Newsletter of Economic and Market Events
Year of 2014 Best Investments in 2014
2014 complete News (click)
Month of December 2014
Dow: 17,823
Dow 2014: 16,576.66 to 17,823
Dow return for 2014: 7.52%
S&P 500 2014: 1,848.36 to 2,059
S&P 500 return for 2014: 11.39%
NASDAQ 2014: 4,176.59 to 4,736
NASDAQ return for 2014: 13.40%
10 year Treasury: 2.17% yield down 28%, prices up
World Equity Market: $69.42 trillion up 11%
MSCI Europe Index down -2.8%
MSCI Asia Pacific Index up 10.7%
S&P Latin America 40 down -13.7%
MSCI BRIC down -6.8%
S&P Middle East & Africa up 2.3%
* U.S. Total stock market returned 11% in 2014, Stocks had average gains, Bonds had above average gains and inflation was below average 1.5%.
* Of the 5 largest sectors in the U.S. Economy: Real Estate 29.3%, Healthcare 23.5%, Technology 16.2%, Financials 13.5% while Natural Resources -10.3%. By size: Large Cap returned 10%, Mid Cap 9%, Small Cap 5% and Micro Cap 3% all had gains. Gold down -2% while oil fell -45% with commodity prices (CRB) down -18%.
* Global markets rose by 11% of the World's largest economic regions: Asia 11%, Europe -3%, while Emerging Markets down -7% and Latin America down -14%. Of the World's largest Developed non-U.S. Economies: Japan 7%, Canada 7%, Germany 3%, France -1%, Britain -2%. In the Emerging markets China 52%, India 30% while Brazil -3% and Russia -45%. Hedge funds underperformed 6% and Private Equity 11% outperformed market indexes.
* Those who diversified with MPT did best, a trend which should accelerate indicative are the returns in U.S sectors, China and India.
* Separate yourself and your performance from retail investors by using Modern Portfolio Theory (MPT) and Tactical Portfolio Optimization. Institutional investors have for decades spread their investments across many asset classes seeking higher returns. Underperformance is caused by confining your investments to a few similar asset classes and neglecting risk management.
Months 2009-14 (click)
U.S. unemployment at 6.7% to 5.6% remained a major concern. 2014 gdp 2.5% with 3 million jobs added.
U.S. monthly job gains in 2014: 1/14 144,000, 2/14 222,000, 3/14 203,000, 4/14 304,000, 5/14 229,000, 6/14 267,000, 7/14 243,000, 8/14 203,000, 9/14 256,000, 10/14 261,000, 11/14 353,000, 12/14 252,000.
GDP quarterly growth for 2014 1Q -2.1% (largest loss since 1Q09), 2Q 4.6%, 3Q 5.0% (largest gain since 3Q03), 4Q 3.0%.
FOMC neutral stance Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. QE3/QE4 ended, FMOC (Oct 29) "decided to conclude its asset purchase program [will maintain] its existing policy of reinvesting principal payments from its holdings" Federal Reserve's balance sheet stands at $4.48T.
- Federal Reserve extends (12/18) compliance of Volcker rule from 7/21/15 to July 21, 2017 for "legacy covered funds" (covered funds and foreign funds prior to 12/31/13); Federal Reserve previously extended (4/7) collateralized loan obligations (CLOs) compliance to July 21, 2017.
- Federal Reserve new chairwoman Janet Yellen (1/6) confirmed first woman ever to head bank.
CFPB (Consumer Financial Protection Bureau, 1/10) new mortgage rules ensure that consumers can repay mortgages with protections (if problems occur) to avoid foreclosure. Lenders must document consumer's income and assets, along with debt, against the long-term monthly payments.
TARP closed (12/18) with $15.35B profit - $426.35B disbursed with repayments of $441.7B, U.S. Treasury sold over $80 billion of stock and convertible warrants from 2010-12. TARP ownership positions end in: AIG, Citigroup, Bank of America, Fannie Mae, Freddie Mac, General Motors, Chrysler, GMAC, and Ally Financial. AIG - total $182.3B ($67.8B disbursed), profit $5.1B. Banks: total 245.1B, profit $29.7B. Auto: total $79.7B, lost $9.35B. Credit: total $19.1B, profit $4.5B. Housing: total $14.6B, lost $14.6B.
US 10yr Treasuries trades 1.8622% (10/15) yield falls 39% (10 months) from 3.0516% (1/2) and 30yr Treasuries trades 2.6744% (10/15) yield falls 33% (10 months) from 3.9744% (1/2). VIX trade 31.06 (10/15) rises 202% (3 months) from 10.28 (7/3).
Treasuries gained 6.1% in 2014, -3.4% in 2013, 2.2% in 2012, 9.8% in 2011, 5.9% in 2010. U.S. Aggregate Bond index up 5% .
Mergers and acquisitions $3.4T in 2014, up from $2.63T in 2013, $2.19T in 2012 and $2.26T in 2011. Venture capital $40B in 4,195 deals in 2014.
WTI/Brent oil trades $52.44/55.82 (12/31) falls 53/51% (16 months) from $112.24/117.29 (8/26/13). Gold trades $1130.4 (11/7) down 41% from $1,923.70 (9/6/11), 5-year low. Silver falls to $14.10 (12/1) down 72% from $49.82 (4/25/11). CRB index falls to 228.99 (12/31) down 38% from $370.72 (5/2/11).
U.S. participation rate falls to 62.7% lowest since February 1978 - 155,862,000 of 248,446,000 civilian noninstitutional population (16yrs and older, not Armed Forces, health/mental facilities, or incarcerated).
Obama signs (12/19) Tax Increase Prevention Act of 2014 - individual, business, energy tax extenders through 12/31/14, $41.6 billion in tax relief.
ECB cuts (9/4) lending rate to 0.05% (from 0.15%) and overnight deposit rate to -0.2% (from -0.1%). Starting 10/1 ECB will purchase ABS (asset-backed securities) and covered bonds. ECB balance sheet to rise from €2T to €2.7T euros (3/1/12, record €3.02T, $3.96T). TLTRO facility (9/18, 4yrs) €82.6B ($106.5B) to 255 EU banks at 0.15%.
- German 10yr trades 0.535% (12/30) yield falls 74% (16 months) from 2.087% (9/11/13). Greek 10yr trades 9.85% (12/26) yield up 78% (3 months) from 5.52% (9/8). Euro trades €1.2151 (12/26) down 13% (7 months) from €1.399 (5/6).
- European Fund for Strategic Investment (11/26) €21B (€16B EU and €5B from the European Investment Bank) invested to issue €60B in bonds, proceeds will then be invested in €315B of loans for infrastructure and small businesses. ECB (11/21) begins purchases of €1T of asset-backed securities.
- ECB (10/26) tests 130 EU banks (covering 85%) ability to withstand future crises. 25 banks failed stress tests (17 have already covered their capital shortfalls) remaining shortfall €6.35B ($8B) and non-performing EU bank exposure about €879B. ECB (10/20) begins purchases of €1T of covered-bonds - EU has a €2.6T covered-bond market.
- ECB initiates negative rates (6/5): deposit rate to -0.1%, benchmark to 0.15% (down 10bps), and emergency borrowing rate to 0.4% (down 35bps). Also, a €400B ($542B) TLTRO facility to increase lending (Targeted Longer-Term Refinancing Operations in 9/18/2014 and 12/2014) and possible future asset-purchase plan. Denmark's Nationalbanken (Jul 5, 2012 - Apr 24, 2014) cut CD rate to -0.20% (down 25bps, to maintain Danish Krone's peg to the Euro). Swedish Riksbank from July 8, 2009 - Sept. 7, 2010 deposit rate -0.25%.
- EU Single Resolution Mechanism (SRM 4/16, EU banks) to unwind/restructure lenders. Bank Recovery and Resolution Directive (BRRD) requires 8% of failing bank's liabilities wiped out before rescue. Cross-border bank resolution fund €55B ($76B) financed by bank levies. Clients' bank deposits insured up to 100,000 euros (starting 11/2014). ECB will supervise EU's largest banks - EU governments provided €592B ($818B) to support banks from 10/2008-12/2012.
124 major EU banks (over 50% of banking assets in each member state) will be stress tested (common Tier 1 capital above 5.5% of risk-weighted assets).
Greece issues (4/10) $4.14B (€3B) of 5yr bonds yielding 4.95%, unlocking €8.3B of bailout funds - 6 years of recession, 240b euros in rescue loans from EU and IMF, current debt 175.6% of GDP 12/31/13.
- Ireland issued (3/13/2013) €5B ($6.52B) of 10yr bonds at 4.15%. Ireland (12/15/2013) received final bailout loan from EU and IMF pending budget reforms - financial rescue €85B ($117B) program.
- Portugal (4/23) issued €750M ($1.04B) of 10yr bonds at 3.575% - €78B ($107.8B) bailout and ends rescue programs on May 17. Portugal bought back (2/27) €1.32B ($1.8B) of bonds (first buyback since 3/9/2011).
- Portugal will spend €4.9B ($6.58B, 8/3) to rescue Banco Espirito Santo "good bank" (Novo Banco) and a "bad bank" (losses incurred by junior bondholders and shareholders), dipping into Portugal's EU/IMF bank resolution fund (2012) of €6.4B.
Bank of Japan (10/31) to buy ¥80T annually ($716B) increased from ¥60-70T under Quantitative and Qualitative Easing (QQE) on April 4, 2013 monetary easing stimulus - extending the "average remaining maturity" to 7-10 years (up from 3 years of Japanese government bonds) and triple its purchases to ¥3T for ETFs, ¥90B for J-REITs. BOJ holds about 20% of Japan's outstanding government bonds.
Japan's Government Pension Investment Fund (GPIF, $1.2T, ¥127.3T the world's largest pension fund) would increase its Japanese and overseas equity holdings to 25% each (from 12%), 15% in foreign bonds (from 11%), and reducing Japanese debt to 35% from 60%.
- Japan approves 12/27 ¥3.5T ($29 billion) fiscal stimulus package to boost economy.
- Japanese 10yr yield fell to all time low of 0.31% (12/24).
- Yen trades ¥121.85 (12/8) down 62% (2 years) from ¥75.31 (10/31/11).
PBOC (11/21) cuts 1yr lending rate (first since July 6, 2012) to 5.6% from 6.0% and 1yr deposit rate to 2.75% from 3.0% - PBOC's new Medium-term Lending Facility injected 元769.5B yuan ($126B) to lenders in September and October. China's outstanding value of shadow-banking products estimated 元21.87T yuan ($3.52T).
- PBOC cuts (6/16) Reserve Requirement Ratio (RRR, 20%) for Rural Commercial Banks (RCBs) to 18% and Rural Credit Cooperatives (RCCs) to 16% - China raised (from 7.5%) its RRR 19 times (to 17.5%) from 7/2006 to 7/2008 to moderate growth, then cut RRR 3 times 9/2008 to 12/2008 (to 15.5%) to support the global downturn, then starting in 1/2010 raised 13 more times to cool their property market to 21.5% (a high in June 2011) before cutting in 11/2011.
- China's foreign reserves touches $4T 6/2014 - $3T, 4/2011, China holds $1.27T of U.S. Treasury market (10.6% of the U.S.'s $12T).
- Chinese yuan apreciates to 元6.0393 (1/14) up 13% from 6.83 (6/17/10).
- BRICs (7/15) Brazil, Russia, India, China and South Africa establish $100B development bank.
- Alibaba IPO (9/19, $68 a $167.6B market capitalization) sold 368M shares raising $25B - opening $92.70 ($228.5B market cap) with 2013 gross receipts of $248B (vs Amazon $116B). Agricultural Bank of China IPO $22.1B in 2010, Industrial & Commercial Bank of China $21.9B in 2006, Visa's $19.7B in 2008, General Motor's $18.1B in 2010 and Facebook's $16B in 2012.
Argentina defaults (7/30) for second time (2001) with about $200B in foreign-currency debt (including $29B of restructured bonds) - ISDA (International Swaps & Derivatives Association) determines Argentina's failure is a credit event that will trigger settlement of $1B of CDSs. Argentina defaulted (12/26/2001) on $102.6B (National bank run), on (1/14/2005) Argentina restructured 76.2% of debt ($62.3B), on (8/11/2010) Argentina debt exchange restructuring rose to 92.6% ($12.4B).
Russian ruble trades ₽81.1 (12/16) falls 59% (6 months) from ₽33.55 (6/27, ruble high ₽23.15 7/15/2008 4 days after oil hit $147.27, ₽27.15 on 5/5/11). Russia's central bank raises interest rate to 17% from 10.5% (12/15). Russia's RTS Index falls 73% to 578.21 (12/16) from 2,134.23 (4/11/11). Russia's central bank's reserves fell from over $509.6B to under $388B defending the ruble. Russia's Deposit Insurance Agency takes control (12/22) of National Bank Trust (15th-largest by retail deposits) with ₽127B ($2.1B) bailout, Russia's National Wealth Fund injects (12/31) ₽100B ($1.7B) into VBT Bank (2nd-largest) and injects (12/31) ₽150B ($2.5B) into Yamal LNG (the Arctic gas project of Novatek).
U.S. Government settlements against 6 largest U.S. bank totals $128B (2010-14).
- Banks (11/12) settle $4.3B for rigging foreign exchange benchmarks: Citigroup $1.02B, JPMorgan Chase $996M, UBS $800M, RBS $634M, HSBC $618M, and Bank of America $250M to U.S's CFTC & OCC, the U.K.'s FCA, and the Swiss FMSA.
- Bank of America settles (8/21) $16.65B (including $245M to SEC) for selling mortgage-backed securities (MBS) and collateralized debt obligations (CDO) to investors ($9.65B Justice Department and $7B consumer relief). Tobacco industry settled (11/1998) $246B agreement over 25 years and federal regulatory oversight - Philip Morris, R. J. Reynolds, Brown & Williamson, Lorillard and Liggett & Myers. Bank of America settles (7/30) $1.27B for defective mortgages sold by Countrywide to Fannie Mae and Freddie Mac in 2007 and 2008. Bank of America settles (7/16) $650M payment to AIG for mortgage-backed securities sold. AIG also recovered $1.3B from JP Morgan Chase, Morgan Stanley and others - AIG had purchased mortgage bonds and sold over $50B of mortgage CDSs. Bank of America settles (4/9) $783M for deceiving customers in sales of credit-card debt cancellation and theft-protection insurance. Bank of America (3/26) settles with FHFA $9.5B ($6.3B and buy back $3.2B of mortgage bonds) for mortgages sold to Fannie Mae and Freddie Mac between 2005 and 2007. Bank of America (Countrywide) $8.5B 11/18/13 settlement (1/31 approved) with institutional investors. Bank of America sold RMBS ($424B with $100B losses), Bank of America will buyback $5.5B in bonds Countrywide originated (defect rate 36%). Private RMBS totaled $2.2T (2008), with losses 2006-2012 of $449B (exceeding total losses on $9T of non-private mortgage debt).
- Citigroup settles (7/14) $7B ($4B Justice Department, $2.5B in consumer relief and $500B FDIC and 5 states) for fraud related to mortgage-backed securities. Citigroup will pay (6/9) SEC $285M to settle fraud for CDO sold in 2007 (Class V Funding III). Citigroup settles (4/7) $1.13B with institutional mortgage-bond investors resolving RMBS from 2005-2008.
- Goldman Sachs will repurchase (8/22) $3.15B of FHFA mortgage-backed securities ($2.15B from Freddie Mac and $1B from Fannie Mae - a 62% premium of $1.2B).
- Morgan Stanley settles (2/4) $1.25B for selling mortgage-backed securities to Fannie Mae and Freddie Mac. Morgan Stanley settles (7/24) $275M with SEC for misleading investors about mortgage-backed securities.
- JPMorgan Chase settles (Feb 14) $614M they defrauded FHA and VA by selling RMBS packaged mortgage loans. JPMorgan Chase (Feb 28) pays bond insurer Syncora Guarantee $400M selling RMBS packaged mortgage loans.
-Wells Fargo settles (5/29) $62.5M to institutional investors for improperly advertising a risky securities lending program as safe.
- SunTrust Banks settles (6/17) $968M for mortgages to Fannie Mae and Freddie Mac. SunTrust Banks to pay (7/3) up to $320M to resolve a criminal probe in administering HAMP from 3/2009-12/2010.
- Fannie Mae (10/24) settles $170M for misleading shareholders about its finances, risk management and mortgage exposure before it was seized by the U.S. government during the 2008 financial crisis.
- AIG settles (8/4) $960M to investors for not disclosing its financials accurately from 2006-08.
- U.S. Bancorp, settles (6/30) $200M for mortgages to Fannie Mae and Freddie Mac, from 2006-11.
- GE Capital settles (6/14) $169M for credit card lending discrimination.
- MF Global (12/24) fined $100M penalty ($1.2B of client funds ordered returned) for misuse of customers funds and supervisory violations by CFTC.
- Credit Suisse pleads guilty (5/19) $2.615B to helping Americans evade taxes (since 2009 about 18,900 Americans closed their CS accounts rather than surrender). February 4, 2004 - Credit Lyonnais last pleaded guilty ($770M) to criminal charges of making false statements to the Federal Reserve related to the purchase of California insurer Executive Life. 106 Swiss banking institutions have agreed with IRS tax evasion disclosure initiatives by the Dec. 31, 2013 deadline. To date 45,000 America tax evaders have accepted IRS offshore accounts amnesty program and paid more than $6.5B in back taxes, interest and penalties. 77,000 foreign banks will share information about US $50k (or greater) account holders - complying with Foreign Account Tax Compliance Act (7/1/14, FATCA) and stemming offshore tax evasion. Credit Suisse (3/21) settles $885M with FHFA for mortgages sold to Fannie Mae and Freddie Mac between 2005 and 2007. Credit Suisse (2/21) settles $196.5M with SEC for regulatory violations related to clients avoiding paying U.S. taxes. Credit Suisse cross-border services (2002-08) of 22,000 U.S. client with up to $12B of assets.
- BNP Paribas settles (6/30) for $8.97B and pleads guilty to criminal charges of filing false business records and conspiracy - attempting to conceal (more than $190B processed) almost $9B in banned transactions from 2002-12 involving Sudan, Iran and Cuba. BNP also banned from dollar clearing for clients for 2015. Credit Suise (2009) $1.2B banned transactions $536M settlement.
ABN Amro (2010) $3.2B banned transactions $50M settlement.
Standard Chartered (2012) $667M banned transactions $667M settlement.
RBS (2013) $32M banned transactions $100M settlement.
- HSBC settles (9/12) $550M for failing to disclose the risks on mortgage bonds it sold to Fannie Mae and Freddie Mac.
- Standard Chartered settles (8/19) $300M and indefinitely suspends some dollar clearing for money laundering compliance failures required in their 12/10/12 settlement.
- Lloyds' settles (7/28) for $370M for LIBOR rate rigging.
- Pricewaterhouse Coopers fined (8/18) $25M for sanitizing reports to regulators on sanctions and money-laundering controls for Bank of Tokyo-Mitsubishi.
- Bank Leumi Le-Israel settles (12/22) deferred-prosecution agreement for $400 million admitting to helping American clients evade taxes.
- Four former Countrywide executives will receive over $200M of whistleblower payments as part of $16.65B settlement against Bank of America.
Anadarko Petroleum (4/3) settles $5.15B of environmental liabilities for Kerr-McGee acquisition in 2006.
- Halliburton to pay (9/2) $1.1B to Gulf Coast residents, local governments and businesses for fatal 2010 Macondo well oil spill.
- PG&E to pay (9/2) $1.4B for fatal natural-gas pipeline explosion in San Bruno, California.
- Alstom guilty of violating Foreign Corrupt Practices Act settles (12/22) $772M for bribery and failing to have adequate control to win power-plant contracts.
- Apple settles (11/21) $450M for harming consumers by colluding in raising e-book prices.
- Hewlett-Packard fined (9/13) $108M for paying bribes through its subsidiaries in Russia, Poland and Mexico.
- Toyota (3/19) settles $1.2B for cars unintended vehicle acceleration between 2009 and 2010, recalling more than 10 million U.S. vehicles.
- General Motors recalled over 30 million cars, recall repairs expected to cost $2.5B and establishes a fund to provide financial payouts to victims killed or injured in accidents.
Medicare Fraud Strike Force (5/13) charges 90 doctors, nurses, licensed medical professionals, health care company owners and others of conspiring to submit approximately $260M in fraudulent billings. Since its inception (March 2007) 1,900 charged for almost $6B of fraudulent billings.
- Mathew Martoma sentenced (9/8, SAC Capital Advisors) 9 years (and forfeit $9.3M) for record insider trading of $275M of illegal gains and avoided losses, guilty 2 counts securities fraud and 1 count conspiracy.
Ukraine's emergency rescue package IMF approved (4/30) $17B and unlocks an additional $15B in international financing. Kiev, Ukraine (3/27) over $30B in IMF bilateral and multilateral support over the next 2 years. U.S. (3/27) grants $1B in loan guarantees to Ukraine and sanctions against Russia for takeover of Crimea. UN votes Crimea secession invalid. Kyiv parliament's renunciation (12/23) of Ukraine's neutral status a move towards joining NATO.
Sochi 2014 Olympics - Norway's Ole Einar Bjoerndalen becomes most medaled winter Olympian with 13 (8 gold medals, 2 in Sochi). Russia wins 13 golds and 33 total; US wins 9 golds and 28 total.
Dow month: -0.03%, 6 mo: 5.92%, ytd: 7.52%
S&P 500: 2,059
S&P 500 month: -0.44%, 6 mo: 5.05%, ytd: 11.39%
NASDAQ: 4,736
NASDAQ month: -1.06%, 6 mo: 7.44%, ytd: 13.40%
U.S. unemployment falls to 5.8%, adding 252,000 jobs.
FOMC neutral stance (Dec 17) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. Federal Reserve extends (12/18) compliance of Volcker rule from 7/21/15 to July 21, 2017 for "legacy covered funds" (covered funds and foreign funds prior to 12/31/13); Federal Reserve previously extended (4/7) collateralized loan obligations (CLOs) compliance to July 21, 2017.
Obama signs (12/19) Tax Increase Prevention Act of 2014 - individual, business, energy tax extenders through 12/31/14, $41.6 billion in tax relief.
Russian ruble trades ₽81.1 (12/16) falls 59% (6 months) from ₽33.55 (6/27, ruble high ₽23.15 7/15/2008 4 days after oil hit $147.27, ₽27.15 on 5/5/11). Russia's central bank raises interest rate to 17% from 10.5% (12/15). Russia's RTS Index falls 73% to 578.21 (12/16) from 2,134.23 (4/11/11). Russia's central bank's reserves fell from over $509.6B to under $388B defending the ruble. Russia's Deposit Insurance Agency takes control (12/22) of National Bank Trust (15th-largest by retail deposits) with ₽127B ($2.1B) bailout, Russia's National Wealth Fund injects (12/31) ₽100B ($1.7B) into VBT Bank (2nd-largest) and injects (12/31) ₽150B ($2.5B) into Yamal LNG (the Arctic gas project of Novatek). WTI/Brent oil trades $52.44/55.82 (12/31) falls 53/51% (16 months) from $112.24/117.29 (8/26/13). Silver falls to $14.10 (12/1) down 72% from $49.82 (4/25/11). Gold trades $1130.4 (11/7) down 41% from $1,923.70 (9/6/11), 5-year low. CRB index falls to 228.99 (12/31) down 38% from $370.72 (5/2/11). German 10yr trades 0.535% (12/30) yield falls 74% (16 months) from 2.087% (9/11/13). Greek 10yr trades 9.80% (12/31) yield up 65% (3 months) from 5.52% (9/8). Japanese 10yr yield fell to all time low of 0.305% (12/26). Yen trades ¥121.85 (12/8) down 62% (2 years) from ¥75.31 (10/31/11). Kyiv parliament's renunciation (12/23) of Ukraine's neutral status a move towards joining NATO.
Treasury sold (12/18) of remaining $1.25B Ally Financial with $2.4B profit ($19.6B returned of $17.2B loaned). TARP ownership positions end in: AIG, Citigroup, Bank of America, Fannie Mae, Freddie Mac, General Motors, Chrysler, GMAC, and Ally Financial.
TARP closed (12/18) with $15.35B profit - $426.35B disbursed with repayments of $441.7B, U.S. Treasury sold over $80 billion of stock and convertible warrants from 2010-12. AIG - total $182.3B ($67.8B disbursed), profit $5.1B. Banks: Capital Purchase Program (CPP), Targeted Investment Program (TIP), Asset Guarantee Program (ASP), Temporary Liquidity Guarantee Program (TLGP), Small Business Lending Fund (SBLF), Community Development Capital Initiative (CDCI) - total 245.1B, profit $29.7B. Auto: Automotive Industry Financing Program (AIFP), Auto Supplier Support Program (ASSP) - total $79.7B, lost $9.35B. Credit: Term Asset-backed Loan Facility (TALF), Public Private Investment Funds (PPIF), Small Business Administration (SBA7a) - total $19.1B, profit $4.5B. Housing: Home Affordable Modification Program (HAMP), Home Affordable Refinance Program (HARP), and Making Home Affordable (MHA), Home Affordable Modification Program SM (HAMP SM), Second Lien Modification Program (2MP), New Issue Bond Program (NIBP), Temporary Credit and Liquidity Program (TCLP), Hardest Hit Fund (HHF) - total $14.6B, lost $14.6B.
60%.
Japan approves 12/27 ¥3.5T ($29 billion) fiscal stimulus package to boost economy.
Bank Leumi Le-Israel settles (12/22) deferred-prosecution agreement for $400 million admitting to helping American clients evade taxes.
Alstom guilty of violating Foreign Corrupt Practices Act settles (12/22) $772M for bribery and failing to have adequate control to win power-plant contracts.
MF Global (12/24) fined $100M penalty ($1.2B of client funds ordered returned) for misuse of customers funds and supervisory violations by CFTC.
Month of November 2014
Dow: 17,828
Dow month: 2.51%, 6 mo: 6.65%, ytd: 7.55%
S&P 500: 2,068
S&P 500 month: 2.48%, 6 mo: 7.48%, ytd: 11.88%
NASDAQ: 4,787
NASDAQ month: 3.37%, 6 mo: 12.82%, ytd: 14.62%
U.S. unemployment unchanged at 5.8%, adding 353,000 jobs.
European Fund for Strategic Investment (11/26) €21B (€16B EU and €5B from the European Investment Bank) invested to issue €60B in bonds, proceeds will then be invested in €315B of loans for infrastructure and small businesses. ECB (11/21) begins purchases of €1T of asset-backed securities.
PBOC (11/21) cuts 1yr lending rate (first since July 6, 2012) to 5.6% from 6.0% and 1yr deposit rate to 2.75% from 3.0% - PBOC's new Medium-term Lending Facility injected 元769.5B yuan ($126B) to lenders in September and October. China's outstanding value of shadow-banking products estimated 元21.87T yuan ($3.52T).
Apple settles (11/21) $450M for harming consumers by colluding in raising e-book prices.
Banks (11/12) settle $4.3B for rigging foreign exchange benchmarks: Citigroup $1.02B, JPMorgan Chase $996M, UBS $800M, RBS $634M, HSBC $618M, and Bank of America $250M to U.S's CFTC & OCC, the U.K.'s FCA, and the Swiss FMSA.
Month of October 2014
Dow: 17,391
Dow month: 2.04%, 6 mo: 4.89%, ytd: 4.91%
S&P 500: 2,018
S&P 500 month: 2.33%, 6 mo: 7.12%, ytd: 9.18%
NASDAQ: 4,631
NASDAQ month: 3.07%, 6 mo: 12.55%, ytd: 10.88%
U.S. unemployment falls to 5.8%, adding 261,000 jobs.
FOMC neutral stance (Oct 29) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. QE3/QE4 ended in October. FMOC "decided to conclude its asset purchase program this month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction." Federal Reserve's balance sheet stands at $4.48T.
US 10yr Treasuries trades 1.8622% (10/15) yield falls 39% (10 months) from 3.0516% (1/2) and 30yr Treasuries trades 2.6744% (10/15) yield falls 33% (10 months) from 3.9744% (1/2). VIX trade 31.06 (10/15) rises 202% (3 months) from 10.28 (7/3). Russian ruble trades ₽41.148 (10/17) falls 23% (3.5 months) from ₽33.5503 (6/27, ruble high ₽23.15 7/15/2008 4 days after oil hit $147.27, ₽27.15 on 5/5/11). WTI/Brent oil trades $79.10/82.94 (10/16) falls 29% (14 months) from $112.24/117.29 (8/26/13). Gold trades $1183.3 (10/6) near 5-year low ($1180 11/25/09, $1,179.40 6/2/13, $1181.4 12/30/13). German 10yr trades 0.715% (10/16) yield falls 66% (14 months) from 2.087% (9/11/13). Greek 10yr trades 9.101% (10/17) yield up 65% (5 weeks) from 5.52% (9/8). Euro trades €1.2506 (10/6) down 11% (5 months) from €1.399 (5/6). Yen trades ¥110.09 (10/1) down 46% (2 years) from ¥75.31 (10/31/11). Europe deflation fears, Russia incursion in Ukraine, Greece explores ending EU support on Dec 31, Ebola outbreak, and ISIS Islamic fighters in Syria/Iraq.
Bank of Japan (10/31) to buy ¥80T annually ($716B) increased from ¥60-70T under Quantitative and Qualitative Easing (QQE) on April 4, 2013 monetary easing stimulus - extending the "average remaining maturity" to 7-10 years (up from 3 years of Japanese government bonds) and triple its purchases to ¥3T for ETFs, ¥90B for J-REITs. BOJ holds about 20% of Japan's outstanding government bonds, yen trades ¥112.48 (10/31) a 7 year low ¥111.61 8/17/2007, gold trades $1160.5 (10/31) a 5 year low 11/23/09.
Japan's Government Pension Investment Fund (GPIF, $1.2T, ¥127.3T the world's largest pension fund) would increase its Japanese and overseas equity holdings to 25% each (from 12%), 15% in foreign bonds (from 11%), and reducing Japanese debt to 35% from 60%.
ECB (10/26) tests 130 EU banks (covering 85%) ability to withstand future crises. 25 banks failed stress tests (17 have already covered their capital shortfalls) remaining shortfall €6.35B ($8B) and non-performing EU bank exposure about €879B. ECB (10/20) begins purchases of €1T of covered-bonds - EU has a €2.6T covered-bond market.
Fannie Mae (10/24) settles $170M for misleading shareholders about its finances, risk management and mortgage exposure before it was seized by the U.S. government during the 2008 financial crisis.
Earnings season for 3Q14 for the S&P 500 index was positive, 10.5%.
Month of September 2014
Dow: 17,043
Dow month: -0.32%, 6 mo: 3.55%, ytd: 2.81%
S&P 500: 1,972
S&P 500 month: -1.55%, 6 mo: 5.34%, ytd: 6.69%
NASDAQ: 4,493
NASDAQ month: -1.90%, 6 mo: 7.00%, ytd: 7.58%
U.S. unemployment falls to 5.9%, adding 256,000 jobs. U.S. participation rate falls to 62.7% lowest since February 1978 - 155,862,000 of 248,446,000 civilian noninstitutional population (16yrs and older, not Armed Forces, health/mental facilities, or incarcerated).
FOMC neutral stance (Sep 17) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. QE3/QE4 reduced in October from $10B per month of agency mortgage-backed securities to $5B and $10B of longer-term Treasury securities from $15B.
ECB cuts (9/4) lending rate to 0.05% (from 0.15%) and overnight deposit rate to -0.2% (from -0.1%). Starting 10/1 ECB will purchase ABS (asset-backed securities) and covered bonds. ECB balance sheet to rise from €2T to €2.7T euros (3/1/12, record €3.02T, $3.96T). TLTRO facility (9/18, 4yrs) €82.6B ($106.5B) to 255 EU banks at 0.15%.
Alibaba IPO (9/19, $68 a $167.6B market capitalization) sold 368M shares raising $25B - opening $92.70 ($228.5B market cap) with 2013 gross receipts of $248B (vs Amazon $116B). Agricultural Bank of China IPO $22.1B in 2010, Industrial & Commercial Bank of China $21.9B in 2006, Visa's $19.7B in 2008, General Motor's $18.1B in 2010 and Facebook's $16B in 2012.
HSBC settles (9/12) $550M for failing to disclose the risks on mortgage bonds it sold to Fannie Mae and Freddie Mac.
Hewlett-Packard fined (9/13) $108M for paying bribes through its subsidiaries in Russia, Poland and Mexico.
Halliburton to pay (9/2) $1.1B to Gulf Coast residents, local governments and businesses for fatal 2010 Macondo well oil spill.
PG&E to pay (9/2) $1.4B for fatal natural-gas pipeline explosion in San Bruno, California.
Mathew Martoma sentenced (9/8, SAC Capital Advisors) 9 years (and forfeit $9.3M) for record insider trading of $275M of illegal gains and avoided losses.
Month of August 2014
Dow: 17,098
Dow month: 3.23%, 6 mo: 4.75%, ytd: 3.15%
S&P 500: 2,003
S&P 500 month: 3.73%, 6 mo: 7.75%, ytd: 8.37%
NASDAQ: 4,580
NASDAQ month: 4.81%, 6 mo: 6.31%, ytd: 9.66%
U.S. unemployment falls to 6.1%, adding 203,000 jobs.
Portugal will spend €4.9B ($6.58B, 8/3) to rescue Banco Espirito Santo "good bank" (Novo Banco) and a "bad bank" (losses incurred by junior bondholders and shareholders), dipping into Portugal's EU/IMF bank resolution fund (2012) of €6.4B.
Pricewaterhouse Coopers fined (8/18) $25M for sanitizing reports to regulators on sanctions and money-laundering controls for Bank of Tokyo-Mitsubishi.
AIG settles (8/4) $960M to investors for not disclosing its financials accurately from 2006-08.
Standard Chartered settles (8/19) $300M and indefinitely suspends some dollar clearing for money laundering compliance failures required in their 12/10/12 settlement.
Goldman Sachs will repurchase (8/22) $3.15B of FHFA mortgage-backed securities ($2.15B from Freddie Mac and $1B from Fannie Mae - a 62% premium of $1.2B).
Bank of America settles (8/21) $16.65B (including $245M to SEC) for selling mortgage-backed securities (MBS) and collateralized debt obligations (CDO) to investors ($9.65B Justice Department and $7B consumer relief). Tobacco industry settled (11/1998) $246B agreement over 25 years and federal regulatory oversight - Philip Morris, R. J. Reynolds, Brown & Williamson, Lorillard and Liggett & Myers.
Month of July 2014
Dow: 16,563
Dow month: -1.57%, 6 mo: 5.50%, ytd: -0.08%
S&P 500: 1,931
S&P 500 month: -1.48%, 6 mo: 8.30%, ytd: 4.47%
NASDAQ: 4,370
NASDAQ month: -0.86%, 6 mo: 6.48%, ytd: 4.63%
U.S. unemployment rises to 6.2%, adding 243,000 jobs.
FOMC neutral stance (July 30) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. QE3/QE4 reduced in August from $15B per month of agency mortgage-backed securities to $10B and $15B of longer-term Treasury securities from $20B.
Argentina defaults (7/30) for second time (2001) with about $200B in foreign-currency debt (including $29B of restructured bonds) - ISDA (International Swaps & Derivatives Association) determines Argentina's failure is a credit event that will trigger settlement of $1B of CDSs. Argentina defaulted (12/26/2001) on $102.6B (National bank run), on (1/14/2005) Argentina restructured 76.2% of debt ($62.3B), on (8/11/2010) Argentina debt exchange restructuring rose to 92.6% ($12.4B).
BRICs (7/15) Brazil, Russia, India, China and South Africa establish $100B development bank.
China's foreign reserves reaches $4T ($3T, 4/14/11), China holds $1.27T of U.S. Treasury market (10.6% of the $12T).
Lloyds' settles (7/28) for $370M for LIBOR rate rigging.
Morgan Stanley settles (7/24) $275M with SEC for misleading investors about mortgage-backed securities.
SunTrust Banks to pay (7/3) up to $320M to resolve a criminal probe in administering HAMP from 3/2009-12/2010.
Bank of America settles (7/30) $1.27B for defective mortgages sold by Countrywide to Fannie Mae and Freddie Mac in 2007 and 2008. Bank of America settles (7/16) $650M payment to AIG for mortgage-backed securities sold. AIG also recovered $1.3B from JP Morgan Chase, Morgan Stanley and others - AIG had purchased mortgage bonds and sold over $50B of mortgage CDSs.
Citigroup settles (7/14) $7B ($4B Justice Department, $2.5B in consumer relief and $500B FDIC and 5 states) for fraud related to mortgage-backed securities.
Earnings season for 2Q14 for the S&P 500 index was positive, 8.5%.
Month of June 2014
Dow: 16,827
Dow month: 0.66%, 6 mo: 1.51%, ytd: 1.51%
S&P 500: 1,960
S&P 500 month: 1.87%, 6 mo: 6.04%, ytd: 6.04%
NASDAQ: 4,408
NASDAQ month: 3.89%, 6 mo: 5.54%, ytd: 5.54%
U.S. unemployment falls to 6.1%, adding 267,000 jobs.
FOMC neutral stance (June 18) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. QE3/QE4 reduced in July from $20B per month of agency mortgage-backed securities to $15B and $20B of longer-term Treasury securities from $25B.
ECB initiates negative rates (6/5): deposit rate to -0.1%, benchmark to 0.15% (down 10bps), and emergency borrowing rate to 0.4% (down 35bps). Also, a €400B ($542B) TLTRO facility to increase lending (Targeted Longer-Term Refinancing Operations in 9/18/2014 and 12/2014) and possible future asset-purchase plan. Denmark's Nationalbanken (Jul 5, 2012 - Apr 24, 2014) cut CD rate to -0.20% (down 25bps, to maintain Danish Krone's peg to the Euro). Swedish Riksbank from July 8, 2009 - Sept. 7, 2010 deposit rate -0.25%.
PBOC cuts (6/16) Reserve Requirement Ratio (RRR, 20%) for Rural Commercial Banks (RCBs) to 18% and Rural Credit Cooperatives (RCCs) to 16% - China raised (from 7.5%) its RRR 19 times (to 17.5%) from 7/2006 to 7/2008 to moderate growth, then cut RRR 3 times 9/2008 to 12/2008 (to 15.5%) to support the global downturn, then starting in 1/2010 raised 13 more times to cool their property market to 21.5% (a high in June 2011) before cutting in 11/2011.
General Motors (6/30) has recalled 27 million cars in North America, recall repairs expected to cost $2.5B and establishes a fund to provide financial payouts to victims killed or injured in accidents.
GE Capital settles (6/14) $169M for credit card lending discrimination.
U.S. Bancorp, settles (6/30) $200M for mortgages to Fannie Mae and Freddie Mac, from 2006-11.
Citigroup will pay (6/9) SEC $285M to settle fraud for CDO sold in 2007 (Class V Funding III).
SunTrust Banks settles (6/17) $968M for mortgages to Fannie Mae and Freddie Mac.
BNP Paribas settles (6/30) for $8.97B and pleads guilty to criminal charges of filing false business records and conspiracy - attempting to conceal (more than $190B processed) almost $9B in banned transactions from 2002-12 involving Sudan, Iran and Cuba. BNP also banned from dollar clearing for clients for 2015. Credit Suise (2009) $1.2B banned transactions $536M settlement.
ABN Amro (2010) $3.2B banned transactions $50M settlement.
Standard Chartered (2012) $667M banned transactions $667M settlement.
RBS (2013) $32M banned transactions $100M settlement.
Month of May 2014
Dow: 16,717
Dow month: 0.82%, ytd: 0.85%, 6 mo: 3.92%
S&P 500: 1,924
S&P 500 month: 2.13%, ytd: 4.09%, 6 mo: 6.53%
NASDAQ: 4,243
NASDAQ month: 3.12%, ytd: 1.59%, 6 mo: 4.51%
U.S. unemployment unchanged at 6.3%, adding 229,000 jobs.
Credit Suisse pleads guilty (5/19) $2.615B to helping Americans evade taxes (since 2009 about 18,900 Americans closed their CS accounts rather than surrender). February 4, 2004 - Credit Lyonnais last pleaded guilty ($770M) to criminal charges of making false statements to the Federal Reserve related to the purchase of California insurer Executive Life. 106 Swiss banking institutions have agreed with IRS tax evasion disclosure initiatives by the Dec. 31, 2013 deadline. To date 45,000 America tax evaders have accepted IRS offshore accounts amnesty program and paid more than $6.5B in back taxes, interest and penalties. 77,000 foreign banks will share information about US $50k (or greater) account holders - complying with Foreign Account Tax Compliance Act (7/1/14, FATCA) and stemming offshore tax evasion.
Wells Fargo settles (5/29) $62.5M to institutional investors for improperly advertising a risky securities lending program as safe.
Medicare Fraud Strike Force (5/13) charges 90 doctors, nurses, licensed medical professionals, health care company owners and others of conspiring to submit approximately $260M in fraudulent billings. Since its inception (March 2007) 1,900 charged for almost $6B of fraudulent billings.
Month of April 2014
Dow: 16581
Dow month: 0.75%, ytd: 0.03%, 6 mo: 6.66%
S&P 500: 1,884
S&P 500 month: 0.64%, ytd: 1.92%, 6 mo: 7.22%
NASDAQ: 4,115
NASDAQ month: -2.01%, ytd: -1.49%, 6 mo: 4.96%
U.S. unemployment falls to 6.3%, adding 304,000 jobs.
FOMC neutral stance (Apr 30) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. QE3/QE4 reduced in May from $25B per month of agency mortgage-backed securities to $20B and $25B of longer-term Treasury securities from $30B. Federal Reserve revises terms (4/7) of Overnight Fixed-Rate Reverse Repurchase Agreement facility for maintaining short-term interest rates.
Greece issues (4/10) $4.14B (€3B) of 5yr bonds yielding 4.95%, unlocking €8.3B of bailout funds - 6 years of recession, 240b euros in rescue loans from EU and IMF, current debt 175.6% of GDP 12/31/13.
Ireland issued (3/13/2013) €5B ($6.52B) of 10yr bonds at 4.15%. Ireland (12/15/2013) received final bailout loan from EU and IMF pending budget reforms - financial rescue €85B ($117B) program.
Portugal (4/23) issued €750M ($1.04B) of 10yr bonds at 3.575% - €78B ($107.8B) bailout and ends rescue programs on May 17. Portugal bought back (2/27) €1.32B ($1.8B) of bonds (first buyback since 3/9/2011).
EU Single Resolution Mechanism (SRM 4/16, EU banks) to unwind/restructure lenders. Bank Recovery and Resolution Directive (BRRD) requires 8% of failing bank's liabilities wiped out before rescue. Cross-border bank resolution fund €55B ($76B) financed by bank levies. Clients' bank deposits insured up to 100,000 euros (starting 11/2014). ECB will supervise EU's largest banks - EU governments provided €592B ($818B) to support banks from 10/2008-12/2012.
124 major EU banks (over 50% of banking assets in each member state) will be stress tested (common Tier 1 capital above 5.5% of risk-weighted assets).
Bank of America settles (4/9) $783M for deceiving customers in sales of credit-card debt cancellation and theft-protection insurance.
Citigroup settles (4/7) $1.13B with institutional mortgage-bond investors resolving RMBS from 2005-2008.
Anadarko Petroleum (4/3) settles $5.15B of environmental liabilities for Kerr-McGee acquisition in 2006.
Ukraine's emergency rescue package IMF approved (4/30) $17B and unlocks an additional $15B in international financing.
Earnings season for 1Q14 for the S&P 500 index was positive, 5.5%.
Month of March 2014
Dow: 16,458
Dow month: 0.83%, ytd: -0.72%, 6 mo: 8.78%
S&P 500: 1,872
S&P 500 month: 0.70%, ytd: 1.28%, 6 mo: 11.30%
NASDAQ: 4,199
NASDAQ month: -2.53%, ytd: 0.54%, 6 mo: 11.35%
U.S. unemployment unchanged at 6.7%, adding 203,000 jobs.
FOMC neutral stance (Mar 19) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. QE3/QE4 reduced in April from $30B per month of agency mortgage-backed securities to $25B and $30B of longer-term Treasury securities from $35B.
U.S. GDP fell -2.1% 1Q14, largest since 1Q09.
Feds stress tests (3/26) Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act (DFA) annual stress tests found 25 of the 30 largest U.S. banks could withstand a deep recession and still pay dividends - except Citigroup, HSBC, RBS, Santander, and Zions Bancorporation.
Toyota (3/19) settles $1.2B for cars unintended vehicle acceleration between 2009 and 2010, recalling more than 10 million U.S. vehicles.
Credit Suisse (3/21) settles $885M with FHFA for mortgages sold to Fannie Mae and Freddie Mac between 2005 and 2007.
Bank of America (3/26) settles with FHFA $9.5B ($6.3B and buy back $3.2B of mortgage bonds) for mortgages sold to Fannie Mae and Freddie Mac between 2005 and 2007.
Kiev, Ukraine (3/27) over $30B in IMF bilateral and multilateral support over the next 2 years. U.S. (3/27) grants $1B in loan guarantees to Ukraine and sanctions against Russia for takeover of Crimea. UN votes Crimea secession invalid. Russian ruble falls (3/3) to $0.027/36.9 - below $0.027/36.4 its crisis level on Feb 18 '09. RTS Russian index falls to 1016.01 (3/14) from 2,123.56 on 4/8/2011 down 52%.
Month of February 2014
Dow: 16,322
Dow month: 3.97%, ytd: -1.54%, 6 mo: 10.21%
S&P 500: 1,859
S&P 500 month: 4.26%, ytd: 0.58%, 6 mo: 13.84%
NASDAQ: 4,308
NASDAQ month: 4.97%, ytd: 3.15%, 6 mo: 20.00%
U.S. unemployment rises to 6.7%, adding 222,000 jobs.
Credit Suisse (2/21) settles $196.5M with SEC for regulatory violations related to clients avoiding paying U.S. taxes. Credit Suisse cross-border services (2002-08) of 22,000 U.S. client with up to $12B of assets.
JPMorgan Chase settles (Feb 14) $614M they defrauded FHA and VA by
selling RMBS packaged mortgage loans. JPMorgan Chase (Feb 28) pays bond insurer Syncora Guarantee $400M selling RMBS packaged mortgage loans.
Morgan Stanley settles (2/4) $1.25B for selling mortgage-backed securities to Fannie Mae and Freddie Mac.
Mathew Martoma (SAC, 2/6) guilty 2 counts securities fraud and 1 count conspiracy in $275M insider trading.
Sochi 2014 Olympics - Norway's Ole Einar Bjoerndalen becomes most medaled winter Olympian with 13 (8 gold medals, 2 in Sochi). Russia wins 13 golds and 33 total; US wins 9 golds and 28 total.
Month of January 2014
Dow: 15,699
Dow month: -5.29%, ytd: -5.29%, 6 mo: 1.28%
S&P 500: 1,783
S&P 500 month: -3.54%, ytd: -3.54%, 6 mo: 5.75%
NASDAQ: 4,104
NASDAQ month: -1.74%, ytd: -1.74%, 6 mo: 13.18%
U.S. unemployment falls to 6.6%, adding 144,000 jobs.
FOMC neutral stance (Jan 29) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%. QE3/QE4 in February reduced from $35B per month of agency mortgage-backed securities to $30B and $35B of longer-term Treasury securities from $40B.
CFPB (Consumer Financial Protection Bureau, 1/10) new mortgage rules ensure that consumers can repay mortgages with protections (if problems occur) to avoid foreclosure. Lenders must document consumer's income and assets, along with debt, against the long-term monthly payments.
Federal Reserve new chairwoman Janet Yellen (1/6) confirmed first woman ever to head bank.
Chinese yuan apreciates to 元6.0393 (1/14) up 13% from 6.83 (6/17/10).
Bank of America (Countrywide) $8.5B 11/18/13 settlement (1/31 approved) with institutional investors. Bank of America sold RMBS ($424B with $100B losses), Bank of America will buyback $5.5B in bonds Countrywide originated (defect rate 36%). Private RMBS totaled $2.2T (2008), with losses 2006-2012 of $449B (exceeding total losses on $9T of non-private mortgage debt).
Earnings season for 4Q13 for the S&P 500 index was positive, 10%.
Year of 2013 Best Investments in 2013
2013 complete News (click)
Dow 2013: 13,104.14 to 16,576.66
Dow return for 2013: 26.5%
S&P 500 2013: 1,426.19 to 1,848.36
S&P 500 return for 2013: 29.6%
NASDAQ 2013: 3,019.51 to 4,176.59
NASDAQ return for 2013: 38.3%
10 year Treasury: 3.026% yield up 72%, prices down
World Equity Market: $62.54 trillion up 20%
MSCI Europe Index up 17.4%
MSCI Asia Pacific Index up 10.3%
S&P Latin America 40 down -16%
MSCI BRIC down -10.2%
S&P Middle East & Africa down -7.7%
* U.S. Total stock market returned 32% in 2013, Stocks had above average gains, Bonds had below average gains and inflation was below average 1.5%. Only U.S. corrections in June and August the rest of the year had gains.
* Of the 5 largest sectors in the U.S. Economy: Healthcare 42%, Financials 36%, Technology 27%, Natural Resources 19% and Real Estate 5%. By size: Large Cap returned 29%, Mid Cap 32%, Small Cap 39.6% and Micro Cap 35% all had above average gains. Gold down -28% while oil rose 7% with commodity prices (CRB) down -5%.
* Global markets rose by 20% of the World's largest economic regions: Europe 17.4%, Asia 10.3%, while Emerging Markets down -2.7% and Latin America down -16%. Of the World's largest Developed non-U.S. Economies: Japan 56.7%, Germany 25.5%, France 18.0%, Britain 14.4% and Canada 9.6%. In the Emerging markets India 9.0% while Brazil -15.5%, Russia -5.6%, and China -5.2%. Hedge funds 8% and Private Equity 30.4% outperformed market indexes.
* Those who diversified with MPT did best, a trend which should accelerate indicative are the returns in U.S sectors.
* Separate yourself and your performance from retail investors by using Modern Portfolio Theory (MPT) and Tactical Portfolio Optimization. Institutional investors have for decades spread their investments across many asset classes seeking higher returns. Underperformance is caused by confining your investments to a few similar asset classes and neglecting risk management.
Months 2009-13 (click)
U.S. unemployment at 6.7% to 7.9% remained a major concern. 2013 gdp 2.6% with 2.3 million jobs added.
U.S. monthly job gains in 2013: 1/13 197,000, 2/13 280,000, 3/13 141,000, 4/13 203,000, 5/13 199,000, 6/13 201,000, 7/13 149,000, 8/13 202,000, 9/13 164,000, 10/13 237,000, 11/13 274,000, 12/13 84,000.
FOMC neutral stance (Dec 13) Fed Funds rate 0%-0.25% and the Discount rate of 0.75%.
Federal Reserve's QE4 in January reduced (to $75B/mo from $85B/mo) may extend thru 2014 and unemployment below 6.5%.
- Fed's balance sheet exceeds $4T ($891M end of 2007) 2.2T U.S. Treasuries, $1.5T mortgage backed securities, $326M other.
- Federal Reserve continues temporary bilateral liquidity swap arrangements with the European Central Bank, Bank of Japan, Bank of England and central banks of Canada and Switzerland "until further notice" (set to expire 2/1/14).
- Federal Reserve returned $79.5B to the Treasury in 2013 (balance sheet of $4.023T) down from $88.4B in 2012.
- Financial Stability Oversight Council (FSOC, 6/4/13) adds AIG, Prudential Financial, General Electric as SIFIs (Systemically Important Financial Institution).
GDP quarterly growth for 2013 1Q 2.7%, 2Q 1.8%, 3Q 4.5%, 4Q 3.5%.
Volcker rule (12/10) prohibits "any transaction or activity...that would substantially increase the likelihood that the banking entity would incur a substantial financial loss". To hedge "demonstrably reduces or otherwise significantly mitigates one or more specific, identifiable risks [and provide] ongoing recalibration". Must qualify for the market-making exemption and inventories cannot exceed "reasonably expected near-term demands of customers". Limited investments in private equity, hedge funds and commodity pools. An exemption for some securities tied to foreign sovereign debt. Compliance by July 21, 2015 - beginning June 30, 2014, banks with $50B must report 7 quantitative measurements to Supervision: OCC, CFTC and the SEC.
Treasuries lost -3.4% in 2013, 2.2% in 2012, 9.8% in 2011, 5.9% in 2010. U.S. Aggregate Bond index down -1.92% first loss since 1999 and worst loss since 1994.
Gold falls to $1,179.40 (6/27) down 38.7% from $1,923.70 (9/6/11). Silver falls to $18.185 down 63.5% from $49.82 (4/25/11). Jefferies CRB down -5% for the year, trades 272.36 (11/19) down -18% from 321.36 (9/14/12) all-time high of 370.72 (May 2, 2011).
Mergers and acquisitions $2.63T in 2013, up from $2.19T in 2012 and $2.26T in 2011. Venture capital $29.4B in 3,995 deals in 2013.
FDIC selling (9/11) $2.42B of Citigroup bonds exiting U.S. government holdings linked to financial crisis.
GM, U.S. Treasury completes divestiture (12/9) losing $11.2B on its GM investment of $49.5B, now UAW retiree health-care trust owns 9.2% and the Canadian governments 7.2%.
Obama signs American Taxpayer Relief Act of 2012 (1/2, $4T over 10 years) in tax relief.
Labor force participation rate falls to 62.8% lowest since 8/1978 (25 yrs) it peaking at 67.3% in 2000. Currently 92M Americas are not counted as part of the labor force.
Nearly 20% of U.S. homeowners mortgages "underwater" (12/31, 10M households, peak of 31.4% 3/31/2012) and next 10M households have 20% or less equity in their homes.
Since 2009, 1.4M have modified their mortgages through Treasury's Home Affordable Modification Program (HAMP) and 3M under Home Affordable Refinance Program (HARP).
Food-stamp (SNAP, Supplemental Nutrition Assistance Program) benefits rose to 47.8 million Americans and a record $82.5B (2013) - 26 million Americans and about $30B, in 2007.
State's unfunded liabilities: California $640B (liabilities of $1.1T), Ohio $287B ($433B), Illinois $287B ($378.5B), New York $260B ($490B), and Texas $244B ($427B). Worst per capita: Connecticut $76.7B ($102.2B), Kentucky $71.1B ($97.2B), Kansas $32.9B ($46.1B), Alaska $23.7B ($34B), Mississippi $48.8B ($69.2B), New Hampshire $13.9B ($19.7B), Hawaii $27B ($39.2B), Louisiana $74.9B ($108.5B), North Dakota $7.3B ($10B).
Detroit files Chapter 9 bankruptcy (7/18) largest U.S. municipal bankruptcy with total liabilities of $18.8B. Vallejo CA filed May 6, 2008, Central Falls RI filed Aug. 1, 2011, Boise County ID filed Sept. 8, 2011, Jefferson County GA filed Nov. 9, 2011, Harrisburg PA filed March 10, 2012, Stockton CA filed June 28, 2012, Mammoth Lakes CA filed July 3, 2012 and San Bernardino CA filed Aug. 1, 2012.
Japan restarts (4/4) monetary easing program "QE", $1.43T in 24 months targeting 2% inflation. 10 year yields fell to all time low of 0.315% on 4/5 (0.446% in 6/03). Japanese yen depreciates 39.8% to ¥105.3 (12/31) all-time high of ¥75.31 (10/31/11).
Cyprus (3/25) becomes the 5th EU nation to receive a bailout (from EU, ECB and IMF) a €10B rescue plan.
European Union settles (12/5) €1.71B ($2.3B) record antitrust Libor interest rates rigging: Deutsche Bank €725M, Societe Generale €446M, RBS €391M, J.P. Morgan €80M, Citigroup €70M, RP Martin Holdings Ltd. €247k.
13 banks settle $9.3B (Bank of America $2.9B, JPMorgan Chase $2B, Wells Fargo $2B, Goldman Sachs, Morgan Stanley, HSBC, Citibank, MetLife, PNC Financial Services Group, Sovereign Bank, SunTrust Banks, US Bancorp and Aurora Bank) for wrongful foreclosure on homeowners.
J.P. Morgan Chase settles (11/19) $13B for residential mortgage-backed securities ($2B Justice Department, $4B in consumer relief, $4B FHFA and $3B to state authorities). JPMC settles (11/15) $4.5B for 330 mortgage bond trusts. JPMorgan Chase settles (10/25) $5.1B with FHFA over mortgage bonds. JPMorgan Chase settles (10/15) $100M with CFTC related to "London whale" trades and settles (9/19) $920M for $6.2B loss on derivatives bets. JP Morgan Chase also settles (9/19) $389M for debt-collection lawsuits. J.P. Morgan Chase (7/30) settles $410M to Federal Energy Regulatory Commission (FERC) for manipulating electricity markets. JPMorgan Chase settles 2 years bank probation (12/31, deferred prosecution) and $2.2B to resolve complicity in Madoff Ponzi scheme - $1.7B to Justice Dept., $350M to OCC and $543M to trustee (Irving Picard) of victims fund.
- Bank of America settles $11.6B (1/7) with Fannie Mae, Countrywide Financial subsidiary loans. Bank of America settles (12/7) $500M with investors for Countrywide's securities offerings, and settles (12/2) $404M with Freddie Mac and settled (5/8) $315M with investors for Merrill Lynch's securities offerings. Bank of America (Merrill Lynch) settles (12/12) $131.8M for deceptive disclosures of CDOs sold to investors.
- Citigroup settles (7/1) $968M to Fannie Mae and settles (9/25) $395M to Freddie Mac. Citigroup (3/18) settles $730M to investor's in the sale of Citigroup's debt and preferred stock. Citigroup (May '13) and General Electric (Jan '13) settled with FHFA for undisclosed amounts.
- Wells Fargo settles (9/27) $869M to Freddie Mac and (11/6) settles $335M with FHFA for security offerings.
- SunTrust Bank settles (10/10) $968M and settles (10/10) $228M with Fannie Mae. SunTrust Bank settled (9/30/12) $6M with Freddie Mac.
- HSBC (Household International) must pay investors (10/17) $2.46B for securities fraud.
- Deutsche Bank settles (12/20) €1.4B ($1.9B) for mortgage-backed securities sold to Fannie Mae and Freddie Mac, from 2005 to 2007.
- Residential Capital LLC (Ally Financial subsidiary) settles (11/29) $1.2B with FHFA for subprime mortgages.
- Rabobank settles (10/29) $1.07B for LIBOR violations.
- UBS settles (7/25) $885M with FHFA for misrepresenting mortgage-backed bonds.
- Royal Bank of Scotland (2/6) settles $612M for LIBOR manipulation and (11/7) settles $153.7M for security offerings.
- Ally Financial settles (12/20 ) $98M with U.S. Justice Depart. for discriminatory lending practices to 235,000 minority borrowers, since 2011.
-Barclays settles (FERC, 7/16) record $487.9M for manipulation of the California energy markets.
Johnson & Johnson (11/4) settles $2.2B for violations in marketing drugs and (11/19) settles $2.475B for hip replacements.
- Transocean agrees (1/3) to $1.4B settlement with Justice Dept. for the BP Gulf of Mexico oil spill.
- Microsoft (3/6) fined $730M by EU for monopoly practices regarding browsers.
SAC Capital (Steven Cohen) pleads guilty (11/4) to 4 counts of securities fraud and 1 count of wire fraud; a total settlement amount of $1.8B and ends its investment advisory business. 87 people charged with insider trading and 75 convictions and guilty pleas, since 2010.
- Fabrice Tourre found guilty (8/1) of fraud in misleading buyers of Goldman's 2007 $1B CDO shorted by John Paulson.