Asian Economy: New billionaire born in Asia every other day

The total wealth of billionaires surged to six trillion dollars last year, more than 17 percent than a year ago. Asian billionaires are outpacing their US counterparts for the first time, says research released by UBS on Thursday.

The surge is caused by an increase in Asia’s emerging billionaire class and growth in the materials, industrials, financial and technology sectors.

“On average, a new billionaire was created in Asia every two days, with the total number of Asian billionaires rising by almost a quarter to 637, compared to 563 in the US,” the report says.

Read more: New billionaire born in Asia every other day — RT Business News

Global Economy: Economic Recession in 2017 -

Next year, we will see a recession.

I’m calling it.

Why? Well … there are just too many events unfolding this year that will set the stage for a recession, including a corporate earnings recession, a growth-stunting Brexit vote and a U.S. presidential election unlike any we have ever experienced.

Any one of these events could be the direct catalyst for next year’s recession, or it could be one of the many other reasons not listed.

While I can’t predict the exact catalyst for the event, I do know that I’m not the only one expecting the worst.

In fact, according to a recent report, companies are preparing for a recession as well … and you should be doing the same.

In the latest durable goods advance estimate for June, orders tumbled 4% versus expectations of a 1.7% decline. Durable goods orders represent orders for products that last typically for at least three years, like appliances, office equipment, motor vehicles and turbines.

Earlier this month, I explained how declining durable goods orders mean that the Federal Reserve’s hands are tied, and that interest rates are not going higher by any meaningful degree for at least another decade.

This remains true, but you also have to be prepared for the inevitable — a recession.

Your takeaway here is simple: Prepare for a recession-like investment environment.

That means you want to own safe-haven stocks — think gold-related stocks, utilities or telecommunication companies, bonds and even some blue-chip stocks.

But the main thing you want to consider, if you haven’t already, is to find a strategy for profiting from declining stocks.

Depending on how you manage your money, this can be easy to do. If you are managing your own portfolio, a long-term put option on the SPDR S&P 500 ETF (NYSE Arca: SPY) (expiration in 2018 would be ideal) is a simple way to profit from a recession and decline in stocks.

If, instead, you have an adviser who manages your portfolio, tell them you want more bearish exposure, assuming you have little at the moment. It’s your money, and they will listen and help you prepare for the imminent recession.

They should be able to put your investment in some simple bear funds that benefit from a market fall, or they might also consider buying an inverse ETF that returns the opposite of the underlying equity.
Just keep in mind that these positions are used as protection to hedge your portfolio from a crash.

The further we get into 2017 without the expected stock market crash, tilt your portfolio more and more to positions that will rise when the crash hits.

A crash is coming. It’s just a matter of when, not if.

Read more: conomic Recession in 2017 - ValueWalk

US Presidential Elections: Bernie Sanders: Tackling America’s Biggest "Rackets" - by Richard Phillips

Merriam-Webster defines a racket as “a usually illegitimate enterprise made workable by bribery or intimidation.” Certainly, enough rackets operate in the United States, but three stand head and shoulders above the rest.

Health care, education and finance are the three rackets that have particularly significant effects in distorting the U.S. economy.

It is not by coincidence that these three industries are also the targets that Presidential candidate Bernie Sanders is attacking head-on in his Presidential bid.

Important i8n Sanders’ racket-busting agenda is finance. There is little disagreement that the U.S. financial sector has been egregious in its stewardship of America’s finances.

The market capitalization of America’s banks accounts for 113% of its GDP, which is more than in any other developed country.

England and Switzerland, both of which serve as international financial centers, have ratios of 90% and 65% respectively. Germany and France, which are more domestically oriented, have ratios of 31% and 46%.

Clearly, these and other statistics underscore the overemphasis on finance in the U.S. economy. This is partly due to finance wages, which are typically well above national norms.

Read more: Bernie Sanders: Tackling America’s Biggest "Rackets" - The Globalist

Wall Street versus Main Street: “Over-representation of Wall Street banks in senior government positions sends bad message" - by David Ignatius

The revival of the U.S. financial system after the crash of 2008 is arguably the Obama administration’s biggest domestic policy success. But Sen. Elizabeth Warren (D-Mass.), in her jihad against Wall Street, seems determined to devalue this accomplishment — and to make financial expertise a mark of shame for Democrats, rather than a source of pride.

Warren’s current target is Antonio Weiss, the president’s nominee for Treasury undersecretary for domestic finance. Weiss’s chief defect, in the eyes of Warren and other liberal critics, is that he worked as an investment banker at Lazard and, in that role, appears to have advised Burger King on how to reduce its U.S. tax liability.

“The over-representation of Wall Street banks in senior government positions sends a bad message.”

Warren and the neo-populists are right that the recovery hasn’t benefited Main Street as much as it has Wall Street and that the fruits of American prosperity are skewed toward the wealthy. Changing the structural problems that limit job growth may be the country’s biggest economic challenge, as Summers has argued persuasively.

But fixing this problem will surely be harder if liberal Democrats such as Weiss, who understand the financial world enough to challenge it, are barred from government for the offense of working on Wall Street. 

Read more: Warren’s war against Wall Street - The Washington Post

Disparity: How Shadow Banking and Extreme Wealth Inequality Threaten Us - by David DeGraw

Hidden wealth estimates vary widely. Many of them only take a partial look at the most basic methods of offshoring wealth.  Given the unprecedented growth of wealth over the past generation, the secretive methods used to hide it have evolved far beyond well-known tax havens in Switzerland and small-island jurisdictions such as the Bahamas.  While estimates based on banking secrecy and tax havens help to give us a more accurate picture of overall wealth, they do not give a total view.

Research by Gabriel Zucman, which analyzed banking secrecy, estimated that “around 8% of the global financial wealth of households is held in tax havens.”  If we correlate this 8% with the $82 trillion in accounted for wealth reported by the Federal Reserve, that would be an additional $6.6 trillion for the wealthy, bringing the richest 1% up to roughly $39 trillion in overall wealth.

However, to get a more complete understanding of the reality of the situation, the most wide-ranging look into hidden wealth was done in 2012 by economist John Henry in partnership with the Tax Justice Network (TJN).  They estimated that there was $21- $32 trillion hidden globally at the end of 2010. As shocking as that sounds, that estimate still did not give a complete view of hidden wealth.  As they put it, “We consider these numbers to be conservative. This is only financial wealth and excludes a welter of real estate, yachts and other nonfinancial assets owned via offshore structures.”

We also need to consider that overall US household wealth is up 30% and has increased by $25 trillion since the end of 2010. Globally, High Net Worth Individual investible wealth has increased 19% since then, and has begun to accelerate at a record pace.  In 2013, it increased globally by 14%, with a 17% increase in North America, which is now at an all-time high.  Given these factors, and several others that will be explained below, the higher TJN estimation of $32 trillion in 2012 is conservative today.

Correlating TJN’s wealth estimates with US distribution percentages is not an exact science but it gives a much more accurate total of overall wealth than excluding it.  Based on TJN’s estimation, Ultra High Net Worth Individuals (UHNWI) accounted for 48% of hidden wealth.  If we correlate that to the overall estimate of $32 trillion, it equates to $15.4 trillion for the UHNWI population.

The US accounts for 35% of the UHNWI population, which correlates to $5.4 trillion.  In the next tier, High Net Worth Individuals (HNWI) also accounted for 48% of hidden wealth.  The US currently has 42% of the HNWI population, which correlates to $6.5 trillion.  The additional 4% of hidden wealth is estimated to be held below the economic top 1% of the US population, which correlates to roughly $538 billion.

This brings the estimated total of hidden US wealth to $12.4 trillion, with $11.9 trillion of that held within the top 1%.  We can now estimate that the top .01% has $14.5 trillion in wealth, the top .1% has $26.4 trillion and in total the top 1% has $44.5 trillion.

Read more: How Shadow Banking and Extreme Wealth Inequality Threaten Us | Alternet

Cyprus negotiations with troika go to the wire

Cyprus said on Saturday it would tax big savers at its largest bank in a dramatic U-turn as it raced to satisfy European partners and seal an 11th-hour bailout deal to avert financial collapse.

President Nicos Anastasiades, barely a month in the job and wrestling with Cyprus's worst crisis since a 1974 invasion by Turkish forces split the island in two, was due to lead a delegation to Brussels, also on Sunday, to meet heads of the EU, the European Central Bank and International Monetary Fund, in a sign a deal might be near.

"Hopefully by tomorrow in Brussels we will have the agreement of our partners," Averof Neophytou, deputy leader of the ruling Democratic Rally party, told reporters.

The tottering banks hold 68 billion euros in deposits, including 38 billion in accounts of more than 100,000 euros - enormous sums for an island of 1.1 million people which could never sustain such a big financial system on its own.
 
 Read more: Cyprus weighs big bank levy; bailout goes down to wire | Reuters

Iceland : Baugur Investment chief indicted in Iceland - by Richard Milne

The most prominent of Iceland’s one-time corporate raiders has been indicted by the country’s special prosecutor in the latest attempt by the Nordic island uncover alleged wrongdoing from its dramatic financial crisis.

Jón Ásgeir Jóhannesson, who once bought up swaths of the UK high street through his investment company Baugur, was charged in last week’s indictment alongside the former chief executive of Glitnir, one of Iceland’s biggest banks.

The entrepreneur became the epitome of both Iceland’s boom and also its painful bust after a group of oligarchs used cheap credit to build global empires that crumbled as Iceland’s overleveraged banks collapsed. At one stage, Baugur owned UK retail chains such as Hamley’s, House of Fraser and Oasis.

Read more: Baugur chief indicted in Iceland - FT.com

Europe aims for breakthrough on financial transactions tax

Europe's finance ministers on Saturday made another effort to achieve a breakthrough on a disputed financial transactions tax, as Germany unveiled a plan to bring on board a sceptical Britain. 

Ministers entering the second of a two-day meeting here expressed cautious support for a proposal issued by German Finance Minister Wolfgang Schaeuble to introduce a tax only on trade in company shares before broadening it out. 

Acknowledging that resistance from several countries had delayed the tax, proposed by the European Commission in September 2011, that aims to make the financial sector pay for the crisis, Schaeuble proposed an "intermediate step."

For more: Europe aims for breakthrough on financial transactions tax - The Economic Times

EU-Digest Polls: 98% says yes to taxing financial speculators

Check out our new EU-Digest Poll: "Do you believe Iran presents a threat to the Middle East?"
In our last poll: "Should Financial Speculators be taxed" 98% of the respondents voted yes. One percent of those polled said no and 1% said they did not know.

Let your voice be heard: vote.

EU-Digest

Eurozone split over private sector role in debt rescue fund

The eurozone's northern and southern nations are locking horns over whether the private lenders should automatically participate in bailouts of distressed nations, diplomats said Friday.

France, Italy and Spain want to remove a clause from the EU's future, permanent rescue fund that would make private sector investors take losses as part of bailouts, the sources said, confirming German newspaper reports.

"We have always said that we should not add uncertainty in the markets," said a diplomat from one of the countries reluctant to force banks and investment funds to be attached to debt rescues. The diplomat said that insisting on making the private sector participate in a second Greek bailout at a July summit had increased tension on the markets.

Note EU-Digest: there they go again...financial sector wants to make the profits, but when their wheeling and dealing goes sour they want the taxpayer t0 pick up the tab.


For more: Eurozone split over private sector role in debt rescue fund - The Economic Times

ECB’s strength under microscope in euro zone debt crisis - by Martin Mittelstaed

As Europe’s sovereign debt crisis intensifies, financial markets are worried about the continent’s banks. But the strain is also falling in an unexpected direction – on the European Central Bank.

Like its privately owned counterparts, the euro zone’s core financial institution carries large amounts of debt on its balance sheet from Greece and other risky borrowers. It wouldn’t need much of a “haircut” – bond market jargon for a drop in the value of these debts – to seriously diminish the ECB’s capital.

Last month, Open Europe, a think tank based in London, issued an analysis suggesting that a Greek default could erase most, if not all, of the ECB’s capital. “We think that the ECB’s balance sheet is now incredibly exposed and that it’s very weak,” says Mats Persson, director of Open Europe.

Note EU-Digest: as usual the critique on the EU, EURO and the ECB once again comes from Anglo-Saxon circles.

For more: ECB’s strength under microscope in euro zone debt crisis - The Globe and Mail

Top eurozone officials meet on Greece amid alarm on Italy

Top eurozone officials met this morning to discuss the debt crisis in the 17-nation single currency region amid concerns that it could spread to Italy.

European Central Bank chief Jean-Claude Trichet, EU monetary affairs commissioner Olli Rehn, eurozone chief Jean-Claude Juncker and Jose Manuel Barroso, the head of the European Commission, are attending the specially-convened event in Brussels.

Markets became jittery after Prime Minister Silvio Berlusconi publicly criticised his widely-respected finance minister Giulio Tremonti.

There is also concern about the health of Italian banks, with the results of EU stress tests due out on Friday. At the end of last week, the premium which Italy pays to borrow money compared with Germany's soared to its highest point since the eurozone came into being.

As to Greece Euro-zone governments might proceed with a plan to bring Greece's private-sector creditors into a new aid package, even if major credit ratings agencies find Greece to have defaulted on its debt. "I am more searching for a solution than a rating," Belgian Finance Minister Didier Reynders said before a meeting of euro-zone finance ministers here. "If it's with a negative reaction from the rating agencies, that's not a problem."

EU-Digest

The Netherlands: Discussions around the "Third Capital Requirements CRD III EU Directive"

Recently the European Commission requested Greece, Italy, Poland, Portugal, Slovenia and Spain to notify measures within two months to implement important rules concerning the capital adequacy and the remuneration policies of financial institutions, as laid down in the Third Capital Requirements Directive or CRD III (2010/76/EU).


The aim of the Directive is to ensure the financial soundness of banks and investment firms and to address excessive and imprudent risk-taking in the banking sector promoted by improperly designed remuneration practices which led to the failure of individual institutions and problems to the society as a whole.


The deadline for implementing the rules in question was 1 January 2011. The Commission has also requested Belgium, Luxembourg, Slovakia and Sweden to implement those parts of the Directive that they have so far failed to, according to an announcement.


Today in the Netherlands there was a parliamentary round-table panel discussion  on the issue, including all the major Dutch financial/insurance  institutions. They discussed not only the EU CRD III directive, but also remuneration standards for board members and top management which becomes very muddled when looking at multi-national financial institutions. operating outside EU borders. In the discussions it became apparent that the financial sector is still greatly  influenced by short term thinking and shareholders interest.  

Listening to these public discussions it became apparent that most of the financial/insurance sector representatives on the panel, except for  two banks,  which have a different corporate structure,  had major problems in  recognizing  that  the present culture of the financial industry has to change.  Public pressure on the political establishment, as a result of the financial crises revealed that the tax payers wanted action,  without delay,  to change the financial sectors focus and  its culture back from being a short term profit/shareholders oriented sector,  to a socially focused  public service structure   

Unfortunately it seems that if there are no international agreements which can be linked with  the EU CRD III directive, it will be difficult to control the malpractises of  multi-national financial organizations which are not regulated.


EU-Digest