Tag Archives: IMF

Articles of Interest

Why America Is Headed For Civil Unrest

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By Gene Daily

Police SC Why America is Headed for Civil Unrest

I am writing from a very fearful Spain. The looming Banking crisis in Cypress has nearly everyone in Spain concerned. When the story first broke nearly ten days ago, the Spanish Stock Market dropped, and the price of interest on Spanish Bonds doubled in one day. The Troika (as they are being called), the IMF, the EU, and the ECB, calmed fears somewhat by saying it was only a one-off decision in relation to Cypress. But is it really?

The Euro Group formed by the Troika from a group of European Finance Ministers has made a new demand in face of the opposition to the initial orders, which failed to pass the Parliament in Cypress. They now demand 20% of deposits over 100,000 Euros and the closing of the second largest bank in Cypress. This stipulated because deposits up to 100,000 Euros are insured, and deposits over that amount are not.

All of this works as planned in Europe. The bankers will expect to recoup as much as 10 billion from this so-called “Haircut” on account holders. But wasn’t it the bankers who did the bad investments with the depositors’ money? Why do the depositors who have saved and are receiving virtually no return on their savings currently, due to low interest rates, now have to bear the cost of bailing out the bankers who lost the money in the first place? Think about it. It is because they can. There are strict gun laws in nearly all of Europe. Of course, the people demonstrate; of course, there will be demonstrations against this action. But as people in Cypress are now restricted to a mere 100 Euro per day as a withdrawal limit, what can they possibly do?

Think for a moment what would happen in the USA if the people were restricted to a mere $100 limited withdrawal per day and the banks were closed on Bank Holiday for 10 days. Would there be animosity towards the Bankers, demonstrations, or worse?

Could this be why the 2700 armored vehicles have been purchased for DHS, along with an estimated 1.5 billion rounds of hollow point jacketed ammunitions. The question hangs as a hammer over why Janet Napolitano refuses to answer questions surrounding this subject.

As recently as March 18, 2013, a train was sighted near Peach Springs, Arizona carrying well over 100 of these vehicles along with many other types of support vehicles of a military type (and what appeared to be cases containing unknown material, possibly ammunition.) This was caught on tape by chance. How many of these trains are active in the USA? What is their purpose? Where are they headed for? These are all questions to be put to representatives of the people at all levels. What person can trust a government that carries out such operations without any legislative sanctions?

Personally, I find it difficult to trust an administration that proclaimed it would be the most transparent in history and then refuses to answer honest questions asked in a direct and simple …read more
Source: FULL ARTICLE at Western Journalism

Business, Finance, Occupation & Industry

Cyprus and Pending Home Sales Plague the Dow

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By John Maxfield, The Motley Fool

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You can tell that investors and the financial media had grown accustomed to the run-up in stocks earlier this month, as any down day now triggers speculation of impending doom. Today, we have the ongoing situation in Cyprus and disappointing pending home sales here in the U.S. to thank for the worry. With roughly an hour left in the trading session, the Dow Jones Industrial Average is down 32 points, or 0.22%.

In order to meet its obligations under an ECB- and IMF-funded bailout, the tiny island nation of Cyprus has agreed to close its second-largest lender and confiscate a purported 40% of all deposits in excess of 100,000 euros. The country has also imposed capital controls meant to stem the outflow of money once its banks reopen for business on Thursday: They’ve been closed for the last week and a half, pursuant to a government-mandated bank holiday. Suffice it to say that the decision on deposits has rattled the markets over the last few weeks, as it has called into question the sanctity of funds once presumed safe.

Adding to pessimism today was data showing that pending home sales — a measure based on contract signings — slipped last month. The National Association of Realtors’ pending-home-sales index fell 0.4% in February to 104.8. While this was lower than the previous month’s reading of 105.2, it was nevertheless 8.2% higher on a year-over-year basis.

The problem, according to NAR chief economist Lawrence Yun, is that a limited inventory is holding back sales in many areas. “Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50% from current levels,” Yun said in a prepared statement. “Most local homebuilders are small businesses and simply don’t have access to capital on Wall Street. Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market.”

Despite the marginal step backward, it has become increasing clear that housing is truly improving. According to a New York-based fund-manager quoted by Bloomberg, “There’s absolutely no question about that if you look at all the data, not just one month. Investment is starting to come back and one of those legs is housing.”

In terms of individual stocks, shares of Boeing are lower today after aviation experts and government officials predicted that the Federal Aviation Administration would limit the flying times of its beleaguered 787 Dreamliners. The planes were grounded two months ago after battery problems sparked fires on two separate aircraft.

According to an industry analyst quoted by Reuters, “Depending on how long that restriction remains in place, it would completely undermine the business case for the airplane, which was to be able to do these long, thin intercontinental routes.”

And shares of JPMorgan Chase , the nation’s largest bank by assets, are also suffering following a revelation that prosecutors are looking into …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

3 Shares to Survive the Cyprus Aftershock

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By Tony Reading, The Motley Fool

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LONDON — It’s getting tiresome, but once again the eurozone is threatening markets. Shares wobbled last week but just held on after an 11th-hour deal to “rescue” Cyprus was agreed. The wobble showed that the confidence powering markets up this year is fragile. If Cyprus hadn’t secured funding from the “troika” of the IMF, the EU, and the ECB, then stocks would have plunged.

The snowball keeps rolling
That’s worrying, because the Cyprus deal has stored up more trouble ahead. It has loaded the country with debt and simultaneously trashed its financial sector, the mainstay of its GDP. Capital controls mean a euro in Cyprus isn’t the same as a euro in Germany, and confidence in Southern Europe‘s banks has been undermined.

What should investors do? It’s too much of a bunker mentality to just put your money in a (non-eurozone) bank. Europe will probably muddle through, and 2013 could be a great year to be in the market.

Safety first
But I think there’s a good case for having a slug of safe shares that would survive a euro blow-up. They are shares that:

  • Have low exposure to the eurozone.
  • Aren’t exposed to the financial sector.
  • Are in defensive sectors.
  • Have growth prospects.

Here are three I have picked.

1. Tesco
Tesco has lost its halo, but it’s repairing past mistakes. The U.K.’s economy is vulnerable to events in Europe, but Tesco’s 30% share of the grocery market makes it resilient. It’s not short of ideas for growth, from coffee shops in the U.K. to online sales in China.

2. Centrica
British Gas, Centrica‘s downstream utility, is well insulated from economic turmoil. Last week’s bad weather exposed the U.K.’s shortage of gas storage, and the Government’s “dash for gas” is sure to benefit Centrica’s upstream gas-production business.

3. Unilever
Strong brands and the indispensible nature of Unilever‘s personal-care and health care products give it its defensive characteristics. Expansion in emerging markets provides growth. A quarter of Unilever’s sales come from Europe, but that’s lower than for Reckitt Benckiser.

Boring is good
Two of my three picks are included in “Five Shares To Retire On,” a brand-new report from the Motley Fool. It describes a mix of five solid (some might say boring) shares in diverse sectors that could form the core of a portfolio — shares that you can tuck away and not have to watch every day.

Whether you’re saving for retirement or building an investment portfolio for any other reason, it’s sensible to have some solid, dependable core holdings. To find out which of my three picks made the grade and discover the identity of the other three stocks, you can download the report straight to your inbox. Just click here — it’s free.

The article 3 Shares to Survive the Cyprus Aftershock originally appeared on Fool.com.

Fool contributor Tony Reading owns shares …read more
Source: FULL ARTICLE at DailyFinance

News, Politics, Government

EU chief to lead negotiations on Cyprus deal before deadline

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The EU says a top official will chair a high-level meeting on Cyprus in a last-ditch effort to seal a deal before finance ministers decide whether the island nation gets a 10 billion euro bailout loan to save it from bankruptcy.

Cypriot President Nicos Anastasiades and Finance Minister Michalis Sarris were flying to Brussels early Sunday.

Spokesman Preben Aaman couldn’t confirm who would participate in the meeting, but said it would be led by European Council President Herman Van Rompuy.

Cyprus has been told it must raise $7.5 billion in order to secure the loan from the IMF and other eurozone countries. The IMF, European Central Bank and European Commission will determine whether any Cypriot plan meets its requirements.

Finance ministers would have to approve the deal Sunday evening.

…read more
Source: FULL ARTICLE at Fox World News

News, Politics, Government

EU chief to try to get last-minute Cyprus deal

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The EU says a top official will chair a high-level meeting on Cyprus in a last-ditch effort to seal a deal before finance ministers decide whether the island nation gets a 10 billion euro bailout loan to save it from bankruptcy.

Cypriot President Nicos Anastasiades and Finance Minister Michalis Sarris were flying to Brussels early Sunday.

Spokesman Preben Aaman couldn’t confirm who would participate in the meeting, but said it would be led by European Council President Herman Van Rompuy.

Cyprus has been told it must raise 5.8 billion euros ($7.5 billion) in order to secure the loan from the IMF and other eurozone countries. The IMF, European Central Bank and European Commission will determine whether any Cypriot plan meets its requirements.

Finance ministers would have to approve the deal Sunday evening.

…read more
Source: FULL ARTICLE at Fox World News

News, Politics, Government

Is Germany Playing A Game Of Chicken Over Cyprus?

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By Tim Worstall, Contributor There’s a school of thought that Germany is simply playing a game of chicken over the Cyprus situation. They know that the island nation doesn’t really have anywhere to go other than the “troika” of EU, ECB and IMF. The only realistic alternative is that the entire economy crashes and burns and that would be so unpleasant that it will inevitably be the Cypriots that blink first. …read more
Source: FULL ARTICLE at Forbes Latest

Business, Finance, Occupation & Industry

3 Companies That Could Save America From $250 Oil

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By Tyler Crowe, The Motley Fool

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Despite increased oil production in the U.S. from unconventional sources such as the Bakken and Eagle Ford shales, oil prices haven’t gone down. In fact, the price for a barrel of West Texas Intermediate crude is at about $93 and climbing. What’s even worse is that one international group believes that the price of oil is poised to go up — way up.

Who is proclaiming this bad news? The Organization of Economic Cooperation and Development, or OECD. Based on its models, a barrel of oil could be in the range of $150 to $270 by the end of the decade. Let’s look at why they could be right and how we could avoid the sting of surging oil prices.

Why they could be right
Despite the large increase in domestic production, it costs more to access these new sources, and demand is still outpacing supply. According to EIA, demand for oil was about 1 million barrels per day higher than supply in 2011, and the projections for global demand are expected to continue to climb, thanks in large part to two countries: China and India.

On a worldwide proven-reserve basis, China and India are not well endowed, nor do they have a copious amount of deposits. Collectively, the two countries have only about 20.4 billion barrels of proven reserves, or about 1.3% of the world’s total supply. Also, a few weeks ago, the U.S. Department of Energy reported that China had surpassed the U.S. as the world’s largest importer of oil. From a raw numbers perspective, India doesn’t hold a candle to China, but it still imports about 80% of its oil needs. With China and India — the two most populous countries in the world — growing GDP at roughly 8% and 6% annually, demand will more than likely skyrocket.

Why they could be wrong
Models are great, and they can give a decent window into the future — if the correct assumptions are made. The OECD admits that these projections could be thrown off by two things: a slowing of global GDP, and the potential for oil substitutes to capture market share. Obviously, a slowing economy would put a dent in oil demand, but growing oil prices could be what brings GDP down as well. According to the IMF, imbalances in oil supply and demand could affect global GDP growth by as much as 1% annually — a bit of a Catch-22.

With oil potentially getting that expensive, we need to seriously consider the potential of seeing another energy source replace oil demand. In the past 23 years, gasoline prices and the price for a barrel of West Texas intermediate in the U.S. have traded at a multiple of roughly 33.1. Based on the OECD‘s projections, this could mean that gasoline in the U.S. would cost somewhere in the range of $6.05 to $10.85. With current prices already causing a consideration of alternative fuels, $10 a gallon certainly would tip the scales …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Market Vectors' Fran Rodilosso on EU Plans for Cyprus and the Risks They May Hold for Investors in S

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By Business Wirevia The Motley Fool

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Market Vectors’ Fran Rodilosso on EU Plans for Cyprus and the Risks They May Hold for Investors in Senior Debt

NEW YORK–(BUSINESS WIRE)– A push by the so-called Troika (a tripartite committee led by the European Commission, European Central Bank, and International Monetary Fund) to impose a deposit tax on Cyprus-based bank accounts was flatly rejected this week. As the Cyprus government, EU, ECB and IMF try to find a compromise before Monday, the rest of the world is watching closely, even if market action this week does not portray a high level of concern. Still, the Troika’s original proposal should give investors in European senior debt some cause for concern, according to Fran Rodilosso, Fixed Income Portfolio Manager at Market Vectors ETFs, who also believes that the entire process does not bode well for future bank resolutions in Europe‘s larger peripheral economies.

“Cyprus has built up its status as a tax haven and its banking system is now close to seven times the size of the country’s GDP. Given that scale, I see no option for the government by itself to bail out the banks,” said Rodilosso. “It certainly seems as though Cyprus is a test case for some new approaches within Europe to keep the costs of bailing out banks away from the taxpayers in other countries, namely Germany. That the very banks in question in Cyprus were largely damaged by the Greek restructuring seems to have had minimal impact on the equation.”

“Upon announcement of the original package, there were legitimate questions of fairness voiced by several different constituencies,” Rodilosso added. “I do not think, however, that Europe would have been pushing for a tax on depositors were the deposits in Cypriot banks primarily those of its own citizens. That is why I and so many others take the skeptical view that the Troika considered Cyprus to be small enough that any resulting volatility in both the markets and among the island’s citizens would not cause wider contagion. So far that assumption has held — the Cyprus crisis has been relatively contained. From a longer-term perspective, this past week, in my view, it paints a bleak picture about the strength of the Troika’s anti-crisis formula.”

“The news around Cyprus did appear to cause modest widening of spreads on senior and subordinated bank debt across Europe, with more substantial widening in the periphery,” continued Rodilosso. “While the original Cyprus plan imposed losses on subordinated holders, it also attempted to set a new precedent in ‘bailing in’ depositors. In my opinion, the latest plan is likely to still impose a significant haircut on …read more
Source: FULL ARTICLE at DailyFinance

Articles of Interest

Video: Will Obama Seize Americans’ Savings?

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By Kris Zane

Supposedly in order to stave off an “economic apocalypse”—reminiscent of the banshee Barack Obama’s recent sequestration road show—Cyprus called for a “tax”—that is, confiscation—of between six and ten percent of its citizens’ bank accounts.

Yesterday, they floated the idea of nationalizing—that is, confiscating—pensions.

Today, the European Union is pushing to “freeze”—that is confiscate— bank accounts of the “bad” banks—forget about six and ten percent; they’re talking about forty percent!

They use terms like “tax,” “freeze,” or “nationalize”; but the operative word here is “confiscation.”

Obama would call it “paying their fair share.”

Although “theft” would be the word most would use.

The whole fiasco matters little as far as Cyprus is concerned. We’re talking about the EU wanting to “freeze” $13 billion. America spends that much funding Obama’s endless golf outings.

But when Americans heard that the European Union could force a sovereign nation to confiscate private citizens’ bank accounts, there was a collective gasp. Our economy is intimately tied with the European Union; and in fact, Americans have largely funded the endless bailouts through our having to pony up funds for the IMF. So when it was heard that the EU could confiscate private citizens’ bank accounts or pensions, we knew they could do it to virtually any country in the EU—and in fact, many now are talking about a “tax” of 15% on Italians’ savings.  What country is next? Germany? The UK?

What about the United States?

Far fetched?

Not at all. Obama and his gaggle of leftists were actually floating the idea of nationalizing 401Ks and IRAs in 2010—and only were stopped in their tracks when they lost the House in the 2010 midterms.

Under the auspices of a “bailout” for Big Labor’s bankrupt pensions—the same Big Labor that has donated a trillion dollars  to Obama’s endless campaign—Democrats were planning on confiscating Americans’ retirement accounts and funneling the money to their Big Labor backers.  The cover was the creation of what they called a Guaranteed Retirement Account—GRA—another government takeover that dwarves ObamaCare’s takeover of the healthcare industry.

Is this something a radicalized Obama administration floated, then rejected, in 2010?

Not at all. Obama’s just doing it, as always, via a Trojan Horse. Called “Automatic IRAs,” Obama’s budget proposals for 2013 include a preliminary government takeover of Americans’ retirement accounts by mandating employers contribute a certain amount to their employees’ retirement.

Of course, this employer mandate sounds oddly similar to ObamaCare’s mandate to buy health insurance, which is nothing more than a Trojan Horse for single-payer—that is, socialized healthcare.

And the “Automatic IRA” will be a Trojan Horse for nationalizing retirement accounts.

But this is only the beginning. Barack Obama and his gaggle of leftists are out for the motherlode: full-blown socialism.

Behind the scenes, the Obama administration is waiting for the European Union to collapse; waiting for the U.S. stock market to crash; and, like a vulture waiting for his prey to die, waiting for the U.S. economy itself to collapse.

Enter George Soros,  dubbed “The Man Who Broke the …read more
Source: FULL ARTICLE at Western Journalism

News, Politics, Government

Cyprus: Test Case for Leaving the Euro?

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By Chuck Jones, Contributor

Key Takeaway: This weekend Cyprus will have to either have to take money from depositors, default/restructure some of its bank debt (but there isn’t enough to absorb what needs to be done), let its banking system fail, turn to Russia for cash or some combination to get money from the ECB and IMF or be forced to leave the Euro. …read more
Source: FULL ARTICLE at Forbes Latest

Business, Finance, Occupation & Industry

Why the Dow Was Down More than 100 Points Earlier Today

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By John Maxfield, The Motley Fool

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Shares in the major indexes are broadly lower today on the back of a bevy of economic reports and a disappointing earnings release in the technology sector. With roughly an hour left in the trading session, the Dow Jones Industrial Average is lower by 70 points, or 0.48%.

The economic reports released today — which fellow Fool Dan Dzombak discusses at length — paint a generally positive picture of the domestic economy’s direction. Among other things, new claims for unemployment insurance came in lower than expected last week, existing-home sales climbed to a three-year high in February, and home prices for the month of January increased by 6.5% on a year-over-year basis.

Despite the generally upbeat news, however, all but six of the Dow’s 30 components are trading in the red. The explanation for this seems to be twofold. First, the ongoing crisis in Europe continues to roil the markets. Over the weekend, the Mediterranean island nation of Cyprus was bailed out by the EU and IMF. But to unlock the support, Cyprus must come up with 5.8 billion euros in new revenue, something that it has failed to do thus far. It now has only four more days to find a solution.

Suffice it to say, a Cyprus-induced fracture in the EU would cause panic throughout the financial markets. It would wreak particular havoc on the likes of JPMorgan Chase and Citigroup , both of which have significant global trading operations that would expose them to potentially massive losses. For its part, JPMorgan is down by 1.2% today, while Citigroup is 1.4% lower.

And second, technology shares are down following Oracle‘s earnings announcement last night. For the fiscal third quarter ended Feb. 28, the technology giant posted a 2% decline in new software sales and cloud-related subscription revenue. According to CNBC, this dramatically underperformed its previous estimates, which called for growth rates of 3% and 13%, respectively.

The impacts of this are being felt throughout the technology sector, which is down in aggregate by 1.3% in afternoon trading. “When you have a big company like that, it’s going to have a big impact on the sector,” an analyst at Wells Fargo told The Wall Street Journal. It’s largely for this reason, in turn, that the three worst-performing components on the Dow today are all tech stocks: Cisco Systems , IBM, and Hewlett-Packard.

With respect to Cisco, as my colleague Matt Thalman noted earlier, the two companies are close competitors in many of the same areas with similar products and services. Consequently, to echo Matt’s point, while “Oracle’s weak performance could mean that Cisco is gaining market share, but based on today’s stock performance … it’s safe to say investors feel that the market for these devices is weakening.”

Want to learn more about Cisco?
Once a highflying tech darling, Cisco is now on the radar of value-oriented dividend lovers. Get the low down …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Cyprus' Politicians: More Dysfunctional Than the U.S. Congress

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By Alex Dumortier, CFA, The Motley Fool

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After tallying up healthy gains yesterday, stocks opened lower this morning, with the S&P 500

and the narrower, price-weighted Dow Jones Industrial Average
down 0.49% each at 10:10 a.m. EDT.

follow-up
The situation is increasingly muddled — and dire —  in Cyprus as the government runs out of time and options. Banks have been ordered shut until Tuesday, there are long lines at ATMs, and the European Central Bank has given Cyprus until Monday before it suspends liquidity to its banks (which would precipitate a collapse of the banking system).

Originally, I had thought the troika (the IMF, the European Union, and the European Central Bank) was largely to blame for this fiasco by pushing a plan that included a levy of 6.75% on small depositors. However, it is becoming increasingly clear that the Cypriot government itself is unwilling to force large depositors (many of them Russian) to take the full hit for fear of irreparably damaging Cyprus‘ rather dubious offshore-banking franchise.

In desperation, the government is going hat in hand to the Russian state and drumming up harebrained schemes. Natural-gas-royalty-backed bonds or equity units, anyone? Just bear in mind that the gas reserves are uncertain, ownership rights are in dispute, and pumping would begin no earlier than 2019.

There are other indications that Cypriot leaders have forsaken rationality, such that one cannot now exclude the worst-case scenarios. Yesterday, the Eurogroup Working Group, which consists of deputy finance ministers or senior treasury officials from the 17 eurozone countries, as well as representatives from the European Central Bank and the European Commission, held a teleconference to discuss the situation. Cyprus didn’t even bother to take part; according to Reuters, several participants understandably described the decision as “troubling.”

It seems that Cypriot politicians may yet succeed where their Greek counterparts failed: forcing the EU to expel them from the eurozone. Hang on to your hats — this could get interesting!

If you want to invest rationally, based on company fundamentals rather than macroeconomic news, The Motley Fool’s chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the brand-new free report “The Motley Fool’s Top Stock for 2013.” Just click here to access the report and find out the name of this under-the-radar company.

The article Cyprus’ Politicians: More Dysfunctional Than the U.S. Congress originally appeared on Fool.com.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on LinkedIn. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same …read more
Source: FULL ARTICLE at DailyFinance

News, Politics, Government

Investigators search Paris home of IMF chief as part of probe into $400M arbitration deal

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A lawyer for IMF chief Christine Lagarde says French investigators have searched her Paris home as part of an inquiry into her role in a $400 million arbitration deal in favor of a tycoon.

The lawyer, Yves Repiquet (eev ruh-PEE-kay), says Lagarde has nothing to hide and welcomed Wednesday’s search as another step in proving her innocence.

Lagarde was France‘s finance minister when magnate Bernard Tapie won a 2008 settlement with a state-owned bank over the mishandled sale of Adidas in the 1990s. Critics said the settlement was too generous.

IMF spokesman Gerry Rice said the organization’s executive board had discussed the issue prior to Lagarde’s appointment in June 2011, “and expressed its confidence that Madame Lagarde would be able to effectively carry out her duties as managing director.”

Rice declined further comment, saying it would be inappropriate to say more about a case currently before the French judiciary.

Critics in France have said the Adidas case shouldn’t have gone to a private arbitration authority in the first place because it involved a state-owned bank, Credit Lyonnais, and that Lagarde should have questioned the independence of one of the arbitration panel’s judges.

Questions about the settlement began before Lagarde was appointed head of the Washington-based International Monetary Fund after her predecessor, Dominique Strauss-Kahn, quit to face charges he tried to rape a New York hotel maid. The charges against Strauss-Kahn were dropped.

During Lagarde‘s four-year tenure as France‘s finance minister, she won praise for her role in international negotiations during the global financial crisis and Europe‘s debt troubles.

Given the legal troubles of her IMF predecessor, Strauss-Kahn, Lagarde’s contract says she is “expected to observe the highest standards of ethical conduct” and “shall strive to avoid even the appearance of impropriety in your conduct.”

…read more
Source: FULL ARTICLE at Fox World News

Business, Finance, Occupation & Industry

Why the Federal Reserve's Announcement Sent Stocks Soaring

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By John Maxfield, The Motley Fool

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The market‘s recent rally to all-time highs appeared to be in jeopardy at the beginning of the week following the unexpected bailout of Cyprus on Sunday. But if yesterday and today are any indication, the market has since brushed the bad news off. After climbing marginally yesterday, the Dow Jones Industrial Average is up an impressive 78 points, or 0.54%, with roughly an hour left in the trading session.

On its face, the Cyprus bailout seems more like a tempest in a teapot (to steal a phrase from Jamie Dimon) than a serious economic crisis that would roil the international financial system. At $10 billion, the cost to the eurozone and International Monetary Fund hardly registers on the economic Richter scale. But given the media’s obsession with the matter, it’s clearly not the size of the bailout that matters. The devil, as they say, is in the details.

The most contentious aspect of the bailout concerns the country’s proposed manner of meeting its obligations, as it must come up with 5.8 billion euros to unlock the 10 billion euro package offered by the EU and IMF. Over the weekend, the parliament in Cyprus tentatively agreed to fund its portion by a levy on bank deposits. As my colleague Morgan Housel discussed, depositors with less than 100,000 euros in the bank would face a 6.75% haircut, while those with more than that figure would face a 9.9% tax.

While the proposed levy was subsequently amended to exclude depositors with less than 20,000 euros in a bank account, it was formally voted down yesterday by the nation’s politicians. If anything, however, this only makes the situation worse. As an article on our site noted this morning: “Tuesday’s decisive rejection of the plan to take a slice of all deposits above 20,000 euros ($25,888) has left the country’s bailout in question. Without the bailout, the Cypriot banking sector would collapse, devastating the country’s economy and potentially causing it to leave the euro.”

Beyond Cyprus, the most concrete catalyst for the market‘s ascent today was the anticipated — and now released — announcement by the Federal Reserve regarding its economic outlook. While analysts and commentators had been speculating for months that the Fed may back away from its former commitment to keep interest rates low for an extended time period, today’s announcement seems to contradict that narrative.

After noting that the domestic economy appears to have returned “to moderate economic growth following a pause late last year,” the central bank’s monetary-policy committee nevertheless noted that it “continues to see downside risks to the economic outlook [and] also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.” Given this, the Fed will continue its current program of buying “additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.” In other words, …read more
Source: FULL ARTICLE at DailyFinance

News, Politics, Government

Investigators search Paris home of IMF chief

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A lawyer for IMF chief Christine Lagarde says French investigators have searched her Paris home today as part of an inquiry into her role in a $400 million arbitration deal in favor of a tycoon.

The laywer, Yves Repiquet (eev ruh-PEE-kay), says Lagarde has nothing to hide and he welcomed Wednesday’s search as another step in proving her innocence.

Lagarde was France‘s finance minister when magnate Bernard Tapie won a 2008 settlement with a state-owned bank over the mishandled sale of Adidas in the 1990s. Critics said the settlement was too generous.

Questions about the settlement began before Lagarde was appointed head of the Washington-based International Monetary Fund after her predecessor, Dominique Strauss-Kahn, quit to face charges he tried to rape a New York hotel maid. The charges were dropped.

…read more
Source: FULL ARTICLE at Fox World News

Business, Finance, Occupation & Industry

Cyprus Seeks Alternative Solution to Debt Crisis

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By The Associated Press

cyprus banking crisis cypriot government

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Petros Giannakouris/AP During a crucial meeting Wednesday, Cypriot leaders meet to find an alternative plan to raise €5.8 billion to finance a bailout of Cyprus banks at the presidential palace in Nicosia.

By ELENA BECATOROS and MENELAOS HADJICOSTIS

NICOSIA, Cyprus — The Cypriot government and the country’s central bank were working Wednesday on an alternative proposal to stave off bankruptcy, a day after Parliament rejected an initial plan to raise billions of euros by seizing up to 10 percent of people’s bank savings.

Government spokesman Christos Stylianides said a meeting was underway at the central bank to discuss an alternative plan for raising funds, but also for reducing the €5.8 billion ($7.5 billion) that must be found domestically.

“A team of experts from each party are on their way to the central bank to discuss a Plan B regarding the financing and reduction of the €5.8 billion,” said Stylianides. “They have now gone to the central bank to assess this possibility and for party representatives to know what this plan is.”

The bank’s deputy governor Spyros Stavrinakis said no decision had been taken on when banks, which have been shut since the weekend, would reopen. The new plan being worked on hasn’t yet been presented to the country’s euro partners and International Monetary Fund, he said.

The meetings were taking place a day after lawmakers rejected a plan to seize up to 10 percent of people’s bank deposits, a key demand from prospective creditors in exchange for rescue money to save the Cypriot banking system and shore up the government‘s finances.

The banks remained shut for the third day running and there are growing expectations that they may not reopen until next week, certainly not until Cypriot authorities come up with a credible financial package that has the blessing of the European Commission, the European Central Banka and the IMF, the so-called troika. The package must also win approval from lawmakers.

Anastasiades was also due to meet with representatives from the creditors later in the day.

Meanwhile, his finance minister, Michalis Sarris, was in Moscow for meetings with his Russian counterpart. Russia could play a key role in any alternative package that may emerge. Russians are believed to account for just under a third of Cyprus‘s €68 billion in bank deposits.

And in a surprise development, the head of Cyprus‘ influential Orthodox church, Archbishop Chrysostomos II, said he would put the church’s assets at the country’s disposal, saying the church was willing to mortgage its assets to invest in government bonds. The church has considerable wealth, including property, stakes in a bank and a brewery.

“The wealth of the church is at the disposal of the country,” Chrysostomos said after meeting with Anastasiades.

<a target=_blank href="http://www.dailyfinance.com/2013/03/20/cyprus-seeks-alternative-solution-to-debt-crisis/" rel="bookmark" title="Permanent link …read more
Source: FULL ARTICLE at DailyFinance

News, Politics, Government

Cyprus seeks to shield small depositors from financial raid

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The Cypriot government sought Tuesday to shield small savers from a plan that is intended to raise €5.8 billion ($7.5 billion) toward a financial bailout by seizing money from bank accounts.

The plan, which is part of a larger bailout package being negotiated with other European countries, has been met with fury in Cyprus and has sent jitters across financial markets.

Banks in Cyprus will stay shut until Thursday to prevent a bank run before Parliament has backed the plan to seize a percentage of bank deposits. If the bill goes through some savers could still try to get their money out.

Just hours ahead of the expected debate and vote in the country’s 56-member Parliament, officials sought to limit the impact on small savers. They also hinted that the country was looking to limit the amount it has to raise from the grab on deposits. The new plan would leave a shortfall in the amount Nicosia has been told it must raise.

About 300 protesters gathered outside parliament, which was cordoned off by police.

A vote in favor of the bank account confiscation is needed if Cyprus is to get €10 billion ($12.9 billion) in rescue loans from its euro partners and the International Monetary Fund. The money will be used to prop up its banks.

A new draft bill discussed in Parliament’s finance committee proposed to spare all deposits below €20,000 ($25,900). Those between €20,000 and €100,000 ($129,290) would still have a 6.75 percent charge imposed, and those above €100,000 would have to give up 9.9 percent of their deposits, in line with the original plan put forward over the weekend.

In a sign of the scale of disagreement over the deposit charge, the country’s central bank governor, Panicos Demetriades, recommended that no accounts below €100,000 be touched. That level represents the amount of savings that are supposed to be insured if a bank collapses.

“The credibility of, and trust in the banking sector depends on this,” said Demetriades, who conceded that he expects at least 10 percent of deposits to be withdrawn when the banks eventually re-open.

Failure to pass the bill could mean no bailout money from the eurozone and IMF and lead to Cyprus‘s bankruptcy, which could reignite concerns in financial markets over the single currency’s future. That would likely put deposits in the country’s banks under even more threat.

Although Cyprus is the smallest eurozone country to be bailed out, the details of the plan sent shockwaves through the single currency area as it was the first time savers’ banks accounts have been directly targeted. Other bailed out countries such as Greece, Ireland and Portugal have raised funds by imposing new taxes.

Proponents of the deposit seizure argue that this way gets foreigners who have taken advantage of Cyprus‘s low-tax regime to share the cost of the bailout of the banks, which have been hit hard by their over-exposure to bad Greek debt.

About a third of all deposits in Cypriot banks are believed to be held by Russians.

Finance Minister Michalis Sarris was flying to Moscow …read more
Source: FULL ARTICLE at Fox World News

Business, Finance, Occupation & Industry

The Cyprus Saga Continues as the Dow Falls

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By Dan Carroll, The Motley Fool

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The Dow Jones Industrial Average continues to fall from last week’s record highs as investors digest the eurozone’s contentious plan for bailing out debt-plagued Cyprus. As of 2:20 p.m. EDT, the Dow has fallen 48 points, or 0.33%, with a majority of its members in the red. Let’s get caught up on today’s biggest stories.

All eyes on Europe
Cyprus revealed a new plan today after Cypriots cried foul on the earlier plan to tax all bank deposits smaller than 100,000 euros at a 6.75% rate and all above that threshold at a 9.9% rate. The new bill sent to the island nation’s parliament proposes not taxing accounts under 20,000 euros, but concerns have risen that the revised plan would not raise the 5.8 billion euros targeted by the IMF and eurozone. The country’s banks are closed until Thursday as the parliament continues to delay a vote on the bill.

The problem raised by Cyprus‘s radical measure isn’t the effect on the Cypriot economy; the nation’s GDP is minuscule compared to the European Union‘s. However, if the initiative to directly tax bank deposits spreads to bigger troubled economies such as Italy and Spain, real trouble could be on the horizon. Cyprus‘ move has already sparked fears of a bank run in the country: Average citizens drained ATMs yesterday. Such an occurrence in larger, more influential Italy could be disastrous.

Numerous stocks have dragged on the Dow as investors remain cautious, and Caterpillar has taken the worst blow today. Shares of the industrial giant have fallen 1.7% today, continuing an ugly 2013 for the stock. The company has blamed lagging demand in China and Europe for its excess inventory, compensating by continuing layoffs at select plants as it tries to bring production under control. While the housing turnaround in the U.S. should help Caterpillar’s waning fortunes, the company’s in desperate need of economic strength in China, as the second-largest economy’s slowdown has hurt stocks across the industrial sector.

Shares of Disney and Alcoa have joined Caterpillar downward today, losing 1.4% and 1.2%, respectively. Alcoa, like Caterpillar, is struggling with demand pressures — particularly in China, as the nation’s plan to slow its growing housing bubble has strained materials firms.

Meanwhile, Disney has announced new age restrictions for its parks. Unaccompanied minors under the age of 14 will now be banned from Disney parks and resorts as the company looks to improve children’s safety. While the move could have a small impact on park revenue, it doesn’t justify today’s sell-off. On the other hand, Disney’s stock has surged more than 30% over the past year, and a small dip is little to worry about for shareholders who have been rewarded handsomely.

One Dow stock is ignoring the bad news, however. Coca-Cola shares have risen 1.4% to lead the Dow today. There’s little news out on the beverage giant, but Cyprus‘ messy situation won’t severely impact this safe and stable …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Bank of America Headed to $15 a Share?

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By John Maxfield, The Motley Fool

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On a day when the financial sector, and banks in particular, are trading lower, shares of Bank of America are continuing their impressive post-stress test rally, up more than 1% roughly two hours before the market closes. By all appearances, the afterglow of last week’s $5 billion share buyback announcement and positive news out of the housing sector today are helping the bank buck the Cyrpus-induced downtrend.

The tiny Mediterranean island of Cyprus is now in its fourth day of deliberations over how to raise an additional 5.8 billion euros to satisfy the conditions of its bailout by the eurozone and the International Monetary Fund. The most contentious issue concerns a proposed levy on bank deposits. On Saturday morning, the country’s parliament tentatively agreed on legislation to this end. Under the terms of the draft bill, depositors with between 20,000 and 100,000 euros on deposit would pay a 6.75% rate, while those with more than 100,000 euros in the bank would pay 9.9%. Those with less than 20,000 euros would be spared the impact.

The reverberations from this news have been widespread, evidenced by the comprehensive coverage given to it by the mainstream financial media. Investors and analysts are principally concerned about the potential for contagion. The fear is that depositors throughout the European continent could begin moving their money to presumed safe havens lest their savings be effectively confiscated as well.

However, there’s a legitimate argument that much of this concern — and media coverage, for that matter — is arguably misinformed. As my colleague Morgan Housel presciently discussed yesterday, the alternative would be for Cyprus to leave the eurozone and set up shop on its own, including reinstituting its former currency and presumably putting its printing presses into overdrive. “That would eventually cause inflation,” Morgan notes. “How much? I don’t know, let’s say 6.75%. In that case, those with cash deposits in Cypriot banks would lose 6.75% of their money in real terms — the same amount being directly confiscated on most deposits through the IMF bailout.”

Thanks to these arguably misguided fears, financial stocks here at home have taken a turn for the worse since the news was made public. The KBW Bank Index is down by 1.4% compared to its Friday close. And all of the too-big-to-fail banks — including JPMorgan Chase , Citigroup , and Wells Fargo — are trading lower as well, even though all three of them got approval to increase the amount of capital that they return to shareholders last week — to read all about this, click here.

The one exception to this trend is Bank of America, the nation’s second largest bank by assets. As I mentioned above, shares of the nation’s second largest bank by assets are more than 1% higher in afternoon trading. What gives?

The answer to this question is twofold. First, unlike JPMorgan and Wells Fargo, shares of B of A have consistently …read more
Source: FULL ARTICLE at DailyFinance