Our blog's intention is to request the US government to grant us a chance to defend our mother country Japan at the American court of law regarding the resolution "Comfort Women" passed July 30, 07.


Roubini Says Rising Sovereign Debt Leads to Defaults

By Vivien Lou Chen and Gabrielle Coppola

April 29 (Bloomberg) -- Nouriel Roubini, the New York University professor who forecast the U.S. recession more than a year before it began, said sovereign debt from the U.S. to Japan and Greece will lead to higher inflation or government defaults.

Almost $1 trillion of worldwide equity value was erased April 27 on concern that debt will spur defaults, derailing the global economy, data compiled by Bloomberg show. German Chancellor Angela Merkel and the International Monetary Fund pledged to step up efforts to overcome the Greek fiscal crisis, after bonds and stocks fell across Europe in the past week.

“The bond vigilantes are walking out on Greece, Spain, Portugal, the U.K. and Iceland,” Roubini, 52, said yesterday during a panel discussion on financial markets at the Milken Institute Global Conference in Beverly Hills, California. “Unfortunately in the U.S., the bond-market vigilantes are not walking out.”

Credit-rating cuts on Greece, Portugal and Spain this week are spurring investors’ concern that the European deficit crisis is spreading and intensifying pressure on policy makers to widen a bailout package. Roubini’s remarks underscore statements by officials such as Dominique Strauss-Kahn, managing director of the IMF, that the global economy still faces risks.

Sovereign Debt

“The thing I worry about is the buildup of sovereign debt,” said Roubini, a former adviser to the U.S. Treasury and IMF consultant, who in August 2006 predicted a “painful” U.S. recession that came to fruition in December 2007. If the problem isn’t addressed, he said, nations will either fail to meet obligations or see faster inflation as officials “monetize” their debts, or print money to tackle the shortfalls.

Roubini, who teaches at NYU’s Stern School of Business, told attendees at the Beverly Hilton hotel that “Greece is just the tip of the iceberg, or the canary in the coal mine for a much broader range of fiscal problems.”

European bonds have plunged on concern that Greece’s won’t be able to pay its debt, with Harvard University Professor Martin Feldstein and Templeton Asset Management Ltd.’s Mark Mobius saying a default may be needed. The yield on the Greek two-year bond rose as high as 26 percent after being downgraded to below-investment grade by Standard & Poor’s on April 27, before falling to 17.35 percent today. The euro, which dropped to the lowest in a year yesterday, rose 0.1 percent to $1.3235 at 4:05 p.m. in New York.

Plugging the Leak

Greek Prime Minister George Papandreou met today the heads of the largest private and public-sector unions as well as representatives from the biggest employer group as Greek, EU and IMF officials put the final touches on a package that will allow the country to tap emergency loans. Greece’s budget deficit was 13.6 percent of gross domestic product in 2009, more than four times the limit allowed under European Union rules.

“A default will help to plug the leak,” said Mobius, who oversees about $34 billion in emerging-market assets as executive chairman of Templeton Asset Management, in an interview with Bloomberg Television in Singapore today. “A bailout at this stage does not make sense to me.”

Feldstein wrote in an article published on the Public Syndicate Web Site that the euro region and Greek bondholders will eventually have to accept that “the country is insolvent and cannot service its existing debt.”

Greece “could eventually be forced to get out” of the 16- nation euro region, said Roubini in a Bloomberg Television interview yesterday. That would lead to a decline in the euro and make it “less of a liquid currency,” he said. While a smaller euro zone “makes sense,” he said, “it could be very messy.”


The Stoxx Europe 600 Index rose 1.4 percent to 261.74 points today, rebounding from a six-week low yesterday after S&P downgraded Spain’s debt by one step to AA.

Roubini, chairman and co-founder of Roubini Global Economics LLC in New York, said the U.S. probably will need a combination of increased tax revenue and lower government spending, while Europe needs to curb spending.

“Eventually, the fiscal problems of the U.S. will also come to the fore,” Roubini said during the panel discussion. “The risk of something serious happening in the U.S. in the next two or three years is going to be significant” because there’s “no willingness in Washington to do anything” unless forced by the bond markets.

Both he and Michael Milken, the founder of the Milken Institute, supported a carbon tax on gasoline, with Roubini saying it would reduce American dependence on oil from overseas, shrink the trade deficit and carbon emissions, and help pay down the U.S. budget deficit.

Slimming Down

Milken compared the excess debt of U.S. consumers, companies and government to the nation’s obesity problem, saying the “best solution” is to become more efficient instead of raising taxes or unnecessarily cutting expenditures.

“If we could just get Americans to reduce their weight to the same as they weighed in 1991, we could save $1 trillion and the U.S. could create $1 trillion of value,” the junk-bond billionaire-turned-philanthropist said on the panel, moderated by Matt Winkler, editor-in-chief of Bloomberg News.

Roubini, who predicted a bubble in U.S. housing prices months before the market peaked in 2006, said the U.S. invested too heavily in housing during the past 20 to 30 years, and that spending on education and technology would be more beneficial in the long run.

Mixed Record

Roubini’s forecasts haven’t all been accurate. When the Standard & Poor’s 500 Index fell to a 12-year low on March 9, 2009, he said it probably would drop to 600 or lower by the end of that year. Instead, the U.S. equity benchmark gained 65 percent. On Feb. 5, he said the index, then at 1,066, would be little changed for the rest of the year. The S&P 500 has gained 12 percent since then.

Milken, 63, is the former high-yield bond chief from Drexel Burnham Lambert Inc. who was indicted on 98 counts of racketeering and securities fraud in 1989, ultimately serving about two years after a plea bargain and sentence reduction. For the past decade, he has focused on philanthropy and running the research institute, which seeks ways to generate capital for people around the world.


Roubini: Fed Will Eat Own Words, Resume Easing

“米連銀(FRB) は、$1.2%兆ドルの住宅ローン不良債権を買い上げてきたSTIMULUSの終了を告げた。この政策は危機における量的緩和というものだ。ここで、インフレよりもデフレが恐いバーナンキ議長は金利をゼロに近いのままとするだろう。少なくとも、来年の第一四半期か第二四半期までは。だが、オバマ民主党が政権に残りたければ住宅市場を底上げしなくてはならない。米国債10年物の利息(4%)のために~低利の住宅ローンを提供するあためには、量的緩和を再開する敷かない”とノリエル・ルビニ・NY大学経済学教授は語った。

Friday, 23 Apr 2010 09:07 AM Article Font Size

By: Dan Weil

The Federal Reserve is likely to resume quantitative easing after reversing it some in recent months, says star economist Nouriel Roubini.

The Fed expanded its balance sheet by leaps and bounds to fight the financial meltdown starting in 2008, buying securities and making loans on very easy terms.

That move is known as quantitative easing

Now the Fed has begun to reverse the stimulus, ending its $1.25 trillion of mortgage security purchases on March 31, for example.

“The federal funds rate is going to stay at zero until at least the first quarter if not the second quarter of next year,” Roubini told Bloomberg.

That’s because given the anemic economic recovery, deflation remains a bigger risk than inflation, he says.

“Chances are they (Fed officials) are going to resume quantitative easing, because if they’re going to have a back-up in mortgage rates or in 10-year Treasury yields, the last thing the Fed can afford in an election year is have a crowding out of the housing recovery.”

The 10-year Treasury yield recently hit 4 percent for the first time since June.

“The Fed is (likely) going to eat its own words and resume quantitative easing directly or indirectly,” Roubini said.

To be sure, Fed officials are still talking about reversing stimulus.

"Some directors favored taking a further step at this time toward (reducing) the discount rate structure that existed before the crisis," according to minutes from the Fed’s mid-March meeting.




Choice for Germany


The euro-zone crisis risks spinning out of control. The Standard & Poor's downgrades of Greece to junk status and Portugal by two notches to A-minus, although only confirmation of what markets prices were already saying, may have broken already fragile investor confidence. The single currency's fate is now in the hands of the German government and the European Central Bank. None of the choices on offer are good ones.

Germany must decide whether to commit its highly reluctant taxpayers to a vast Greek bailout. If the package is too small, markets will conclude the euro zone is unwilling and unable to support its members, triggering contagion to other countries and a possible break-up of the euro zone. But if Germany agrees a big enough package to draw a line under Greece's funding problems for several years, as investors seem to be demanding, it must do so aware it is unlikely to get all its money back. After all, investors now suspect Greece's problem is one of solvency rather than simply liquidity.

The ECB's challenge is no less crucial: It must decide whether to continue accepting Greek government debt as collateral for its lending operations if all three major ratings firms downgrade it to junk. Under ECB rules, already weakened once to accommodate Greece, eligibility requires at least one investment-grade rating. Moody's Investors Service still rates Greek debt four notches above junk. It may retain that investment-grade rating if an aid package materializes—after all, global banks remained investment-grade even after Lehman's collapse, thanks to government support. But S&P's three-notch downgrade shows how quickly the situation can change.

For the ECB, a decision to accept junk paper would be a blow to its credibility and confidence in the single currency, confirming fears the euro zone lacks discipline. But refusal to accept Greek paper would play havoc with the euro-zone financial system, inflicting huge losses on European banks that could necessitate further rescues.

The markets must hope Germany and the ECB bow to the remorseless logic of the crisis that has so far seen debt problems transferred from off-balance-sheet vehicles to banks, from banks to sovereigns, and finally from weaker sovereigns to stronger sovereigns. Yet Germany is already balking at the €8.4 billion ($11.3 billion) it is being asked to contribute in the first year. Politicians may simply not be able to move fast enough. Portuguese three-year bond yields have already climbed above 5%, the rate at which the country would likely be asked to lend three-year money to Greece, according to Evolution Securities.

Policy makers are in unchartered waters. Raw politics is taking precedence over what earlier in the crisis were largely technocratic decisions. That only adds to the uncertainty.


The national debt and Washington's deficit of will

By Joel Achenbach
Sunday, April 25, 2010

Bill Gross is used to buying bonds in multibillion-dollar batches. But when it comes to U.S. Treasury bills, he's getting nervous. Gross, a founder of the investment giant Pimco, is so concerned about America's national debt that he has started unloading some of his holdings of U.S. government bonds in favor of bonds from such countries as Germany, Canada and France.

This Story
Will the debt break Washington?
Q&A: Monday, 11 a.m.
Gross is a bottom-line kind of guy; he doesn't seem to care if the debt is the fault of Republicans or Democrats, the Bush tax cuts or the Obama stimulus. He's simply worried that Washington's habit of spending today the money it hopes to collect tomorrow is getting worse and worse. It even has elements of a Ponzi scheme, Gross told me.

"In order to pay the interest and the bill when it comes due, we'll simply have to issue more IOUs. That, to me, is Ponzi-like," Gross said. "It's a game that can never be finished."

The national debt -- which totaled $8,370,635,856,604.98 as of a few days ago, not even counting the trillions owed by the government to Social Security and other pilfered trust funds -- is rapidly becoming a dominant political issue in Washington and across the country, and not just among the "tea party" crowd. President Obama is feeling the pressure, and on Tuesday he will open the first session of a high-level bipartisan commission that will look for ways to reduce deficits and put the country on a sustainable fiscal path.

It's a tough task. The short term looks awful, and the long term looks hideous. Under any likely scenario, the federal debt will continue to balloon in the years to come. The Congressional Budget Office expects it to reach $20 trillion over the next decade -- and that assumes no new recessions, no new wars and no new financial crises. In the doomsday scenario, foreign investors get spooked and demand higher interest rates to continue bankrolling American profligacy. As rates shoot up, the United States has to borrow more and more simply to pay the interest on its debt, and soon the economy is in a downward spiral.

Of course, at least in theory, this problem can be fixed. Unlike a real Ponzi scheme, which collapses when no new suckers offer money that can be used to pay off earlier investors, the government can restore fiscal sanity whenever our leaders decide to do so.

But that premise is what has people like Gross worried. In addition to running a budget deficit, Washington for years has had a massive deficit of political will.

Over the past decade, lawmakers have avoided the kind of unpopular decisions -- tax increases, spending cuts or some combination -- needed to keep the debt under control. Federal Reserve Chairman Ben Bernanke testified recently that, for investors, the underlying problem with the debt isn't economic. "At some point, the markets will make a judgment about, really, not our economic capacity but our political ability, our political will, to achieve longer-term sustainability," he said.

The economic recovery has been picking up steam in recent weeks -- "America's Back!" trumpets Newsweek -- but the political recovery has been feeble. Whether on taxes, entitlements, military retooling, financial reform, energy policy or climate change, Washington is mired in a political enmity that makes tough decisions nearly impossible.

In the fiscal debate, the default position, as it were, is to do nothing. Debt is the grease of Washington legislation; for short-sighted leaders, it is less a political problem than a political solution. As long as the government can continue borrowing at reasonable rates, citizens can have their tax cuts and government services, and eventually the growing debt becomes someone else's problem.

"This is all an exercise in current generations shifting burdens on future generations," Brookings Institution economist William Gale says. "Future generations don't vote, of course."

Many careers in Washington have come to an end as casualties of the long battle to restore fiscal balance. President George H.W. Bush in 1990 went back on his "no new taxes" pledge and lost much of his political base. By the narrowest of margins -- with Vice President Al Gore breaking a tied vote in the Senate -- President Bill Clinton raised taxes again in 1993, and House Democrats were pummeled in the following year's midterm elections, giving up control of the chamber to the GOP for the first time in 40 years.

But then, after two decades of deficits, the fiscal picture brightened unexpectedly. The peace dividend at the end of the Cold War combined with the booming economy of the 1990s (and some tech-bubble tax receipts) to create an unexpected dilemma in 2000: what to do with the budget surpluses that were forecast for years to come? One obvious idea was to pay down the existing publicly held debt, then hovering around $3.4 trillion.

But a decade later, we're back in debt madness. The causes of this reversal are not a mystery: tax cuts, two wars, a new Medicare drug benefit, two recessions, massive bailouts and a huge stimulus package -- very little of it paid for in any conventional sense. Obama never misses a chance to remind the public that he inherited an enormous deficit, but as a purely political matter he still needs to persuade the public that he's a prudent fiscal steward.

To that end, the president has proposed a freeze on most nonmilitary discretionary spending. Obama also insisted that the health-care overhaul not add to the deficit, and it won't, according to the CBO. But no one would confuse the health-care law with a deficit-reduction package. Critics say the law worsens the fiscal outlook because its spending cuts and new taxes could have been used to reduce the deficit -- which may run at about $1.3 trillion for 2010 -- instead of being an offset for an entitlement expansion.

Beyond the simplicity of the problem -- the Treasury spends more than it collects -- is a thorny mess of policy options. Conservatives fear that liberals want to expand government by imposing a European-style value-added tax, in which the government sips revenue at multiple stages in the production and sale of goods and services. But a VAT is regressive, would hit the middle class in the teeth and is probably too politically radical to survive beyond the haven of a few Washington think tanks.

Obama's vow not to raise taxes on the middle class -- meaning he's extending George W. Bush's tax cuts for everyone except the most affluent -- eliminates a lot of revenue options. "The Republican view is no new taxes, and the Democratic view is no new taxes on 95 percent of the population. Both of those are so far from reasonable starting points that it's astonishing," Gale argues.

Obama and his fellow Democrats may also be shy of substantial Pentagon cuts, lest they be pegged as weak-kneed liberals. Some of the easiest Medicare cuts have already been made. That leaves Social Security, and such options as postponing the retirement age or means-testing benefits. But recipients figure they paid into Social Security and it's their money, not to be taken away. And they vote -- and live by the millions in swing states such as Florida.

With so many unpleasant options, everyone is looking to Obama's new bipartisan commission for some kind of miracle solution. The 18-member panel, headed by former Clinton White House chief of staff Erskine Bowles and retired Republican senator Alan Simpson, is charged with producing recommendations by Dec. 1, after the midterm elections. Congressional leaders say they'll vote on the recommendations, but the commission has no real clout. A panel proposed by Senate colleagues Kent Conrad (N.D.), a Democrat, and Judd Gregg (N.H.), a Republican, would have had more teeth, but the idea died in the ideological crossfire early this year.

Even before the commission's first meeting, the body is already in the thick of the political battle, with antitax advocate Grover Norquist suggesting that Simpson has a history as a tax hiker. The retired senator struck back in a statement: "This 'Mr. Tax Hike' business is garbage, and is intended to terrify people and at the same time make money for the groups who babble it."

In an interview, Simpson said the capital has an aversion to dealing with debt. "It makes all sorts of sense if you're worshiping the great god hiding behind the screen, which is called reelection," he told me.

The latest news from the Treasury is hopeful: Tax revenues are slightly higher than anticipated so far this year. The TARP program to bail out financial firms has proved far less costly than expected. Investors from around the world still eagerly bid on Treasury notes at auction. During this global recession, the U.S. Treasury has been a safe port in the storm.

When I spoke to Peter Orszag, the director of the Office of Management and Budget, he expressed optimism that the administration can balance the primary budget -- not including interest payments -- by 2015. The longer-term deficits are his bigger worry. Asked if the political process in Washington is broken, he answered: "I think it's too soon to know whether the system's broken. The problem is not what happened last year or this year. The real issue is when we move forward in time, something has to give."

The danger is that what "gives" will be investors' confidence in the United States. Bill Gross told me that Pimco still has $150 billion in Treasuries, but that's seriously "underweight" given that the company controls $1 trillion in assets.

"It's becoming immediately apparent that some countries will not do especially well and may not escape the debt trap from the recent financial crisis, Greece and Iceland being the most prominent cases," Gross said. "But now investors are even looking at the best of the best, including the United States."

That's also the concern of Michael Burry, the investment guru who predicted Wall Street's meltdown and made millions by placing bets against (or "shorting") the financial sector. Burry, one of the protagonists in Michael Lewis's account of the financial crisis, "The Big Short," believes the federal government is behaving like the companies that lost billions in mortgage-backed securities. He told me he sees the common mistake of focusing on short-term benefits -- whether quarterly earnings or the next election.

The world doesn't want America to go broke, he points out. Americans are the planet's greatest consumers. But if this is a bubble, it will burst with little warning, Burry said.

"Strictly looking at the monthly Treasury statement of receipts and outlays," Burry said, "as an 'investor,' you see a company you might want to short."

Joel Achenbach is a reporter and blogger on the national staff of The Washington Post. He will be online on Monday, April 26, to chat with readers at 11 a.m. Submit your questions or comments before or during the discussion.


A Rising Yuan May Be Good for Japan

人民元(RMB)の切り上げが間近い。日本の輸出に有利なのかも知れない。伊勢平次郎 ルイジアナ

It's not a typo: Japan's exporters ought to start thinking about the yuan.

Beijing is expected to let its currency appreciate. It will take several years, but Japan Inc., China's top source for imports, stands to gain.

China imported some $131 billion worth of Japanese goods in 2009—everything from steel used by auto makers to cosmetics and food. Some of this is re-exported to Asia and the West, but nearly 60% of sales of the China-based subsidiaries of Japanese companies remain within China, according to Japanese trade ministry data.

The makers of that 60% will profit as a stronger yuan makes foreign goods more affordable. Already, another factor is boosting this hunger. In China's cities, per-capita gross domestic product is approaching levels at which consumers tend to spend more on imported products, fashionable clothes, and foreign car brands, says Daiwa Capital Markets.

That threshold—the $10,000 mark to be specific—has been crossed in Shanghai. Market-research firm Euromonitor International says the whole country will reach the same point in a decade.

Those likely to benefit? Cosmetic maker Shiseido already holds 5% of China's beauty and personal-care market by revenue. Watchmaker Casio Computer, meanwhile, holds 20% of its market. Both brands benefit from a perception that they're selling higher quality products than Chinese competitors.

On a different level, factory-equipment maker Fanuc and steel-producer JFE Holdings could profit as Chinese companies also find foreign-made machinery and intermediate goods cheaper.

Meanwhile, a rising yuan could make Japanese exporters more competitive with regional counterparts. The central banks of Asia's exporters have stepped into currency markets lately to keep the likes of the South Korean won and New Taiwan dollar from rising sharply while the yuan remains pegged.

A rising Chinese currency, then, gives these economies room to ease off the intervention. But the yen may not follow suit. Tokyo hasn't intervened, and Japan's interest rates will remain low even as those elsewhere in Asia rise, keeping the yen from gaining much ground relative to neighboring currencies.

This won't benefit all. Fast Retailing's Uniqlo brand, which relies on low-cost Chinese labor to produce its chic but cheap clothing, and Nintendo, which outsources all production to China, could see margins squeezed.

Admittedly, much remains unknown about when and how quickly China is going to start pushing its currency higher. But for once, a rising currency could be good news in Japan.


SEC vs. Goldman

By Sebastian Mallaby

Wednesday, April 21, 2010

Let's stipulate that there's a problem with the power of Goldman Sachs. The firm takes vast risks and earns vast profits; then, when it gets into trouble, as it did after the Lehman Brothers failure, it turns to the government for a bailout. But the case the Securities and Exchange Commission has brought against Goldman also involves a problem. Unless the SEC is sitting on more evidence than it has laid out so far, the charge sheet looks flimsy. If Goldman has become a poster child for excessive power on Wall Street, the SEC might become a poster child for government power run amok.

This Story
Goldman's non-scandal
The Senate's attempt at Goldman-like fraud
The SEC's 22-page complaint states that Goldman sold fancy mortgage securities without disclosing that a hedge fund manager, John Paulson, was betting that those same securities would go bad. This is a non-scandal. The securities in question, so-called synthetic collateralized debt obligations, cannot exist unless somebody is betting that they will lose value. The firms that bought Goldman's securities knew perfectly well that some other investor must be taking the opposite position. It was their job to evaluate the Goldman offer and make up their own minds. One of the big losers in the deal was IKB, a German bank with a big business in mortgages. We're not talking mom and pop.

Perhaps the SEC is suggesting that Paulson's involvement changes this logic, because the hedge fund manager is famous for making billions from his mortgage bets? There's a superficial case here: Even if investors don't mind that somebody else is on the other side of the trade, maybe they wouldn't want to bet against a superstar. But at the time of the deal, Paulson was a low-profile player whose name would not have set off alarm bells. And intermediaries like Goldman are not supposed to blab about the identities of their clients.

Next, the SEC complains that Paulson had a hand in designing the securities, maximizing the chances that they would blow up. He did the equivalent of building a timber house with a large fireplace and a blocked chimney, then buying fire insurance on the structure. Shocking though this may sound, it is another non-scandal. An investor who wants to bet against a bundle of mortgages is entitled to suggest what should go into the bundle. The buyer is equally entitled to make counter-suggestions. As the SEC's complaint states clearly, the lead buyer in this deal, a boutique called ACA that specialized in mortgage securities, did precisely that.

Finally, the SEC asserts that Goldman, and specifically its young mortgage whiz, Fabrice "Fab" Tourre, tricked ACA into believing that Paulson meant to bet on the mortgages' soundness, not the other way around. This is the nub of the case, and if there's proof that Goldman or Tourre was dishonest, the SEC could yet emerge with its reputation intact. But none of the e-mail fragments quoted in the complaint comes close to being a smoking gun.

What the complaint does show is that ACA believed Paulson was a buyer, not a seller; and the really intriguing mystery is how ACA could have been so dumb. As the deal was taking shape, ACA and Paulson met repeatedly. If ACA had any doubt as to Paulson's intentions, surely it could have asked him a straight question rather than relying on alleged hints from Goldman. Throughout the negotiations, Paulson kept proposing notoriously low-quality mortgages for the bundle and vetoing high-quality ones. It should have been obvious to ACA that he meant to bet that they would go down.

The worst that can be said on the basis of the available evidence is that Goldman knew ACA was being stupid and failed to point this out. That falls far short of the offenses that the SEC alleges, which might be why two of the SEC's five commissioners refused to vote for the action against Goldman -- a rare split in an enforcement case. And yet, rather than treat the SEC's adventure with due caution, politicians and regulators are jumping on the bandwagon. British Prime Minister Gordon Brown, who just happens to be fighting an election campaign, has pushed British regulators to pile on to the SEC case. German Chancellor Angela Merkel, who could use some market scapegoats to distract from the euro zone's debt crisis, is threatening to follow suit. Congressional investigators are planning to grill Goldman officials for the umpteenth time.

Much is wrong on Wall Street, and Congress should pass some version of the regulatory package that is bottled up in the Senate. But the premise for more regulation is that the regulators will behave responsibly. Let's hope the SEC remembers that.


goldman sachs
マンハッタンにあるゴールドマン・サックス本社。去年の秋、“何故、金融証券に問題があると知っていながら、顧客を欺いたのか?”と証券委員会に尋問されたとき、“顧客の情報に対する守秘義務があったから”と答えた。ゴールドマン・サックスは世界デ最大の利益を上げてきた金融証券会社である。サブプライムにリンクする「CDO」のリスクを知りながら、ジョン・ポールソン・ヘッジファンドに推薦して買わせた~買わせた後、証券が価値を下げるのを見越して利益を上げたと証券委員会に告訴されたのだ。伊勢平次郎 ルイジアナ

Goldman Sachs ‘Had Duty’ to Keep Paulson Bets Secret

April 20 (Bloomberg) -- Goldman Sachs Group Inc., being sued by the U.S. Securities and Exchange Commission over claims that it deceived investors about one of its financial products, tried to fend off regulators last fall by arguing it had a duty to keep the information confidential.

The company failed to disclose that hedge fund Paulson & Co., run by billionaire John Paulson, helped pick the underlying securities in a collateralized debt obligation and then bet against them, the SEC said in a lawsuit filed April 16. After being told in July 2009 that the SEC planned to bring a complaint, New York-based Goldman Sachs argued it had been compelled to keep Paulson’s role secret.

The SEC’s “proposed theory ignores the fact that, as a broker-dealer acting as an intermediary on behalf of a client, Goldman Sachs had a duty to keep information concerning its client’s (Paulson’s) trades, positions and trading strategy confidential,” the company said in a Sept. 10, 2009, document addressed to the agency.

Goldman Sachs, the most profitable company in Wall Street history, created and sold CDOs linked to subprime mortgages in 2007, using ACA Management LLC, a firm that analyzes credit risk, to select underlying securities. Goldman Sachs knew that at least one prospective investor, Dusseldorf, Germany-based IKB Deutsche Industriebank AG, wasn’t likely to invest in a CDO that didn’t have a collateral manager to analyze and select the portfolio, according to the SEC’s lawsuit. Goldman Sachs misled investors by not disclosing that Paulson had a hand in picking the portfolio, according to the SEC’s lawsuit.

Wells Notice

The Sept. 10 letter was one of at least two sent to the SEC in response to the agency’s Wells notice -- a signal of its intention to pursue a lawsuit. The responses were prepared by Sullivan & Cromwell LLP, a law firm representing Goldman Sachs.

All participants in the transaction were “highly sophisticated institutions” that had the resources and expertise to perform due diligence, analyze the portfolio and form their own market views, the letter said. Goldman Sachs’s actions were “entirely appropriate” and it “will take all necessary steps to defend the firm” against the allegations, the company said in a statement.

Participants knew that “someone had to take the other side of the portfolio risk,” and that a disclosure that “the relatively unknown Paulson” was betting against the CDO would not have been material to the investors, Goldman Sachs said in the September document.

Goldman Sachs has come under fire from overseas regulators after the SEC’s lawsuit. U.K. Prime Minister Gordon Brown yesterday called for the Financial Services Authority to start a probe into the firm and Germany’s financial regulator, BaFin, asked the SEC for details on the lawsuit.

Brown said he was “shocked” at the “moral bankruptcy” indicated in the suit.



Treasuries Gain on Inflation Data, Increase in Jobless Claims

April 17 (Bloomberg) -- Treasuries gained for a second week as reports that showed consumer prices excluding food and fuel were unchanged and jobless claims unexpectedly rose spurred speculation the Federal Reserve will keep rates low.

Two-year note yields dropped below 1 percent for the first time in almost a month yesterday as the Securities and Exchange Commission sued Goldman Sachs Group Inc. for fraud and an index of U.S. consumer sentiment unexpectedly declined. Producer prices rose 0.5 percent in March, according to the median estimate in a Bloomberg News survey before a report next week.

“Good inflation data is signaling to the Fed that there’s no hurry to raise rates,” said David Brownlee, head of fixed income at Sentinel Asset Management in Montpelier, Vermont, which manages $22 billion. “Bonds seem to me to be cheap.”

The 10-year note yield fell 11 basis points on the week, or 0.11 percentage point, to 3.76 percent, according to BGCantor Market Data. The yield on April 5 rose above 4 percent for the first time since June. The 3.625 percent security maturing in February 2020 gained 29/32, or $9.06 per $1,000 face amount, to 98 27/32.

Shares of Goldman Sachs slid as much as 16 percent yesterday after it was sued by regulators for fraud tied to collateralized debt obligations that contributed to the worst financial crisis since the Great Depression.

‘Completely Unfounded’

“The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation,” Goldman Sachs said in a statement.

Consumer prices rose 0.1 percent in March, in line with forecasts, while the core rate held steady, reflecting cheaper rents and clothing.

U.S. debt rose yesterday as confidence among U.S. consumers unexpectedly fell to the lowest level in five months. The Reuters/University of Michigan preliminary April consumer sentiment index fell to 69.5 from 73.6 in the previous month. The data followed a report on April 14 that showed retail sales rose 1.6 percent in March, the biggest gain in four months.

“The surprising number was consumer confidence as it doesn’t jibe with the recent uptick in retail sales,” said Kevin Flanagan, a Purchase, New York-based chief fixed income strategist at Morgan Stanley Smith Barney. “The theme for this week has been establishing the new range for the 10-year note. We tested four percent and established it as a new top.”

The difference between yields on 10-year notes and Treasury Inflation Protected Securities, or TIPS, a gauge of trader expectations for consumer prices, narrowed to 2.34 percentage points, from this year’s high of 2.49 percentage points in January. The five-year average is 2.15 percentage points.

‘Bullish on Treasuries’

“We remain bullish on Treasuries and favor expressing this in the front end,” analysts at BNP Paribas SA wrote in a report on April 15. “The downside surprise in core CPI this week, along with stable inflation expectations and relatively contained TIPS breakevens, all should lead the market to expect the Fed to remain on the sidelines for the foreseeable future.”

Central bank officials indicated the recovery won’t generate enough jobs or inflation to change a pledge to keep interest rates low when they meet this month.

Fed Chairman Ben S. Bernanke told Congress on April 14 that high unemployment and weak construction are among the “significant restraints” on the pace of growth. He repeated the Fed’s view that borrowing costs are likely to stay low for an “extended period” as the economy contends with weak construction spending and high unemployment.

Hawkish Comments’

“Don’t be misled by occasional hawkish comments,” John Richards and Jim Lee, strategists at Royal Bank of Scotland Group Plc in Stamford, Connecticut, wrote in a note to clients on April 15. The firm is one of 18 primary dealers that trade with the Fed. “With inflation quiescent and Bernanke reiterating the ‘extended period’ language yesterday, the lower- longer group at the Fed is in firm control.”

Declining confidence threatens to restrain household spending, which accounts for about 70 percent of the economy. While recent figures showed retail sales picked up in March, a 9.7 percent unemployment rate and mounting home foreclosures are risks for the recovery.

“There is concern that the recent optimism in consumer spending is unsustainable without clear improvement in the unemployment rate,” said Christian Cooper, an interest-rate strategist at primary dealer Royal Bank of Canada in New York.

Initial jobless claims jumped by 24,000 to 484,000 in the week ended April 10, the Labor Department reported on April 15. Economists forecast claims would fall to 440,000, according to the survey median.

‘Remains a Worry’

“The growth data is looking better but it remains a worry that jobless claims have not fallen to a level that is consistent with job growth,” said Carl Lantz, head of interest- rate strategy at Credit Suisse AG in New York, another primary dealer. “The labor market is not clicking on all cylinders. We are still a long way from there.”

Treasuries also gained as European Union finance ministers yesterday told Greece to brace itself for the International Monetary Fund’s conditions for granting a bailout package for the debt-strapped nation. The yield premium investors demand to hold Greek 10-year bonds instead of benchmark German bunds rose for a fourth day.

“The endless Greece saga is just not going away,” said Ward McCarthy, chief financial economist at primary dealer Jefferies & Co. Inc. in New York. “Greece sort of provides a failsafe bid under Treasuries.”

Hedge-fund managers and other large speculators increased bets in the futures market in the week ended April 13 that 10- year notes will decline, according to U.S. Commodity Futures Trading Commission data.

Speculative short positions, or bets prices will fall, outnumbered long positions by 274,741 contracts on the Chicago Board of Trade. So-called net-short positions rose by 30,008 contracts, or 12 percent, from a week earlier, the Washington- based commission said in its Commitments of Traders report.


Federal Reserve Chairman Ben Bernanke sounds a warning on growing deficit

By Neil Irwin and Lori Montgomery
Washington Post Staff Writer
Thursday, April 8, 2010

Federal Reserve Chairman Ben S. Bernanke warned Wednesday that Americans may have to accept higher taxes or changes in cherished entitlements such as Medicare and Social Security if the nation is to avoid staggering budget deficits that threaten to choke off economic growth.

"These choices are difficult, and it always seems easier to put them off -- until the day they cannot be put off anymore," Bernanke said in a speech. "But unless we as a nation demonstrate a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy economic growth."

His stern lecture came as the economy is emerging from the worst recession in years, sending the stock market up considerably over the past year and raising public hopes for a return to prosperity. But the economic downturn -- with tumbling tax revenue, aggressive stimulus spending and rising safety-net payments such as unemployment insurance -- has driven already large budget deficits to their highest level relative to the economy since the end of World War II. This has fueled public concern over how long the United States can sustain its fiscal policies.

The health-care bill signed by President Obama last month has further stoked the national debate over government entitlement programs, though the non-partisan Congressional Budget Office has projected that the legislation would actually reduce future deficits.

Barely two months after Bernanke was confirmed by Congress for a second term following a bruising fight, he used his bully pulpit to tread into an area of economic policy that is usually the province of the president and Congress. He characterized the budget gap as the biggest long-term economic challenge the nation faces, even as he acknowledged that reducing the deficit immediately would be "neither practical nor advisable" given the still-weak economy.

While the immediate audience for the speech was the Dallas Regional Chamber, his message was intended for Congress and the Obama administration. Officials in both branches have spoken of the need for a more sustainable fiscal policy, but few have proposed concrete plans to achieve it. A deficit commission created by Obama is scheduled to begin meeting at the end of the month.

With his warning about what could be the next economic crisis, Bernanke offered a contrast to Alan Greenspan, his predecessor as Fed chairman. Greenspan did little to sound an alert about the housing and credit bubbles that brought on the financial crisis and was pilloried on Wednesday by a special congressional commission for the Fed's lapses during his tenure.

Bernanke did not endorse any particular approach to reducing the deficit. But he laid out the "difficult choices."

"To avoid large and ultimately unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above," he said.

His remarks highlighted the difficulties posed by funding these entitlement programs over the long term. With the population aging and medical costs rising faster than inflation, Medicare is set to become a major drain on the federal budget in the coming decades, though the recently passed health-care bill has delayed the date when the program will begin to require big infusions of cash.

Social Security is already draining resources from the broader federal budget, as spending on benefits has risen above this year's Social Security tax collections. While that gap is expected to be fleeting, the program, the largest single item in the federal budget, is projected to require sustained support within the next 10 years.

Bernanke argued that if the government develops a "credible plan" to reduce long-term deficits, it could help boost the economy before long. Such a plan could enhance investors' confidence in the financial health of the United States and make them more willing to lend the government money at lower interest rates. That, in turn, could lower long-term interest rates in general, making it cheaper for Americans to get a home mortgage or for companies to borrow money to build a factory.

Investors still view U.S. government debt as among the safest investments in the world. But the perceived creditworthiness of nations depends on fickle market forces -- which can change quickly, as Greece and other several other European countries have learned in recent months. Doubts about Greek debt, for instance, have driven up interest rates there and damaged the economy.

The Obama administration is in the early stages of crafting a strategy to reduce U.S. deficits, which are projected to hover around $1 trillion a year for much of the next decade. The presidentially appointed commission, known as the Commission on Fiscal Responsibility and Reform, has been assigned the task of helping develop that strategy.

Obama has said he expects the commission to look at all options for reining in deficits, including cuts to entitlement programs, reductions in other spending and tax increases.

On Tuesday, White House adviser Paul A. Volcker spoke in favor of higher taxes, telling an audience at a New York Historical Society event that the nation may have to consider a European-style sales tax, known as a value-added tax, to close the persistent budget gap. In answer to a question, Volcker said a VAT "was not as toxic an idea" as it has been in the past, according to Reuters. "If at the end of the day we need to raise taxes, we should raise taxes," he added.

Pointing to Volcker's remarks, Republicans in Congress accused Obama of plotting a big tax hike. "To make up for the largest levels of spending and deficits in modern history, the Administration is laying the foundation for a large, misguided new tax, a first-time American VAT," Sen. Charles E. Grassley (R-Iowa) said in a statement. Administration officials, however, said Volcker was not speaking for the president, who campaigned on a pledge to protect the middle class from higher taxes.

"The president has passed historic tax cuts for middle-class families and continues to push for more tax cuts. The president is not proposing to cut the deficit at the expense of middle-class families," said Kenneth Baer, spokesman for the White House budget office.

Bernanke has urged Congress to address long-term fiscal imbalances in congressional testimony before, but usually only when he is asked about them by lawmakers. His speech Wednesday aimed to reach a broader audience, steering away from technical economic speak and using plain, sometimes wry, language -- a rare thing for a Fed chairman.

"The economist John Maynard Keynes said that in the long run, we are all dead," he said. "If he were around today he might say that, in the long run, we are all on Social Security and Medicare."



China hints at readiness to let yuan rise

人民元(RMB)切り上げに踏み切る可能性が出てきた。“意図的に40%も低く抑えている~中国の輸出ばかり有利だ~米失業率が下がらない原因だ”と、米議会は批判してきた。シューマー民主党上院議員が中心であるが、両党とも批判してきた。人民元が切り上げ(3%か?)になれば、1)中国の輸出が鈍る~2)ただでさえ、薄い利潤にプレッシャーがかかる~3)米製造業の対中国輸出が増えるかは疑問~4)米国債への影響は?~5)株価は?~6)日本の経済への影響は?多くのことが未知である。伊勢平次郎 ルイジアナ

By Aileen Wang and Simon Rabinovitch
Wednesday, April 7, 2010; 6:26 AM

BEIJING (Reuters) - U.S. Treasury Secretary Timothy Geithner will hold talks in Beijing on Thursday against a background of fresh signals from Chinese policymakers that they might be paving the way to let the yuan resume its rise.

The National Development and Reform Commission (NDRC), the nation's top economic planner, said China would monitor exchange rate risks facing exporters, while an economist from the agency said Beijing should edge toward a more flexible yuan.

"We should keep the yuan basically stable at a balanced and reasonable level, while strengthening analysis and monitoring and making announcements about risks in a timely manner to reduce exporters' risks and losses," the NDRC said in a policy overview issued on the central government's website,

The statement suggested policymakers are weighing what may happen if they let the yuan recommence its climb after keeping it yoked to the dollar since mid-2008.

The yuan will presumably be at the top of Geithner's agenda when he meets Chinese Vice Premier Wang Qishan on Thursday on his way home from financial partnership talks in India.

A U.S. Treasury spokesman, accompanying Geithner in Mumbai, declined to talk about the subject matter of the meeting and said there would be no further statements about it.

"The secretary and the vice premier have been working together to find an opportunity to meet in person for some time. The meeting was confirmed yesterday," he said.

Washington has pressed Beijing to lift the value of the yuan, which critics say is held so low against the dollar that Chinese producers enjoy a grossly unfair advantage in global markets.


The NDRC is a sprawling agency in charge of industrial policy that has a stronger voice than almost any other government agency, including the central bank, in China's decision-making process about the currency.

Following "stress tests" to examine how exporters would cope with appreciation, the NDRC's comments were possibly a sign the government wants to warn export firms to be ready for a stronger currency that could threaten already-thin profit margins.

Zhang Yansheng, director-general of the Institute for International Economic Research, a think-tank under the NDRC, said China wanted a freer-floating currency but was also wary of the potential pitfalls.

Following "stress tests" to examine how exporters would cope with appreciation, the NDRC's comments were possibly a sign the government wants to warn export firms to be ready for a stronger currency that could threaten already thin profit margins.

Zhang Yansheng, director-general of the Institute for International Economic Research, a think-tank under the NDRC, said China wanted a freer-floating currency but was also wary of the potential pitfalls.

"We also want the yuan exchange rate to be more flexible and based on market supply and demand relation, but the U.S. should be clear that it is a gradual process," he told Reuters.

"Currently, Chinese enterprises do not have the capacity to hedge against currency risks and China also lacks an established system to manage foreign exchange risks."

Beijing let the yuan rise 21 percent against the dollar between July 2005 and July 2008 before effectively re-pegging the currency near 6.83 to the dollar to help its exporters surmount the global financial crisis.

The White House said on Tuesday that President Barack Obama would raise the currency issue with President Hu Jintao on the sidelines of a nuclear security summit in Washington next week.

Vice Foreign Minister Cui Tiankai, briefing reporters on the summit, would not say whether Hu would discuss the yuan. But he said Beijing did not want economic disputes to get out of hand.

"Of course between China and the United States, including in the sphere of economics and trade and finance, there are sometimes differing points of view. But above all, our two countries have very important common interests in these important areas that are constantly strengthening," said Cui.

Speculation Beijing will let the yuan start climbing before long has been fueled by an easing of Sino-U.S. tensions over the currency in recent days.

Geithner said at the weekend he was delaying an April 15 report on whether China manipulates its currency. A finding to that effect would have infuriated Beijing.

Speaking in India, Geithner said on Wednesday that the yuan would take a broader international role, calling that a "healthy, necessary adjustment."

Washington and Beijing are trying to cool tensions after U.S. arms sales to Taiwan and China's dispute with Google over Internet freedom made for a rocky start to 2010.

But with U.S. unemployment stuck near 10 percent, Obama faces pressure to get Beijing to let the yuan rise. Many U.S. lawmakers say that by deliberately holding down the yuan, China is giving its firms an unfair subsidy that costs jobs in many countries.


The yuan rose slightly in the spot market on Wednesday, reaching 6.825 to the dollar, its highest rate this year.

Offshore forwards were pricing in about 1.6 percent appreciation over the next six months and 3.0 percent over the next 12 months, slightly less than had been implied on Tuesday.

While Washington's delay of the currency manipulator report may give Beijing the space needed to resume yuan appreciation, most analysts think it will allow only a small rise, because it remains worried about the solidity of the global recovery.

Figures due this Saturday are expected to show China's first monthly deficit since April 2004.

Although economists think a deficit would be an anomaly, it could still give officials pause before sanctioning a rise in the yuan.

The commerce ministry in particular has repeatedly demanded that the yuan be kept stable until exports have recovered strongly. The central bank, by contrast, would like a firmer currency to ease inflationary pressure from a red-hot economy.

China should let market forces play a bigger role in setting the level of the yuan, a professor at the Chinese central bank's graduate school said in a magazine issued by the bank which reached subscribers on Wednesday.

"This kind of reform will further stress the role of market supply and demand in affecting the direction of the exchange rate," Professor Wu Nianlu wrote in China Finance magazine.



Fed Officials Saw Recovery Curbed by Unemployment

高く止まっている失業率~銀行の貸し渋り~FRBが利息を時期尚早に上げれば、US経済回復の足を引っ張る、、伊勢平次郎 ルイジアナ

April 6 (Bloomberg) -- Federal Reserve officials saw signs of a strengthening recovery that could be hobbled by high unemployment and tight credit, and some warned of raising rates too soon, according to minutes of their March meeting.

“While recent data pointed to a noticeable pickup in the pace of consumer spending during the first quarter, participants agreed that household spending going forward was likely to remain constrained by weak labor market conditions, lower housing wealth, tight credit, and modest income growth,” minutes of the March 16 Federal Open Market Committee released today in Washington showed.

Fed officials are looking for signs of self-sustaining growth before they begin their exit from the most aggressive monetary policy in U.S. history. Payrolls rose by 162,000 last month, the most in three years, and manufacturing grew at the fastest pace in more than five years. At the same time, Fed officials noted slack in the economy reflected in a 9.7 percent unemployment rate and slowing inflation.

“They want to see the whites of the eyes of everything -- from strong growth to many months of employment,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “They want to see inflation accelerate so they are sure we are not going to get deflation, and they probably want to see banks start to lend again.”

The FOMC said in its statement last month that the recovery “is likely to be moderate for a time.” Low rates of resource use and subdued inflation “are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” the statement said. Central bankers have used the “extended period” phrase since March 2009.

Forward Guidance

The minutes showed policy makers discussed the statement language and said “forward guidance would not limit the Committee’s ability to commence monetary policy tightening promptly if evidence suggested that economic activity was accelerating markedly or underlying inflation was rising notably.”

The Standard and Poor’s 500 Index rose 0.2 percent to 1,189.44 in New York. Yields on U.S. two-year notes fell four basis points to 1.13 percent. A basis point is 0.01 percentage point.

The extended period “might last for quite some time and could even increase if the economic outlook worsened appreciably or if trend inflation appeared to be declining further,” the minutes said. “A few members also noted that at the current juncture the risks of an early start to policy tightening exceeded those associated with a later start.”

Jobs Lost

Last month’s increase in payrolls, the third in the past five months, wasn’t enough to push down the jobless rate. The economy has lost more than 8 million jobs since the recession began in December 2007.

“They are seeing the recovery being held back for a time by unemployment,” said David Semmens, U.S. economist at Standard Chartered Bank in New York. “They are not going to be moving in any rush at all. We are not looking for the first rate hike until the third quarter of 2011.”

The minutes also showed that policy makers were surprised by the rate at which inflation was slowing.

“Participants saw recent inflation readings as suggesting a slightly greater deceleration in consumer prices than had been expected,” the minutes said. “A number of participants observed that the moderation in price changes was widespread across many categories of spending.”

A price gauge favored by Fed officials, the personal consumption expenditures price index, minus food and energy, rose 1.3 percent for the year ending February, slowing from a 1.5 percent rate in January.

Inflation Readings

Fed officials stated a longer-run goal of 1.7 percent to 2 percent for the full PCE price index in January. Central bankers last month left the benchmark interest rate in a range of zero to 0.25 percent, where it has been since December 2008.

Officials are considering a variety of tools to tighten policy, from raising the rate they pay on reserves banks keep at the Fed to selling assets, to prevent a surge in inflation once the recovery takes hold.

Officials discussed allowing maturing Treasury securities to roll off the balance sheet without reinvestment. Such redemptions would lower the interest-rate sensitivity of the Fed’s portfolio over time, the minutes said, and limit the need to use other draining tools.

Expected Timing

“The initiation of a redemption strategy might generate upward pressure on market rates, especially if that measure led investors to move up their expected timing of policy firming,” the minutes said. “Participants agreed that the Committee would give further consideration to these matters” while the central bank continues reinvesting all maturing Treasury securities.

U.S. central bankers last month completed their program to purchase $1.25 trillion of mortgage-backed securities, expanding the Fed’s balance sheet to $2.31 trillion on March 31, near the record $2.32 trillion the previous week.

Chairman Ben S. Bernanke told the House Financial Services Committee March 25 that he anticipates “at some point we will in fact have a gradual sales process so that we can begin to move our balance sheet back to its pre-crisis condition” which he described as “under” $1 trillion.

Officials in January unanimously agreed that Fed assets and banks’ excess cash will need to shrink “substantially over time” and return the central bank’s holdings to just Treasuries.

Sales Backed

Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, today said he backs the gradual sale of mortgage-backed securities. He isn’t a voting member of the FOMC this year.

“If the Federal Reserve wants to normalize its balance sheet in the next five, 10, or even 20 years, it needs to supplement the passive approach with an active one,” he said in a speech in Bloomington, Minnesota.

The minutes showed Fed officials are trying to identify potential asset-price bubbles and determine whether financial firms are using too much debt to boost returns.

“Members noted the importance of continued close monitoring of financial markets and institutions” in order to see “significant financial imbalances at an early stage,” the Fed said. “At the time of the meeting the information collected in this process, including that by supervisory staff, had not revealed emerging misalignments in financial markets or widespread instances of excessive risk-taking.”


Pimco Favors Aussie, Real, Yuan Forwards on Growth


(解説)つまり、日本企業も、日本政府も、US経済との付き合い方を良く考えなければいけない。伊勢平次郎 ルイジアナ

April 6 (Bloomberg) -- Pacific Investment Management Co., which runs the world’s biggest mutual fund, is favoring Asian currencies and Chinese yuan forwards as it gauges emerging economies are poised to grow faster than developed counterparts.

Pimco predicts U.S. 10-year Treasury yields will trade in a range of 3.50 percent to 4.25 percent, according to a report by Paul McCulley, a portfolio manager at the company.

“Subpar growth and subdued inflation” will mark the months ahead, McCulley wrote on the Web site of Newport Beach, California-based Pimco. “We continue to expect a ‘desynchronized’ recovery, with less leveraged emerging economies likely to grow more robustly than the developed economies.”

Investors should be “underweight” the euro, British pound and Japanese yen, McCulley said.

Pimco’s $220 billion Total Return Fund handed investors a 15 percent gain in the past year, beating 52 percent of its competitors, according to data compiled by Bloomberg.

The company had $1 trillion in assets under management as of Dec. 31 and is a unit of Munich-based insurer Allianz SE.


Dollar Rises to Seven-Month High Versus Yen on Economic Outlook

April 3 (Bloomberg) -- The dollar touched the strongest level against the yen in more than seven months as a government report added evidence to speculation that the labor market is recovering, helping to fuel U.S. economic growth.

The greenback’s rise against the Japanese currency tied last week’s gain, the biggest since December, as the Labor Department said U.S. employers added 162,000 jobs in March. The Swiss franc rose to a record against the euro before dropping amid speculation the central bank intervened. Canada’s currency came within one cent of parity with the dollar. A slide in pending U.S. home sales slowed, a report may show this week.

“A strong jobs report means a stronger dollar against most currencies, including the yen,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, who predicts the greenback may rise to 100 yen in six months. “The core underlying trend in terms of overall private-sector hiring has probably turned positive in the first quarter of 2010.”

The dollar advanced 2.2 percent, matching the most since the five days ended Dec. 4, to 94.57 yen in New York yesterday, from 92.52 on March 26. It touched 94.69 yen, the highest level since Aug. 24. The dollar fell 0.6 percent to $1.3484 per euro, the first weekly slide since March 12, from 1.3410 on March 26. The yen fell 2.7 percent to 127.50 versus the 16-nation currency, the second weekly loss. It closed March 26 at 124.06.

‘Getting Stronger’

The increase in employment reported yesterday in Washington was the biggest since a 239,000-job gain in March 2007. It followed a revised reduction of 14,000 in February, fewer cuts than first estimated. The median forecast in a Bloomberg survey was for an increase of 184,000 jobs. The unemployment rate held steady at 9.7 percent.

Treasury Secretary Timothy F. Geithner said the report showed the U.S. economy is “getting stronger.” Business investment is expanding and exports are “coming back,” he said yesterday in an interview on Bloomberg Television.

The dollar rallied yesterday against 13 of its 16 most- traded counterparts, advancing 0.8 percent versus Switzerland’s franc, the worst performer. Mexico’s peso posted the biggest increase among the three currencies that gained, rising 0.2 percent to 12.2995 versus the greenback.

“It’s a dollar move,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. “The dollar is cheap because it’s trading below fair-value models. And what does that mean? It means that U.S. labor costs are relatively cheaper compared to Europe, or maybe Japan, or the U.K. or Switzerland.”

Rate Bets

Financial markets in the U.S., Europe, Australia and Hong Kong were closed yesterday for the Good Friday holiday.

Futures on the CME Group Inc. exchange showed a 60 percent chance the Fed will raise the target rate for overnight bank lending by at least a quarter-percentage point by November, up from 45 percent odds a month ago. It has been a range of zero to 0.25 percent since December 2008, and policy makers reiterated in March it would stay low for an “extended” period.

The payrolls report “does signal the U.S. is recovering faster than Japan and is likely to hike rates sooner,” said Amelia Bourdeau, a currency strategist at UBS AG in Stamford, Connecticut. “Japan’s economy is recovering, but it’s still not strong enough.”

Bourdeau forecast a dollar rally to 95 yen in the next three months.

The Canadian dollar gained 1.6 percent since to C$1.0106 per greenback after strengthening to as much as C$1.0068 on April 1. It touched C$1.0062 on March 19, the closest to parity with its U.S. counterpart since July 2008. Canada’s biggest trading partner is the U.S.

Swiss Franc

The franc slid April 1 to $1.4411 per euro from a record 1.4145 amid speculation the Swiss National Bank sold the currency. It ended the week at 1.4333. The SNB declined to comment. Central banks intervene by purchasing or selling currencies to influence exchange rates.

“It’s pretty clear from the price action that the SNB is in the market, and quite aggressively as well,” Geoffrey Yu, a currency strategist at UBS in London, said on April 1.

President Barack Obama urged China in a call on April 1 to help balance global growth. Strategists said President Hu Jintao’s decision to visit Washington this month increases the likelihood his nation will escape being branded a currency manipulator by the U.S. Obama also sought Hu’s support for cooperation to help stop Iran from developing nuclear weapons.

Manipulator Label

Hu’s presence at the nuclear summit improves the chances China won’t be labeled a manipulator when the U.S. Treasury releases its biannual report on exchange rates, said China International Capital Corp., a Beijing-based investment bank that’s part-owned by Morgan Stanley.

The People’s Bank of China said in its 2009 international financial markets report posted on its Web site that the dollar will have only a limited rebound in 2010 because of the nation’s high fiscal deficit and low interest rates.

Pending home sales in the U.S. fell 1 percent in February after tumbling 7.6 percent in the previous month, according to the median forecast in a survey of 21 economists by Bloomberg News. The National Association of Realtors is scheduled to report the data on April 5.


March unemployment rate unchanged at 9.7%
The official U.S. unemployment rate in March remained unchanged at 9.7 percent, the Labor Department's Bureau of Labor Statistics said moments ago.

However, only 162,000 new jobs were created on non-farm payrolls, well below what economists were expecting. Most forecasters were expecting about 200,000 new jobs to be created last month, and the shortfall underlines the wobbly nature of this recovery.

Nevertheless, it was the biggest one-month jobs gain in the past three years.

Contributing to the less-than-expected job growth was the 2010 Census. The Commerce Department expects to hire at least 600,000 temporary workers this year to staff the survey. Forecasters expected a bump of 100,000 census hires in March. But only 48,000 were hired.

More than 6.5 million Americans have been unemployed for six months or longer, the data said, which is a record high.

In other sectors, some 40,000 temporary health service workers were hired in March, while the financial sector shed 21,000 jobs.

Average hourly earnings dropped 0.1 percent in March after climbing 0.2 percent in February.

Forecasters expected the rate to remain unchanged at 9.7 percent. On Thursday, the number of new jobless claims filed last week dipped slightly, down 6,000 to 439,000. It's tough for this economy to start creating a meaningful number of new jobs until the weekly new jobless claims number gets down into the low 400s and stays there.

The unemployment rate hit its recent high of 10.1 percent in October. Economists and forecasters expect the rate to hover near 10 percent for at least the remainder of the year. The White House does not expect the rate to return to its healthy-economy level of 5 percent until at least 2017.

The nation's high unemployment rate has become a political issue for the Democratic Party, in charge of the White House and Congress. The party faces pressure to create new jobs without incurring further wrath from Republicans and other deficit hawks, worried that additional government-subsidized stimulus and jobs bills will add dangerously to the budget deficit and national debt.

The unemployment rate has stayed high for months, if not quarters, following the end of each previous modern recession.



Those angry about health-care generally concerned about the country's direction

By Sandhya Somashekhar and Perry Bacon Jr.
Friday, April 2, 2010

The health-care debate has generated intense levels of frustration among the bill's opponents, and those who say they are outright angry almost universally believe that the country is going in the wrong direction -- some say toward an America they no longer recognize.

Of the 26 percent of people who described themselves as "angry" about the new law in a recent Washington Post poll, virtually all also said the country was on the wrong track. In follow-up interviews, many went beyond health care as they spoke of their deep misgivings about the country's leadership and the changes taking place around them.

"I grew up in the '50s," said Hugh Pearson, 63, a retired builder from Bakersfield, Calif. "That was a wonderful time. Nobody was getting rich, nobody was doing everything big. But it was 'Ozzie and Harriet' days, 'Leave It to Beaver'-type stuff. Now we have all this MTV, expose-yourself stuff, and we have no morality left, not even by the legislators."

Pearson and others described a rising concern about illegal immigrants who they say fill hospital emergency rooms and drain public resources. In the follow-up interviews, they expressed a distrust with a government they believe is taking from the many and giving to the few. Nearly nine in 10 of those who are angry about the health-care bill say it represents a major and negative change for the country, with some interviewed after the poll saying they believe the country is moving toward socialism.

Tricia Farmer, 42, a pension administrator in Glenville, N.Y., said she is a Republican and a fiscal conservative who worries about the creeping expansion of the federal government. At the same time that Congress appears to be increasing spending, her own local school district is facing budget cuts. She worries about the world her elementary-school-age children will inherit.

"What I worry about is that they aren't going to have the choices that we had," she said. "There are going to be mandates for everything. Mandates and taxes, more and more, a heavier burden on them. I'm feeling we're headed toward a socialist society, and I feel that it's not going to be reversible if it keeps going the way that it is."

In the late-March poll, the "angry" population overlapped generally with those who identified as Republicans. They were overwhelming white (94 percent) and conservative (73 percent).

Many of those who listed themselves as "angry" said they felt Congress was operating in a vacuum, removed from the problems encountered by average people struggling against a tepid job market, sagging home values and dwindling retirement funds. About 85 percent strongly disapproved of the way Congress is doing its job.

Much of the language echoed that of the vocal, conservative "tea party" movement, as well as conservative talk radio and blogs.

"The tea party activists represent Middle America. They are the hardworking Americans who see their country eroding in front of their eyes," said Chris Domsch of suburban Kansas City, Mo. He said he is an independent but has never backed a Democratic presidential candidate.

A few voted for President Obama in 2008, such as Chris Lionette, 43, who works in employee relations at a company in Holmdel, N.J. He said he believes the health-care bill is deeply flawed.

"I think it was done for political reasons, that it was done in a rather hasty fashion, and in my opinion there are other issues facing this country we need to be addressing," Lionette said, naming immigration and the wars in Iraq and Afghanistan.

Karen Hamrick, 63, said her southern Kentucky town of Hopkinsville hasn't been the same since Flynn Enterprises closed a jeans-making factory nearby in 2004. Nearby Fort Campbell provides a jolt to the economy, but only when its soldiers are there, the retired dance teacher said. When they are deployed, many of the families pack up and head home, too, she said.

Though she is a registered Democrat, she considers herself a "Southern Democrat" and believes the health-care bill will rob the majority in a misguided effort to help a small number of disadvantaged people.

"It's not realistic. It's very idealistic, and if we lived in that kind of world it would be wonderful," she said. "But where it's left is in our back pockets."

Polling analyst Jennifer Agiesta contributed to this report.


Geithner asserts 'critical role' of manufacturing

By Howard Schneider
Washington Post Foreign Service
Thursday, April 1, 2010

U.S. Treasury Secretary Timothy F. Geithner used a trip to a Pittsburgh metals factory on Wednesday to buff the image of American manufacturing ahead of a key decision on China's currency policy, showcasing the type of heavy industry that can succeed in the United States despite stiff -- and some argue unfair -- competition from abroad.

"This is a sector that will play a critical role in helping to spur our economic recovery and contribute to our long-term prosperity," Geithner said after a day in which he toured a mill where Allegheny Technologies Inc. produces specialty metal plates. He also met with representatives of United Steelworkers and U.S. Steel.

ATI produces titanium, zirconium and stainless steel for aircraft frames, jet engines, chemical plants and other industrial uses. Company officials said investments in new equipment coupled with the unique nature of the metals they produce allowed them to remain profitable through the economic downturn. The company has a U.S. workforce of about 7,800 and several hundred employees abroad -- including at a joint venture in China.

Geithner said facilities such as ATI's show that American manufacturing remains strong -- despite what has been a steady loss of jobs as the production of textiles, consumer electronics and other goods has shifted overseas.

The loss of manufacturing jobs is central to a debate Geithner is going to have to referee April 15, when he is to rule on whether China's policy of pegging the value of its renminbi to the dollar amounts to currency manipulation. The renminbi is estimated to be undervalued by anywhere from 25 to 40 percent, giving Chinese goods an advantage in global markets -- and leading to accusations that the policy is costing U.S. jobs at a time when unemployment is stubbornly hovering around 10 percent.

In recent weeks, pressure has built among members of Congress and manufacturing and business groups for Geithner to cite China for its currency policies.

"We seem to have been in denial that this is a problem. Well, it's a problem," said Wayne Ranick, a spokesman for United Steelworkers International. He said union leaders have told Geithner that China's currency policy was "one of the chief causes of bankruptcy and job loss" among U.S. manufacturers, and urged him to act.

But there are also concerns about an open break in relations between the United States and China, and arguments in favor of addressing the currency issue by working through organizations such as the G-20 group of economically powerful countries. On Wednesday the U.S. Trade Representative's office released an annual survey of trade barriers around the world, and cited Chinese practices that it said discriminate against U.S. goods. The United States runs a trade deficit with China that has exceeded $200 billion annually for the past five years, part of an economic relationship far more complex than the currency issue alone.

Geithner has said recently that the United States cannot "force" China to revalue its currency, and said after a meeting with the United Steelworkers that it was important to keep the relationship cooperative and "work with China to create a level playing field for American exporters."

After Geithner's tour, ATI spokesman Dan Greenfield said the company agreed that the United States should fight for better market access and fairer policies from its major trading partners. But he also said plenty of American manufacturers succeed by "making things that no one else does."

Geithner's visit "was not about currencies; it was not about any specific country," Greenfield said. "It was about how a company can be successful with the majority of its employees in the U.S. We believe we can be competitive in the world economy. . . . We have to focus on what we do better than anybody else."



Author: Nobuyoshi Ozaki

A long forty six years have passed since I stepped on to American soil. I have had various odd jobs in the past until I recently retired. Examples include working with Steven Spielberg as assistant director in a film called "1941." I was supervisor and later became Public Relation representative for Toyota Group - USA. My last occupation was a Senior Research analyst working in Silicone Valley for a major news paper from Tokyo, Japan. My spouse, Christine is a flight attendant, traveling often to the Middle East and Africa. We have spent three quarters of our life together as world adventurers. This photo was taken in Argentina. We now live in swampy Louisiana.