. Why is the amount in most Americans 401(k) savings so low? There was a mistaken sense that a 6% annual contribution, with a 3% company match would be enough. Vanguard Group says the current median amount that people contribute is 9%, counting the employer contribution. Now Vanguard is advising people to contribute more, 12 to 15%, including the employer contribution. Other problems for the low savings is that saving started late, or contributions were suspended after a job loss, or medical emergencies, other debt. The stock market collapses of 2000-2002 and 2007-2009, added to the problems, by wiping out a portion of the savings. The low rate of interest on savings for most of the last decade hurt even conservative investors and lowers the kind of retirement account income used by seniors. The way people are coping with this is to work longer, in some cases into the 70's, cutting down on spending for food, travel, and taking greater risks for higher returns, risks that could make the situation worse....

LyrArc Article Gist
Financial Planner Carl Richards, warns investors about relying too much on market predictions. He cites the law of small samples as one way things go wrong. Another is investment managers with good track records in one decade doing badly in the next decade- David Miller in the 70's and Bill Miller of the Legg Mason Value Fund are others. To show how ridiculous market predictions based on computer models can get he gives the example of a researcher who found that over a 13 year period butter production in Bangladesh 'explained' 75% of the fluctuations in the annual returns of the Standard & Poor's 500 stock index. Adding in U.S. cheese production and the total population of sheep in Bangladesh and the U.S., this researcher was able to forecast past U.S. stock returns with 99% accuracy.

LyrArc Article Gist
Public sector layoffs in Spain in 2012-2013 under the governments deficit reduction plan- as mandated under fiscal compact rules agreed to in the December 2012 eurozone meetings- will worsen Spain's severe unemployment rate of 25%. These public sector layoffs are only now taking place. Upto now local governments had helped offset rising layoffs in the private sector by preserving employment. The result will be a further increase in unemployment in Spain, creating a crisis of large proportions.

LyrArc Article Gist
The civilian labor force participation rate for people over 60 years of age reached 29.4% in the U.S. in 2012, up from a little over 22% in 2002, according to the Labor Department. This reflects the slow growth in retirement savings with low interest rates and the economic shocks from the global financial crisis of 2008 to savings. A Conference Board report shows about two thirds of people between 45 and 60 years age are planning to delay retirement, up from 42% two years earlier.

LyrArc Article Gist
This opinion in DW.com says modernization of Saudi Arabia will take many years and a different mindset from the ultraconservative nature of the country, and cannot be accomplished by a few megaprojects that are announced by Prince bin Salman. He says the 32 year old leader lacks experience. The cost of the new project of $500 billion he has announced to be built in the northwest of the country is extremely high with no clear source of investment funding. Efforts for a more moderate Islam are also seen with much skepticism as Wahhabism has dominated the region for many years with little change. Change from the ground up is needed more than top down says DW.com. This is particularly true for gains to be made in women's rights and other social issues.

LyrArc Article Gist
This essay in the Economist magazine points out the special nature of the 2017 presidential election in France with the rejection of establishment candidates- Manuel Valls, Sarkozy, Juppe, and now Fillon. Fillon and Valls were prime ministers under Sarkozy and Hollande, from the Republican and Socialist parties respectively. With unemployment high in the areas outside the major cities their is a surge in support in these areas for the National Front. Emmanuel Macron, former Economy minister in the Hollande government, is the only candidate leading Marie Le Pen at this time. In a second round of voting he has to bring in centre right supporters and centre left voters and moderate voters, and appeal enough to working class voters, young unemployed people, offering hope for a better future to win this election against Le Pen. Economist magazine research shows support highest for Le Pen outside major cities in outlying areas, and for Macron in the major cities. There is also an education divide as seen in the U.S. election and Brexit referendum with less educated voters preferring the nationalist sentiment, church support sentiment fostered by the National Front.  ...

LyrArc Article Gist
The difficult situation in Spain as unemploymet reaches 23.5%. Descriptions of unemployed young people in the Vallecas neighborhood in Madrid.

LyrArc Article Gist
Provides another view of what was covered in detail in a WSJ article on the role of the ratings agencies in this subprime mess. Lehman Brothers and Morgan Stanley say that there were signs of the problems even a year earlier, HSBC a British bank set aside $1.76 billion to cover potential losses, and a former Federal Reserve Governor published a book in June on subprime mortages going bust. So for ratings agencies to wait till July 2007, to reduce their ratings makes them look ridiculous. Lehman's Malvey, global fixed income strategist quoted here sees a recession in 2008 into 2009, as the impact spreads to retail stores and to car buyers. One reason for this is that jumbo loans on homes are going to cost much more than before, slowing the housing market even more, and the number of housing loans going bad will rise in coming months.

LyrArc Article Gist
Risk of mortgage defaults and heavy debt loads has passed terrorism as the biggest risk to the economy in a survey of economists by the National Association of Business Economics.

LyrArc Article Gist
Takes the risks of the bubble collapsing quite lightly in his reference to the Great Depression after the 1920's stock bubble in the USA. It took several decades for the economy to come back in the US after the 1920's China can ill afford such an experience as hundereds of millions of Chinese are not benefitting in the rural areas as are the coastal areas so for them it would be a great setback, and the economy would take years to recover which can be quite painful.

LyrArc Article Gist
The Council of Mortgage Lenders forecast seems to quite optimistic considering the problems the US housing market is facing in November 2007, "prices will rise only slightly", with foreclosures rising to 45,000 from the current 30,000 in 2007, and house sales dropping by 15% in 2008. The buy-to-let market would be affected and the home buyer's budgets strained with British mortgage debt at 150% of household disposable income would affect new sales. The Economist forecast is more to the point predicting GDP growth in the UK will slowdown to 1.9% from 3.1% estimated this year, with allowance for serious downward risk from a big housing jolt to the economy in 2008. US economic growth was recently estimated by the US government reporting agency at 4.9% revised for the third quarter and the expectation was for flat or no growth in the last quarter. This suggests a dramatic drop. And this may not be fully digested by the markets as there is more bad news to come in the housing market in the USA in 2008....

LyrArc Article Gist
When asked about gas prices and about inflation as well as about the recession Edward Lazear Chairman of the President's Council of Economic Advisors takes a rather laid back response. Unemployment Benefits extension - with the labor market at 4.8% unemployment he thinks the job market is still tight. On inflation he thinks food prices increases were specific to 2007 and that inflation is relatively under control even though he says inflation numbers at 4.3% for the past 12 months is higher than the average for the last couple of years. His reasoning is that core inflation is low and the increase in energy and food prices were idiosyncratic specific to 2007. But the higher prices of food appear to be here for the next couple of years worldwide as demand grows and better nutrition around the world and energy prices are still pushed by overseas demand that by Lazear's own views have not slackened. And prices are up in China pushing up prices of cheaper imports and prices at your local Walmart. So how is inflation relatively under control?...

LyrArc Article Gist
50% of European CFO's surveyed by CFO magazine and 60% of Asian CFO's think the dollar decline is permanent devaluation compared to a third of US CFO's. The Commerce Dept figures show January exports 16.6% higher than a year earlier, and the trade deficit down by 7% in 2007 vs 2006 which will accelerae in 2008 with the larger dollar decline. As long as European and Asian economies continue to grow a bit slowly but not in a recession like the US the positive effect of growing exports should continue. So far for the last 6 quarters according to the WSJ exports have contributed 1 percentage point on average to economic growth measured at annual rate while the housing slump has subtracted just over one percentage point on average. So this is no small feat for exports and it has helped make the economy more resilient to the shocks of housing and oil price. As long as the growth overseas is not affected to a great extent by the economic slowdown in the US exports can continue to play this role. As the housing crisis is primarily a US and UK phenomenon this should not seruiously damage the economies of Asia and Europe and their ability to take in US exports....