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The Federal Reserve"s plan to combat recessions rarely works and often benefits the already-rich — here"s why

The Federal Reserve is to blame for the 2008 recession, one author argues. Here's what they could do differently next time. The US Federal Reserve building in Washington, DC.Getty Images Paul Constant is a writer at Civic Ventures and the cohost of the "Pitchfork Economics" podcast. He spoke with author Christopher Leonard about the role of the Federal Reserve in recessions. Leonard says the Fed should put money into Americans' hands, not Wall Street, to boost the economy. In 2008, when the real-estate bubble burst and the whole world staggered on the precipice of total economic disaster, the Federal Reserve leapt into action to try to save the economy. The planet's most powerful people — world leaders, the media, heads of elite institutions — basically had to helplessly stand by and watch the Fed. Created in 1913, the Fed is a system made up of 12 powerful banks headed up by a single main office in Washington, DC."The Federal Reserve is the central bank of the United States," business reporter Christopher Leonard said on the latest episode of "Pitchfork Economics." "Their job is to basically create dollars — that's the Fed's superpower. It can create new dollars out of thin air and it manages our money supply."The subtitle of Leonard's new book "The Lords of Easy Money" might give you a hint about how he thinks the Fed's action paid off: "How the Federal Reserve Broke the American Economy."In his book, Leonard suggests that the Fed's policies helped create the conditions for the 2008 economic collapse in the first place and that the decade of low wages and raging economic inequality we saw in America's lackluster recovery from the 2008 recession was entirely the Fed's fault. The problem wasn't in the creation of new money, Leonard argues — the problem was where that new money went and who was in charge of distributing it. "There's this group of 24 banks on Wall Street — financial institutions like JP Morgan, Goldman Sachs, Wells Fargo," Leonard said. When the Fed wants to create money to spur spending and combat recessionary influences, he added, they buy large amounts of treasury bills from those two dozen huge financial firms. "From basically 1950 until 2008, that's how the Fed influenced our supply of money," Leonard said. "They would gradually loosen or tighten the money supply by making these purchases on Wall Street."Of course, the problem with this system should be apparent to anyone who's witnessed the repeated failure of trickle-down economics to spur the economy over the last four decades: Giving money to the richest Americans doesn't create economic growth. "The top 1% of our country owns 40% of all our assets. The bottom half of all Americans only own 7% of our assets," Leonard said. "The Fed is pumping up asset prices, which really benefits a tiny group of hyper-rich people. And at the same time, it creates these asset bubbles that inevitably collapse, as we saw in '08 and 2020." "So that's why I say these policies clearly have dramatically widened the gap between the rich and everybody else and they've created these bubbles on Wall Street that periodically explode," Leonard added.Additionally, Leonard said the currency created by the Fed has funded activity that's actively harmful to the public good. "One of the things I document in the book is how this binge of debt and quantitative easing really benefited the fracking industry," Leonard said. "It pushed billions of dollars into corporate junk debt for frackers in North Dakota and Texas — investments that don't make any sense at all" if we expect to combat climate change.Widespread consumer demand is what creates jobs and grows communities. The Fed would do more to encourage true economic growth by creating money and getting it directly into the hands of the American people.Pitchfork Economics cohost David Goldstein said that the Fed could buy municipal bonds at low interest rates to fund the construction of housing in expensive urban areas where homeownership is now out of reach for ordinary Americans, or to fund the construction of solar panels on the roofs of millions of homes to create a green energy grid. Goldstein added the Fed would be "collateralizing against future rents or future income from these investments" and in the meantime the money created would be directed "toward transit and housing and clean energy and schools and so many other things that are real investments that pay off in the future and would more broadly benefit people than just going and raising asset prices.""There's another structural reform people are talking about, in that the Fed could create money in bank accounts instead of just the 24 reserve accounts," " Leonard said. Imagine if, during the economic collapse of 2008, every American received regular infusions of cash from the Fed. Instead of the painfully slow economic recovery that stretched out for the entirety of the Obama presidency, that consumer spending would have been invested directly in communities around the country, spurring small-business growth, tax revenue, and job creation that would have built the economy from the bottom up — not from Wall Street on down. Had the Fed actually invested in the American people and not just the stock market, the pandemic could have ushered in an era of true economic growth and investment in communities — not just a series of record-breaking years for corporate profits, stock buybacks, and executive bonuses.Read the original article on Business Insider.....»»

Category: dealsSource: nytJan 15th, 2022

Joe Manchin digs in on cutting the poorest parents out of the Biden child tax credit as Build Back Better looks dead in the water

Manchin wants only working families to be eligible for monthly checks. The credit expired last year and Democrats don't have a clear path to renew it. Sen. Joe Manchin (D-WV) speaks to reporters outside of his office on Capitol Hill on January 04, 2022.Anna Moneymaker/Getty Images Manchin is sticking by his position to ensure only working families get the child tax credit. "I've been basically very clear on that," Manchin told Insider. But Manchin's demands may add bureaucratic hurdles that could end up shutting families out of the proposed program. Sen. Joe Manchin of West Virginia is sticking by a position he's expressed for at least four months. The conservative Democrat wants only working parents to get the expanded child tax credit."I've been basically very clear on that," Manchin told Insider. "I think there should be a work requirement. That means you file a 1099."He went on: "So I've been very, very direct on that."1099 forms are typically filed by independent contractors and freelancers. A Manchin spokesperson later clarified that the senator meant he wanted families to file a W-2 form to demonstrate they're earning enough to pay taxes.The move to require proof of taxable income would lock out the poorest families — those with no income at all or not enough to file federal income taxes — from being able to receive checks under the expanded child tax credit. Previously, most families, including those where parents had no income in the previous year, were eligible for monthly checks.But some experts say adding that requirement onto the federal aid could pose a fresh bureaucratic hurdle for even middle-income households. Other parents could be working as an Uber driver or a freelancer and file a different tax form that wouldn't be eligible."You'll see more people affected than you might imagine," Elaine Maag, a tax expert at the Urban Institute, told Insider. "It won't just be very low income families that won't be able to meet this test."Manchin's view on the benefit places him as an outlier among Congressional Democrats, most of whom favor locking in the ability of the poorest families to access the beefed-up child tax credit. The one-year child tax credit expansion was enacted under President Joe Biden's stimulus law. It allows most families to get up to $300 each month per kid, depending on their age. It was also changed so families with little or no tax obligations could get the aid.That expanded credit expired in December 2021, and congressional Democrats continue to haggle over whether and how to renew it amid negotations over Biden's broader domestic spending plans.The West Virginia Democrat effectively torpedoed the $2 trillion Build Back Better plan in late December, saying he couldn't bring himself to support it. All 50 Senate Democrats must line up behind the sprawling measure to overcome unanimous GOP opposition.The bill would set up universal pre-K, renew monthly child tax credit payments to American families for another year, establish federal subsidies for childcare, combat the climate emergency and more. Democrats wanted to finance it with new taxes on rich Americans and large corporations paying little in federal taxes.However, talks on reviving the legislation has stalled. "There is no negotiation going on at this time," Manchin told reporters on Tuesday. Instead, Senate Democrats are pivoting to voting rights for the rest of the month.The child tax credit has drawn Manchin's ire since the fall. He's been skeptical of the federal government issuing monthly checks to families with no strings attached.Yet many experts argue that allowing families to receive the aid regardless of whether they owe taxes or not would have big socioeconomic benefits. Research has shown that the child poverty rate has fallen by a third since July."This made a real dent in child poverty as we were coming out of the worst economic crisis since the Great Depression," Claudia Sahm, a senior fellow at the Jain Family Institute, said in a recent interview. "That's exactly what you go after."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 4th, 2022

"Opportunity zones" meant to boost poor communities did little more than give the rich another tax loophole — proof that trickle-down economics doesn"t work

Brookings' economist David Wessel said more funding from Trump's 2017 tax bill went to already-wealthy areas than low-income communities. Economist David Wessell said "opportunity zones" in Trump's 2017 tax bill didn't work in helping lower-income communities.Peeterv/Getty Images Paul Constant is a writer at Civic Ventures and the cohost of the "Pitchfork Economics" podcast. He recently spoke with economist David Wessel about "opportunity zones" in the 2017 tax plan. Wessel said the plan for these zones became little more than a tax cut for the super-rich. Hopefully, the 2017 tax bill passed by former President Trump and the Republican-run Congress served as a kind of last hurrah for trickle-down economics as unquestioned dogma.Through decades of leadership by both political parties, conventional wisdom uncritically accepted the concept that handing money to the wealthiest Americans in the form of tax cuts and deregulation would eventually trickle down to everyone else. Trump's tax cuts represented the purest form of trickle-down that had ever passed in Washington, DC. It handed hundreds of billions of dollars in tax cuts to America's wealthiest people and corporations under the flimsy premise that these economic benefits would somehow translate to economic benefits for everyone else. It didn't work, of course. Trickle-down economics never works. The $4,000 annual raise that former speaker of the House Paul Ryan promised American households would see in the form of higher wages never materialized. The Trump tax cuts didn't increase investments in American business — in fact, the wealth created for the richest Americans from those tax cuts likely wound up overseas. Treasury Secretary Steven Mnuchin promised that the tax plan would "pay for itself" with economic growth, but that economic growth never materialized. Instead, the Congressional Budget Office found that corporate tax revenue fell by over 30% the year after the tax cuts passed.  We're still unraveling all the harm that the 2017 Trump tax bill has done to the economy. In his new book, "Only the Rich Can Play: How Washington Works in the New Gilded Age," David Wessel, a Brookings economist and director of the Hutchins Center on Fiscal and Monetary Policy, documents a clever tax-cut mechanism written into the law that escaped attention until recently. In the latest episode of the "Pitchfork Economics" podcast, Wessel explains how so-called "opportunity zones" were created in the bill as a way to develop the economy in nearly 9,000 targeted areas around the country — but they really only served as a capital-gains tax cut for the super-rich.The plan was relatively simple: Poor and underdeveloped locations around the country that could benefit from a massive influx of cash were identified as opportunity zones, and wealthy people and corporations could claim their investments in opportunity zones as a tax cut. The policy was slipped into the tax bill without much fanfare, and requirements for federal watchdogs to study and report on economic results of the opportunity zones plan were stripped from the bill before it passed."Once governors designated opportunity zones from a list of census tracts that the law made eligible, almost any investment in a property or business in a zone qualified," Wessel wrote in the New York Times, adding that "one doesn't need to even assert that an investment will help the people who live in the zone."Thanks to a recent investigation into 2019 tax records, a pair of enterprising economists provided a partial view of how nearly $19 billion in investments into opportunity zones worked out. The authors of the report, Patrick Kennedy and Harrison Wheeler, found that wealthy Americans and corporations only invested in about 16% of the existing opportunity zones. The majority of zones that received any funds were "neighborhoods with pre-existing upward trends in population, income, and home values, and declining shares of elderly and nonwhite residents," Wheeler and Kennedy said. Wessel said that recipients of opportunity-zone funds include "a Ritz-Carlton hotel and condo complex in downtown Portland, Oregon, and a Virgin Hotel in New Orleans. Self-storage facilities, which create hardly any jobs, are sprouting with opportunity zone money. So is luxury student housing in university towns, which are eligible only because college kids show up as poor in census tallies."In other words, the opportunity-zone program used the excuse of investing in thousands of low-income communities around the country, many of which happen to be nonwhite communities that have been ignored by politicians and business leaders for generations, to create a huge flow of untaxed money into a handful of mostly white, wealthy communities. It's a damning reminder that even when trickle-down economics is explicitly written into the tax code as a feature and not a bug, the only people who benefit are the wealthy few, at the expense of everyone else. The Trump tax cuts could serve as a watershed moment for trickle-down precisely because they prove the fallacy at the heart of the idea that rich people are the true job creators.For the first time in 40 years, mainstream politicians are talking seriously about investing broadly in the American people through programs like affordable childcare, paid family leave, and worker-friendly laws like increased overtime thresholds and higher minimum wages.If they follow through on their promises, they could finally upturn trickle-down's hold on the economy by proving that it's the consumer spending of working Americans — and not ridiculous, convoluted, free-market opportunity-zone schemes — that creates jobs and grows the economy from the middle out.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 1st, 2022

Democrats are actually raising taxes on the ultrawealthy, even though they"re keeping a Trump tax cut

The Joint Committee on Taxation first said Biden's economic plan will cut taxes for the rich, but in a major correction, said it will do the opposite. Speaker of the House Nancy Pelosi (D-CA) takes questions from reporters at her weekly news conference on Capitol Hill on Thursday, Nov. 4, 2021.Kent Nishimura / Los Angeles Times via Getty Images The Joint Committee on Taxation first estimated Democrats' economic plan will cut taxes for the rich. But the committee issued a correction on Tuesday saying the bill will raise taxes for the rich, instead. This comes even as Democrats' bill retains a Trump tax cut from 2017. A nonpartisan congressional taxation committee backtracked on its initial estimate of President Joe Biden's Build Back Better Plan on Tuesday. Instead of cutting taxes for the wealthy, as was first projected, Biden's plan will raise their taxes — even while keeping President Donald Trump's tax cuts.The Joint Committee on Taxation issued a correction that noted Democrats' economic spending plans will raise average taxes for Americans' with incomes over $1 million by 3.2 percentage points. This contrasted the committee's initial estimate that Democrats' plan would cut taxes for the rich by 1.7 percentage points, as NBC's Sahil Kapur reported.—Sahil Kapur (@sahilkapur) November 23, 2021 This finding will help Democrats, and Biden, tout the Build Back Better social-spending bill that passed the House last week. But it now heads to the Senate, where it will likely face changes at the hands of centrist Democratic holdouts Joe Manchin and Kyrsten Sinema, particularly when it comes to tax provisions in the bill.As Insider's Joseph Zeballos-Roig reported, a group of House Democrats want to raise the total amount of state and local taxes (SALT) that people can shave off their federal taxes to $80,000 from $10,000, the cap created under Trump. While some Senate Democrats, like Vermont Sen. Bernie Sanders, have balked at the idea because it would it largely benefits wealthier Americans in high-tax states like New York and California, Manchin was the lone Democrat who backed a GOP proposal to establish the cap in late 2017. "At a time of massive income and wealth inequality, the last thing we should be doing is giving more tax breaks to the very rich," Sanders wrote on Twitter. "Democrats campaigned and won on an agenda that demands that the very wealthy finally pay their fair share, not one that gives them more tax breaks."The final version of the bill, and what tax provisions end up in it, remain to be seen as the Senate works to get the social-spending package, with climate measures and universal pre-K, signed into law before Christmas. And along with the lifting the SALT cap, four weeks of paid leave and medicare expansion is also on the chopping block.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 23rd, 2021

Futures Trade Near All Time High As Traders Shrug At Inflation, Covid Concerns

Futures Trade Near All Time High As Traders Shrug At Inflation, Covid Concerns US equity futures and European markets started the Thanksgiving week on an upbeat note as investors set aside fear of surging inflation and focused on a pickup in M&A activity while China signaled possible easing measures. The euphoria which lifted S&P futures up some 0.5% overnight and just shy of all time highs ended abruptly and futures reversed after German Chancellor Angela Merkel said the Covid situation in the country is worse than anything so far and tighter curbs are needed. At 730 a.m. ET, Dow e-minis were up 95 points, or 0.26%. S&P 500 e-minis were up 12.25 points, or 0.26% and Nasdaq 100 e-minis were up 58.75 points, or 0.357%. U.S. stocks trade near record levels, outpacing the rest of the world, as investors see few alternatives amid rising inflation and a persistent pandemic that undermines global recovery. Concerns about high valuations and the potential for the economy to run too hot on the back of loose monetary and fiscal policies have interrupted, but not stopped the rally. In other words, as Bloomberg puts it "bears are winning the argument, bulls are winning in the market" while Nasdaq futures hit another record high as demand for technology stocks remained strong. “Based on historical data, the Thanksgiving week is a strong week for U.S. equities,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “Black Friday sales will be closely watched. The good news is, people still have money to spend, even though they get less goods and services in exchange of what’s spent.” In premarket moves, heavyweights, including most FAANG majors, rose in premarket trade. Vonage Holdings Corp. jumped 26% in premarket trading after Ericsson agreed to buy it. Telecom Italia SpA jumped as much as 30% in Europe after KKR offered to buy it for $12 billion. Energy stocks recovered slightly from last week's losses, although anticipation of several economic readings this week kept gains in check. Bank stocks rose in premarket trading as the U.S. 10-year Treasury yield climbed for the first time in three sessions to about 1.58%. S&P 500 futures gain as much as 0.5% on Monday morning. Tesla gained 2.8% after Chief Executive Elon Musk tweeted that Model S Plaid will "probably" be coming to China around March. Activision Blizzard (ATVI.O) slipped 1.1% after a media report that the video game publisher's top boss, Bobby Kotick, would consider leaving if he cannot quickly fix culture problems. Travel and energy stocks, which were among the worst performers last week, also marked small gains before the open. Here is a list of the other notable premarket movers: Astra Space (ASTR US) shares surge 33% in premarket trading after the company said its rocket reached orbit. Aurora Innovation (AUR US) falls 8% in premarket, after soaring 71% last week amid a surge in popularity for self-driving technology companies among retail traders. Chinese electric-carmaker Xpeng (XPEV US) rises as much as 2.8% premarket after co. unveils a large sports-utility vehicle pitted more directly against Tesla’s Model Y and Nio’s ES series. Stocks of other EV makers are mixed. Monster Beverage (MNST US)., the maker of energy drinks, is exploring a combination with Corona brewer Constellation Brands (STZ US), according to people familiar with the matter. CASI Pharma (CASI US) jumped 17% in postmarket trading after CEO Wei-Wu He disclosed the purchase of 400,000 shares in a regulatory filing. Along with an eye on the Fed's plans for tightening policy, investors are also watching for an announcement from Joe Biden on his pick for the next Fed chair. Powell was supposed to make his decision by the weekend but has since delayed it repeatedly. Investors expect current chair Jerome Powell to stay on for another term, although Fed Governor Lael Brainard is also seen as a candidate for the position. “Bringing the most dovish of the doves wouldn’t guarantee a longer period of zero rates,” Ozkardeskaya wrote. “If the decisions are based on economic fundamentals, the economy is calling for a rate hike. And it’s calling for it quite soon.” The Stoxx 600 trimmed gains after German Chancellor Angela Merkel called for tighter Covid-19 restrictions. European telecom shares surged after KKR’s offer to buy Telecom Italia for about $12 billion, which boosted sentiment about M&A in the sector. The Stoxx 600 Telecommunications Index gained as much as 1.6%, the best-performing sector gauge for the region: Telefonica +4.8%, Infrastrutture Wireless Italiane +4%, KPN +2.7%. Meanwhile, telecom equipment stock Ericsson underperforms the rest of the SXKP index, falling as much as 4.9% after a deal to buy U.S. cloud communication provider Vonage; Danske Bank says the price is “quite steep”. Earlier in the session, Asian stocks fell as Covid-19 resurgences in Europe triggered risk-off sentiment across markets amid weaker oil prices, a strong U.S. dollar and higher bond yields. The MSCI Asia Pacific Index declined 0.3%, with India’s Sensex measure slumping the most since April as Paytm’s IPO weighed on sentiment. The country’s oil giant Reliance dragged down the Asian index after scrapping a deal with Saudi Aramco, and energy and financials were the biggest sector losers in the region. Asian markets have turned softer after capping their first weekly retreat this month, following lackluster moves from economically sensitive sectors in the U.S., while investors continue to monitor earnings reports of big Chinese technology firms this week. “Some impact from the regulatory risks and dull macroeconomic conditions have shown up in several Chinese big-tech earnings and that may put investors on the sidelines as earnings season continues,” Jun Rong Yeap, a market strategist at IG Asia Pte., wrote in a note. China’s equity gauge posted a second straight day of gains after the central bank’s quarterly report indicated a shift toward easing measures to bolster the economic recovery. South Korea led gains in the region, with the Kospi adding more than 1%, helped by chipmakers Samsung Electronics and SK Hynix. Asia’s chip-related shares rose after comments from Micron Technology CEO Sanjay Mehrotra added to optimism the global shortage of semiconductors is easing. Reports of Japan earmarking $6.8 billion to bolster domestic chipmaking and Samsung planning to announce the location of its new chip plant in the U.S. also aided sentiment. Japanese stocks fluctuated after U.S. shares retreated on Friday following hawkish remarks from Federal Reserve officials. The Topix index was virtually unchanged at 2,044.16 as of 2:21 p.m. Tokyo time, while the Nikkei 225 advanced 0.1% to 29,783.92. Out of 2,180 shares in the index, 1,107 rose and 948 fell, while 125 were unchanged. “There are uncertainties surrounding the direction of U.S. monetary policy,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute Co. “The latest comments from FRB members are spurring talk that steps to taper could accelerate.” Australian stocks sunk as banks tumbled to almost a 4-month low. The S&P/ASX 200 index fell 0.6% to close at 7,353.10, weighed down by banks and technology stocks as the measure for financial shares finished at the lowest level since July 30.  Nickel Mines was the top performer after agreeing to expand its strategic partnership with Shanghai Decent. Flight Centre fell for a second session, ending at its lowest close since Sept. 20, as the Covid-19 situation worsens in Europe. In New Zealand, the S&P/NZX 50 index fell 1% to 12,607.64. In FX, the Bloomberg dollar index holds Asia’s narrow range, trading little changed on the day. AUD outperforms G-10 peers, extending Asia’s modest gains. SEK and JPY are the weakest. RUB lags in EMFX, dropping as much as 1% versus the dollar with USD/RUB on a 74-handle. According to Bloomberg, hedge funds’ bullishness toward the dollar is starting to evaporate amid speculation the U.S. currency has risen too much given the Federal Reserve remains adamant it’s in no rush to raise interest rates. Meanwhile, the euro pared modest Asia session losses to trade below $1.13, while European bond yields edged higher, led by bunds and gilts. The pound dipped after comments from Bank of England policy makers raised questions about the certainty of an interest-rate increase in December. Governor Andrew Bailey said that the risks to the U.K. economy are “two-sided” in a weekend interview. Australian dollar advanced against the kiwi on position tweaking ahead of Wednesday’s RBNZ’s rate decision, and after China’s central bank removed sticking with “normal monetary policy” from its policy outlook. Yen declines as speculation China will steer toward more accommodative policy damps the currency’s haven appeal. Hungary’s forint tumbled to a record low against the euro as back-to-back interest rate increases failed to shield it during a rapidly deteriorating pandemic and a flight to safer assets. In commodities, crude futures drifted higher. WTI rises 0.3% near $76.20, Brent regains at $79-handle. Spot gold has a quiet session trading near $1,844/oz. Base metal are mixed: LME copper, tin and zinc post small losses; lead and nickel are in the green Looking at today's calendar, we get the October Chicago Fed national activity index, existing home sales data, and the Euro Area advance November consumer confidence. Zoom is among the companies reporting earnings. Market Snapshot S&P 500 futures up 0.3% to 4,710.75 STOXX Europe 600 up 0.3% to 487.45 German 10Y yield little changed at -0.34% Euro little changed at $1.1283 MXAP down 0.2% to 198.88 MXAPJ down 0.2% to 647.20 Nikkei little changed at 29,774.11 Topix little changed at 2,042.82 Hang Seng Index down 0.4% to 24,951.34 Shanghai Composite up 0.6% to 3,582.08 Sensex down 2.0% to 58,450.84 Australia S&P/ASX 200 down 0.6% to 7,353.08 Kospi up 1.4% to 3,013.25 Brent Futures up 0.4% to $79.22/bbl Gold spot little changed at $1,846.10 U.S. Dollar Index also little changed at 96.08 Top Overnight News from Bloomberg Negotiators hammering out details of a transformative new global corporate tax regime are shaping the deal to maximize its chance of winning acceptance in the U.S., whose companies face the biggest impact from the overhaul The U.S. has shared intelligence including maps with European allies that shows a buildup of Russian troops and artillery to prepare for a rapid, large-scale push into Ukraine from multiple locations if President Vladimir Putin decided to invade, according to people familiar with the conversations. The ruble slid to the weakest since August and the hryvnia fell With investors ramping up expectations for the Federal Reserve and other developed-market central banks to tighten policy, the likes of the Brazilian real and Hungarian forint have been weighed down by inflation and political concerns even as local officials pushed up borrowing costs. The Chinese yuan, Taiwanese dollar and Russian ruble have been among the few to stand their ground An organization formed by key participants in China’s currency market urged banks to limit speculative foreign-exchange trading after the yuan climbed to a six-year high versus peers The Avalanche cryptocurrency has surged in the past several days, taking it briefly into the top 10 by market value and surpassing Dogecoin and Shiba Inu, after a deal related to improvement of U.S. disaster-relief funding A more detailed breakdown of overnight news courtesy of Newsquawk Asia-Pac stocks traded mixed following last Friday's mostly negative performance stateside, where risk appetite was dampened by concerns of a fourth COVID wave in Europe and recent hawkish Fed rhetoric. Weekend newsflow was light and the mood was tentative heading into this week's risk events including FOMC minutes and US GDP data before the Thanksgiving holiday. The ASX 200 (-0.6%) was subdued with declines led by weakness in gold miners and the energy sector. The Nikkei 225 (+0.1%) was lacklustre after last week’s inflows into the JPY but with downside eventually reversed as the currency faded some of the gains and following the recent cabinet approval of the stimulus spending. The KOSPI (+1.4%) outperformed and reclaimed the 3k level with shares in index heavyweight Samsung Electronics rallying as its de facto leader tours the US which spurred hopes the Co. could deploy its USD 100bln cash pile. The Hang Seng (-0.4%) and Shanghai Comp. (+0.6%) diverged with the mainland kept afloat after the PBoC conducted a mild liquidity injection and maintained its Loan Prime Rate for a 19th consecutive month as expected, although Hong Kong was pressured by losses in energy and cautiousness among developers, as well as the recent announcement of increased constituents in the local benchmark. Finally, 10yr JGBs eked marginal gains amid the cautious risk tone in Asia and following firmer demand at the enhanced liquidity auction for 2yr-20yr JGBs, but with upside capped as T-note futures continued to fade Friday’s early gains that were fuelled by the COVID-19 concerns in Europe before the advances were later halted by hawkish Fed rhetoric calling for a discussion on speeding up the tapering at next month’s meeting. Top Asian News China Blocks Peng Shuai News as It Seeks to Reassure World China FX Panel Urges Banks to Cap Speculation as Yuan Surges Paytm Founder Compares Himself to Musk After Historic IPO Flop China Tech Stocks Are Nearing Inflection Point, UBS GWM Says European cash bourses kicked off the new trading week with mild gains (Euro Stoxx 50 +0.3%; Stoxx 600 +0.3%) following a mixed APAC handover. Some have been attributing the mild gains across Europe in the context of the different approaches of the Fed and ECB, with the latter expected to remain dovish as the former moves tighter, while COVID lockdowns will restrict economic activity. News flow in the European morning has however been sparse, as participants look ahead to FOMC Minutes, Flash PMIs and US GDP ahead of the Thanksgiving holiday (full Newsquawk Desk Schedule on the headline feed) alongside the Fed Chair update from President Biden and a speech from him on the economy. US equity futures see modestly more pronounced gains, with the more cyclically-exposed RTY (+0.6%) performing better than then NQ (+0.4%), ES (+0.4%) and YM (+0.4%). Since the European cash open, the initial mildly positive momentum has somewhat waned across European cash and futures, with the region now conforming to a more mixed picture. Spain's IBEX (+0.7%) is the clear regional outperforming, aided by index heavyweight Telefonica (+5.0%), which benefits from the sectorial boost received by a couple of major M&A updates. Firstly, Telecom Italia (+22%) gapped higher at the open after KKR presented a EUR 0.505/shr offer for Telecom Italia. The offer presents a ~45% premium on Friday's close. Second, Ericsson (-3.5%) made a bid to acquire American publicly held business cloud communications provider Vonage in a deal worth USD 6.2bln. As things stand, the Telecom sector is the clear outperformer, closely followed by banks amid a revival in yields. The other end of the spectrum sees Travel & Leisure back at the foot of the bunch as COVID fears in Europe mount. In terms of individual movers, Vestas Wind Systems (-2.0%) was hit as a cyber incident that impacted parts of its internal IT structure and data has been compromised. Looking ahead, it’s worth noting that volume will likely be more muted towards the latter half of the week on account of the Thanksgiving holiday. Top European News Scholz Closer to German Chancellery as Cabinet Takes Shape Austria Back in Lockdown Ahead of Mandatory Vaccine Policy Energy Crunch Drives Carbon to Record as Europe Burns More Coal BP Goes on Hydrogen Hiring Spree in Bid for 10% Market Share In FX, the Antipodean Dollars are outperforming at the start of the new week on specific supportive factors, like a bounce in the price of iron ore and a further re-opening from pandemic restrictions in both Australia and New Zealand, while the REINZ shadow board is ‘overwhelmingly’ behind another RBNZ rate hike this week. Aud/Usd is holding around 0.7250 and Nzd/Usd is hovering circa 0.7000 as the Aud/Nzd cross pivots 1.0350 in the run up to flash Aussie PMIs and NZ retail sales. DXY - Aussie and Kiwi strength aside, the Greenback retains a solid underlying bid on safe haven and increasingly hawkish Fed grounds after a run of recent much better than expected US data. In index terms, a base just above 96.000 provides a platform to retest last week’s peaks at 96.245 and 96.266 vs 96.223 so far, but Monday’s agenda may not give bulls much in the way of encouragement via data with only existing home sales scheduled. Instead, the Buck could derive more impetus from Treasuries given front-loaded supply ahead of Thanksgiving in the form of Usd 58 bn 2 year and Usd 59 bn 5 year notes. CHF/CAD/EUR/GBP/JPY - All narrowly mixed against their US rival, as the Franc keeps its head above 0.9300 and meanders between 1.0485-61 vs the Euro amidst some signs of official intervention from a rise in weekly Swiss sight deposits at domestic banks. Meanwhile, the Loonie has some leverage from a mild rebound in crude prices to pare declines from sub-1.2650 and should glean support into 1.2700 from 1 bn option expiries at 1.2685 on any further risk aversion or fallout in WTI. Conversely, 1 bn option expiry interest from 1.1300-05 could scupper Euro recoveries from Friday’s new y-t-d low around 1.1250 against the backdrop of ongoing COVID-19 contagion and pre-ECB speakers plus preliminary Eurozone consumer confidence. Elsewhere, the Pound is weighing up BoE tightening prospects and the impact of no breakthrough between the UK and EU on NI Protocol as Cable and Eur/Gbp straddle the 1.3435-40 zone and 0.8400 respectively, while the Yen has unwound more of its safe haven premium within a 114.27-113.91 range eyeing UST yields in relation to JGBs alongside overall risk sentiment. SCANDI/EM - The Nok is deriving some traction from Brent back over Usd 79/brl, but geopolitical concerns are preventing the Rub from benefiting and the Mxn is also on a weaker footing along with most EM currencies. However, the Try is striving to draw a line in the sand irrespective of a marked deterioration in Turkish consumer sentiment and the Cnh/Cny are holding up well regardless of a softer PBoC fix for the onshore unit as LPRs were unchanged yet again and China’s FX regulator told banks to limit Yuan spec trades. In CEE, the Pln has plunged on diplomatic strains between Poland and the EU, the Huf has depreciated to all time lows on virus fears and the Czk has been hampered by CNB’s Holub downplaying the chances of more big tightening surprises such as the aggressive hike last time. In commodities, WTI and Brent front month futures see some consolidation following Friday’s slide in prices. In terms of the fundamentals, the demand side of the equations continues to be threatened by the fourth wave of COVID, namely in the European nations that have not had a successful vaccine rollout. As a reminder, Austria is in a 20-day nationwide lockdown as of today, whilst Germany, Belgium and the Netherlands see tighter restrictions, with the latter two also experiencing COVID-related social unrest over the weekend. The European Commission will on Wednesday issue a set of new recommendations to its member states on non-essential travel, a senior EU diplomat said, which will be watched for activity and jet fuel demand. Over to the supply side, There were weekend reports that Japan and the US are planning a joint announcement regarding the SPR release, although a key Japanese official later noted there was no fixed plan yet on releasing reserves. Japanese PM Kishida confirmed that they are considering releasing oil reserves to curb prices. Meanwhile, Iranian nuclear talks are regaining focus as negotiations are poised to resume on the 29th of November – it is likely we’ll see officials telegraph their stances heading into the meeting. Eyes will be on whether the US offers an olive branch as Tehran stands firm. Elsewhere, the next OPEC+ meeting is also looming, but against the backdrop of lower prices, COVID risk and SPR releases, it is difficult to see a scenario where OPEC+ will be more hawkish than dovish. WTI and Brent Jan trade on either side of USD 76/bbl and USD 79/bbl respectively and within relatively narrow bands. Spot gold and silver meanwhile see a mild divergence, with the yellow metal constrained by resistance in the USD 1,850/oz area, whilst spot silver rebounded off support at USD 24.50/oz. Finally, base metals are relatively mixed with no standout performers to point out. LME copper is flat but holds onto USD 9,500+/t status. US Event Calendar 8:30am: Oct. Chicago Fed Nat Activity Index, est. 0.10, prior -0.13 10am: Oct. Existing Home Sales MoM, est. -1.8%, prior 7.0% 10am: Oct. Home Resales with Condos, est. 6.18m, prior 6.29m DB's Jim Reid concludes the overnight wrap This morning we’ve just published our 2022 credit strategy outlook. 2021 has been one of the lowest vol years for credit on record but we think this is unlikely to last and spreads will sell-off at some point in H1 when markets reappraise how far behind the curve the Fed is. Even with covid restrictions mounting again in Europe as we go to print, we think it’s more likely that we’ll be in a “growthflationary” environment for 2022 and think overheating risks are more acute than the stagflation risk, especially in the US. Strong growth and high liquidity should mean that full year 2022 is a reasonable year for credit overall but if we’re correct there’ll be regular pockets of inflationary/interest rate concerns in the market, which we think is more likely to happen in H1. At the H1 wides, we could see spreads widen as much as 30-40bps in IG and 120-160bps in HY which is consistent with typical mid-cycle ranges through history. We do expect this to mostly retrace in H2 as markets recover from the shock and growth remains decent and liquidity still high. However, with the potential for a shift in the narrative to potential late-cycle dynamics, we think spreads will close 2022 slightly wider than they are today. We will be watching the yield curve closely through the year for clues as to how the cycle will evolve into 2023. This has the ability to move our YE 22 forecasts in both directions as the year progresses. This week will be heavily compressed given Thanksgiving on Thursday. The highlight though will be a likely choice of Fed governor before this, assuming the timetable doesn’t slip again. Overnight it’s been announced that Biden will give a speech to the American people tomorrow on the economy and prices. It’s possible the Fed Chair gets announced here and perhaps plans to release oil from the strategic reserve. We will see. Following that, Wednesday is especially busy as a pre-holiday US data dump descends upon us. We’ll see the minutes of the November 3rd FOMC meeting and earlier that day the core PCE deflator (the Fed's preferred inflation metric), Durable Goods, the UoM sentiment index (including latest inflation expectations), new home sales and jobless claims amongst a few other releases. More internationally, covid will be focus, especially in Europe as Austria enters lockdown today after the shock announcement on Friday. Germany is probably the swing factor here for sentiment in Europe so case numbers will be watched closely. Staying with Germany, there’s anticipation that a coalition agreement could be reached in Germany between the SPD, Greens and the FDP, almost two months after their federal election. Otherwise, the flash PMIs for November will be in focus, with the ECB following the Fed and releasing the minutes from their recent meeting on Thursday. As discussed at the top the most important market event this week is likely to be on the future leadership of the Federal Reserve, as it’s been widely reported that President Biden is expected to announce his choice on who’ll be the next Fed Chair by Thanksgiving on Thursday. Previous deadlines have slipped on this announcement, but time is becoming increasingly limited given the need for Senate confirmation ahead of Chair Powell’s current four-year term expiring in early February. The two names that are quite obviously in the frame are incumbent Chair Powell and Governor Brainard, but there are also a number of other positions to fill at the Fed in the coming months, with Vice Chair Clarida’s term as an FOMC governor expiring in January, Randal Quarles set to leave the Board by the end of this year, and another vacant post still unfilled. So a significant opportunity for the Biden administration to reshape the top positions at the Fed. In spite of all the speculation over the position of the Fed Chair, our US economists write in their latest Fed update (link here), that the decision is unlikely to have a material impact on the broad policy trajectory. Inflation in 2022 is likely to remain at levels that make most Fed officials uncomfortable, whilst the regional Fed presidents rotating as voters lean more hawkish next year, so there’ll be constraints to how policy could shift in a dovish direction, even if an incoming chair wanted to move things that way. Another unconfirmed but much anticipated announcement this week could come from Germany, where there’s hope that the centre-left SPD, the Greens and the liberal FDP will finally reach a coalition agreement. The general secretaries of all three parties have recently said that they hope next week will be when a deal is reached, and a deal would pave the way for the SPD’s Olaf Scholz to become chancellor at the head of a 3-party coalition. Nevertheless, there are still some hurdles to clear before then, since an agreement would mark the start of internal party approval processes. The FDP and the SPD are set to hold a party convention, whilst the Greens have announced that their members will vote on the agreement. On the virus, there is no doubt things are getting worse in Europe but it’s worth putting some of the vaccine numbers in some context. Austria (64% of total population) has a double vaccination rate that is somewhat lower than the likes of Spain (79%), Italy (74%), France (69%), the UK (69%) and Germany (68%). The UK for all its pandemic fighting faults is probably as well placed as any due to it being more advanced on the booster campaign due to an earlier vaccine start date and also due to higher natural infections. It was also a conscious decision back in the summer in the UK to flatten the peak to take load off the winter wave. So this is an area where scientists and the government may have made a calculated decision that pays off. Europe is a bit behind on boosters versus the UK but perhaps these will accelerate as more people get 6 months from their second jab, albeit a bit too late to stop some kind of winter wave. There may also be notable divergence within Europe. Countries like Italy and Spain (and to a slightly lesser extent France) that were hit hard in the initial waves have a high vaccination rate so it seems less likely they will suffer the dramatic escalation that Austria has seen. Germany is in the balance as they have had lower infection rates which unfortunately may have encouraged slightly lower vaccination rates. The irony here is that there is some correlation between early success/lower infections and lower subsequent vaccination rates. The opposite is also true - i.e. early bad outcomes but high vaccination rates. The US is another contradiction as it’s vaccination rate of 58% is very low in the developed world but it has had high levels of natural infections and has a higher intolerance for lockdowns. So tough to model all the above. Overall given that last winter we had no vaccines and this year we have very high levels of protection it seems unfathomable that we’ll have an outcome anywhere near as bad. Yes there will be selected countries where the virus will have a more severe impact but most developed countries will likely get by without lockdowns in my opinion even if the headlines aren’t always going to be pleasant. Famous last words but those are my thoughts. In light of the rising caseloads, the November flash PMIs should provide some context for how the global economy has performed into the month. We’ve already seen a deceleration in the composite PMIs for the Euro Area since the summer, so it’ll be interesting to see if that’s maintained. If anything the US data has reaccelerated in Q4 with the Atlanta Fed GDPNow series at 8.2% for the quarter after what will likely be a revised 2.2% print on Wednesday for Q3. Time will tell if Covid temporarily dampens this again. Elsewhere datawise, we’ll also get the Ifo’s latest business climate indicator for Germany on Wednesday, which has experienced a similar deceleration to other European data since the summer. The rest of the week ahead appears as usual in the day-by-day calendar at the end. Overnight in Asia stocks are mixed with the KOSPI (+1.31%) leading the pack followed by the Shanghai Composite (+0.65%) and CSI (+0.53%), while the Nikkei (-0.18%) and Hang Seng (-0.35%) are lower. Stocks in China are being boosted by optimism that the PBOC would be easing its policy stance after its quarterly monetary policy report on Friday dropped a few hints to that effect. Futures are pointing towards a positive start in the US and Europe with S&P 500 futures (+0.31%) and DAX futures (+0.14%) both in the green. Turning to last week now, rising Covid cases prompted renewed lockdown measures to varying degrees and hit risk sentiment. Countries across Europe implemented new lockdown measures and vaccine requirements to combat the latest rise in Covid cases. The standouts included Austria and Germany. Austria will start a nationwide lockdown starting today and will implement a compulsory Covid vaccine mandate from February. Germany will restrict leisure activities and access to public transportation for unvaccinated citizens and announced a plan to improve vaccination efforts. DM ten-year yields decreased following the headline. Treasury, bund, and gilt yields declined -3.8bps, -6.7bps, and -4.6bps on Friday, respectively, bringing the weekly totals to -1.3bps, -8.3bps, and -3.5bps, respectively. The broad dollar appreciated +0.54% Friday, and +0.98% over the week. Brent and WTI futures declined -2.89% and -3.68% on Friday following global demand fears, after drifting -4.27% and -5.79% lower throughout the week as headlines circulated that the US and allies were weighing whether to release strategic reserves. European equity indices declined late in the week as the renewed lockdown measures were publicized. The Stoxx 600, DAX, and CAC 40 declined -0.33%, -0.38%, and -0.42%, respectively on Friday, bringing their weekly totals to -0.14%, +0.41%, and +0.29%. The S&P 500 index was also hit ending the week +0.32% higher after declining -0.14% Friday, though weekly gains were concentrated in big technology and consumer discretionary stocks. U.S. risk markets were likely supported by the U.S. House of Representatives passing the Biden Administration’s climate and social spending bill. The bill will proceed to the Senate, where its fate lays with a few key moderate Democrats. This follows President Biden signing a physical infrastructure bill into law on Monday. On the Fed, communications from officials took a decidedly more hawkish turn on inflation dynamics, especially from dovish members. Whether the Fed decides to accelerate its asset purchase taper at the December FOMC will likely be the key focus in markets heading into the meeting. Ending the weekly wrap up with some positive Covid news: the U.S. Food and Drug Administration cleared Pfizer and Moderna booster shots for all adults. Additionally, the US will order 10 million doses of Pfizer’s Covid pill. Tyler Durden Mon, 11/22/2021 - 07:49.....»»

Category: blogSource: zerohedgeNov 22nd, 2021

What is OTC? A beginner"s guide to over-the-counter markets

Over-the-counter (OTC) trading allows two parties to trade via a dealer-broker, with lower transaction costs than major stock exchanges. OTC or over-the-counter trading offers opportunities, like buying a young company of great potential for a low price. But it's also subject to major risks, like lack of regulations and difficulty of getting information. visualspace/Getty Images OTC (over-the-counter) refers to buying and selling securities outside of an official stock exchange. OTC investments can include penny stocks, bonds, derivatives, ADRs, and currencies. OTC markets are electronic networks that allow two parties to trade with each other using a dealer-broker as an intermediary. Visit Business Insider's Investing Reference library for more stories. OTC (over the counter) is the stock market version of "for sale by owner."It's a process by which stocks, bonds, and other financial instruments are traded directly between two parties instead of on a public stock market, such as the New York Stock Exchange (NYSE) or Nasdaq. Investing in OTC securities has advantages, such as getting in on the ground floor of a winning stock. "With OTC, you have access to high-growth emerging companies, including startups," says Michael Bertov, author of The Evergreen Startup. And you get more bang for the investment buck too since prices are typically lower for OTC investments than for their public exchange counterparts.Still, there are a lot things to consider when trading OTC securities. Let's look at the ins and outs of investing OTC.What does OTC mean?OTC markets are electronic networks that allow two parties to trade with each other using a dealer-broker as a middleman. They are known as dealer networks or markets. In contrast, stock exchanges are auction markets. A price for a stock is posted (the "ask"), and then investors make offers for it, bidding against each other. Companies that trade OTC are considered public but unlisted. This means their stock can be openly bought and sold, but that the stock is not listed on a major exchange such as the NYSE or Nasdaq. So these equities are subject to the rules and requirements that these exchanges impose on their listed companies. No governing institution is watching them, in other words. That said, there are still federal regulatory hoops to jump through. Many OTC stocks are subject to at least some oversight by the SEC. In fact, SEC regulations were updated in September 2020 to enhance disclosure and investor protections by ensuring that broker-dealers do not publish price quotes for a security when current information about that security is not publicly available.Also, OTC trading is usually done through a licensed broker-dealer. Broker-dealers are regulated by the Financial Industry Regulatory Authority (FINRA).What kinds of investments trade OTC?Many OTC securities include stocks issued by small companies that don't qualify to be listed on major exchanges because they don't trade enough shares or their shares don't sell above a minimum price. Often referred to as penny stocks, they trade for less than $5 per share. Other OTC companies are larger, but can't afford (or don't want to pay) the listing fees the major exchanges charge. NASDAQ, for example, charges companies up to $163,000 to be listed, assuming they qualify.Fast fact: More than 10,000 securities trade OTC. Most bonds trade OTC after their initial offering. OTC markets are a better fit for bonds than stock exchanges because of the large size of trades, number of bonds traded, and the infrequent trading of bonds.Besides stocks and bonds, investments that trade OTC often include:Derivatives, private contracts between two parties, typically arranged by a broker. These can be options, forwards, futures, or other agreements whose value is based on that of an underlying asset, like a stock.American Depositary Receipts (ADRs), sometimes called ADSs, or bank certificates that represent a specified number of shares of a foreign stock. Foreign currencies. About $5 trillion worth in different nations' money trades on what's called the Forex, an over-the-counter currency exchange.Cryptocurrencies, like bitcoin and ethereum. What are the major OTC markets?One primary over-the-counter (OTC) network is OTC Markets Group. As an investor, you'll have access to this market depending on your broker. There's also the Grey Market, which we'll cover below.OTC Markets GroupThe majority of OTC trades take place on the OTC Markets Group, a publicly traded company. OTC Markets lists over-the-counter equities at three tiers, depending on their size, share price, and the amount of financial reporting and disclosure they do. OTCQX® Best Market is the highest tier - these are firms with audited financials that could trade on regular exchanges. The next, OTCQB® Venture Market, is for early-stage or growth companies; they must have a minimum bid price of $0.01.The lowest tier is the Pink® Open Market, which is the default market for broker-dealers who want to trade OTC securities. This tier includes foreign companies, penny stocks, shell companies, and other firms that choose not to disclose financial information. Grey Market Only broker-dealers can trade on the OTC Markets Group. The Grey Market, sometimes called Other OTC, is a catch-all category for any security that is considered over-the-counter but not quoted by broker-dealers due to a lack of investor interest, lack of financial information, or lack of regulatory compliance. Is it safe to buy OTC stocks?OTC trading has had a shady reputation. Partly that's because of the basic way it operates. In contrast to the total transparency of the stock exchanges, where prices are displayed for all to see, OTC is a buyer and seller secretly negotiating a price. The seller might offer the stock to one buyer for one price and to another buyer for another.Small wonder that OTC markets have been the site of scams and criminal activities. Dealing in penny stocks opens the door to illegal pump and dump schemes in which someone promotes (pumps) a stock, then sells (dumps) the stock after you and other investors buy, raising the price of the stock.Bonus scams are also a major risk according to OTC Forex trader Frano Grgić, who notes the presence of unscrupulous "brokerages that want to lure beginners into trading by offering them large bonuses on their deposit." Unfortunately, Grgić says, "when it comes time to withdraw funds, the money is gone."For regular investors, the only safe way to buy (or sell) OTC stocks is through a reputable broker-dealer using a major online platforms like OTC Markets. They actually operate like "discount" stock exchanges, imposing some rules and oversight and, in OTC Markets' case, classifying stocks into tiers. Even then, consider the tier you plan to use and, of course, the reputation of the broker-dealer who will negotiate your trades.Risks of OTC tradingFraudulent activities aside, there are other risks associated with OTC trading.Lack of price transparency. As noted above, theoretically a seller could be charging a buyer one amount for a security, and naming another price to another.Low liquidity. Many OTC stocks are thinly traded, meaning there isn't much demand. That can make them hard to sell when you want to.Volatility. Since OTC securities experience lower trading volume, it may lead to sharp price swings.Lack of oversight. OTC trading may have less regulation than major exchanges, depending on the market or OTC network you choose to trade through.Benefits of OTC tradingDespite the drawbacks, OTC trading has its upsides too.The stars of tomorrow. Many big-name stocks started small, trading OTC. "Imagine buying shares of Twitter or Facebook in 2007," says Michael Bertov. Low transaction costs. Fees are lower on the OTC market compared to major exchanges, says Jon Ovadia, OTC trader and founder of the OVEX cryptocurrency exchange platform.Lower share prices mean your money goes farther and buys more of an OTC investment than an exchange-listed one."Private and personalized service," as Ovadia puts it - you're dealing not in a huge, anonymous market space, but in a more intimate one, with an individual broker-dealer and the seller.The financial takeawayOTC trading is not for everyone. In fact, the SEC does issue this dire warning: "Academic studies find that OTC stocks tend to be highly illiquid; are frequent targets of alleged market manipulation; generate negative and volatile investment returns on average, and rarely grow into a large company or transition to listing on a stock exchange."If your investment strategy is ultra-conservative or if you are a relative novice, most experts suggest you stay away or at the very least, confine your trading to the OTCQX® Best Market tier on OTC Markets Group. On the other hand, "If you are able to be patient and disciplined, and are open to learning something new," you may want to try OTC, says Grgić. He cautions, however, "If you do not have money to invest which you can lose," don't try it.Impact investing finances companies that aim to do good in the world - here's how it works and how to get involvedAlternative investments are exotic assets that can diversify your portfolioTrading and investing are two approaches to playing the stock market that bring their own benefits and risksMargin trading means buying stocks with borrowed funds - it's riskier than paying cash, but the returns can be greaterRead the original article on Business Insider.....»»

Category: personnelSource: nytNov 11th, 2021

Biden Starts To Freak Out About Soaring Inflation, Orders Economic Council To "Reduce Energy Costs"

Biden Starts To Freak Out About Soaring Inflation, Orders Economic Council To "Reduce Energy Costs" When discussing today's "shock" CPI report we said that it was just a matter of time before there is a wave of political blowback that will make the recent anti-democrat revulsion in Virginia and NJ seem like amateur hour. Specifically, we said that "the explosive inflation surge threatens to exacerbate political challenges for President Brandon as he seeks to pass a nearly $2 trillion tax-and-spending package and defend razor-thin congressional majorities in next year’s midterm elections." It took just a few minutes for this prediction to materialize because just around the time the market opened, Biden addressed the public and confirmed that unlike the Fed, he is finally starting to freak out about soaring prices, to wit: ... on inflation, today’s report shows an increase over last month. Inflation hurts Americans pocketbooks, and reversing this trend is a top priority for me. The largest share of the increase in prices in this report is due to rising energy costs—and in the few days since the data for this report were collected, the price of natural gas has fallen. I have directed my National Economic Council to pursue means to try to further reduce these costs, and have asked the Federal Trade Commission to strike back at any market manipulation or price gouging in this sector. And just how does Biden plan on pulling this directive straight out of communist China? Will he restart the Keystone XL pipeline; or will the US fund shale producers - that could be awkward in light of Joe's faux environment concerns. Then again, it's just optics confirming that in a time of near-record inflation, at least Biden's talk remains extremely cheap. And speaking of cheap talk, the president also claimed that "other price increases reflect the ongoing struggle to restore smooth operations in the economy in the restart." Which, we assumes is what uncontrolled inflation is called by the White House today... Hilariously, all this is happening just as Biden is still trying to shove trillions in additional, and quite inflationary fiscal stimulus down the country's throat which, make no mistake, will lead to even higher prices but not to the White House, which continues to claim that a plan that will require trillions in funding is actually, don't laugh, deflationary! I am travelling to Baltimore today to highlight how my Infrastructure Bill will bring down these costs, reduce these bottlenecks, and make goods more available and less costly. And just in case there is any doubt that Biden is contemplating replacing Powell with Hillary Clinton fangirl and Democrat Lael Brainard, Biden said he wants to "reemphasize my commitment to the independence of the federal reserve to monitor inflation, and take steps necessary to combat it." Translation: he wants to appoint a career democrat who will make it easier to push through the $150 trillion in QE needed over the next 30 years to pretend to fund "net zero" but is really meant to make the rich richer. Going forward, it is important that Congress pass my Build Back Better plan, which is fully paid for and does not add to the debt, and will get more Americans working by reducing the cost of child care and elder care, and help directly lower costs for American families by providing more affordable health coverage and prescription drugs—alongside cutting taxes for 50 million Americans including for most families with children. 17 Nobel Prize winners in economics have said that my plan will “ease inflationary pressures.” And my plan does this without raising taxes on those making less than $400,000 or adding to the federal debt, by requiring the wealthiest and big corporations to start to pay their fair share in taxes. Luckily, at least one Democrat is not a lunatic and just as Biden was delivering his prepared remarks, Democratic Senator Joe Manchin said that the “threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse.” “From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day.” By all accounts, the threat posed by record inflation to the American people is not “transitory” and is instead getting worse. From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day. — Senator Joe Manchin (@Sen_JoeManchin) November 10, 2021 To be clear, what he was referring to is Biden's $1.75 trillion (which really is more like $5 trillion) BBB plan (the same as the US credit rating after it passes), which will make galloping inflation quite "hyper" and which Manchin is - at least for now - clearly opposing. Tyler Durden Wed, 11/10/2021 - 10:10.....»»

Category: blogSource: zerohedgeNov 10th, 2021

DEI trailblazers: 16 diversity executives transforming the workplace in post-George Floyd corporate America

From Nike to Google to Bank of America, Insider's top diversity execs of 2021 have led transformative equity progress under immense pressure. From Nike to Google to Twitter, here are Insider's top diversity trailblazers of 2021. American Express; JP Morgan; Facebook; Nike; Alyssa Powell/Insider The echoes of Black Live Matter protesters may have died down since the summer of 2020, but America's CEOs know the pressure to advance racial equity still hovers over them since the murder of George Floyd.Chief diversity officers were hired at record rates to shoulder the brunt of demands placed on companies shortly after Floyd's death. Indeed found that listings for diversity roles jumped 56% between September 2019 and September 2020. LinkedIn data confirmed that the summer of 2020 saw a spike in the hiring of these roles. The year 2021 was the first test to see whether companies would make real progress. These chief diversity officers - often people of color - have enacted incredible change since then. And the work they do is complicated and exhausting. They are the shepherds of what could be a new era in corporate America. Insider is proud to present its second annual list of diversity officers changing the country. Collectively, these executives are helping break barriers for hundreds of thousands of workers while also challenging their CEOs to make their policies and business practices more inclusive. Rosanna Durruthy, vice president of global diversity, inclusion and belonging at LinkedIn Linkedin's Rosanna Durruthy. Courtesy of Rosanna Durruthy Key accomplishments: A result of Durruthy's diligence, LinkedIn announced in July that it would pay the global cochairs of its employee resource groups $10,000 per year for their work, in addition to their salary. "Historically, ERG leaders take on leadership roles and the associated work in addition to their day jobs, putting in extra time, energy, and insight. And despite the tremendous value, visibility and impact to the organization, this work is rarely rewarded financially," Durruthy said. "The work of ERGs is more important than ever." This past year, LinkedIn also created the option for users to share their preferred pronouns, a big move to make the jobs platform more inclusive, especially for transgender and nonbinary professionals. LinkedIn aims to double the number of Black and Hispanic leaders and managers on its US team over the next five years. Durruthy is also focused on increasing leadership training that focuses on inclusion and diversity. In their own words: "As a leader and an LGBTQ woman of color, it's been really important for me to be in conversation with my peers and to allow them to know that I see them as being responsible for helping create the change we're all endeavoring toward."  Brian Lamb, global head of diversity and inclusion at JPMorgan JPMorgan's Brian Lamb. JPMorgan Chase Key accomplishments: This year, Lamb, Jamie Dimon, and a group of other executives deployed funds from the firm's record-making 2020 $30 billion pledge to address racial injustice. The investment aims to boost the number of Black and Hispanic homeowners, create more affordable housing, and support small businesses through loans.  In September, JPMorgan committed an additional $100 million to Black and Hispanic-led minority depository institutions and community-development financial institutions. A month later, JPMorgan announced to Insider it was pressuring the businesses it works with to increase spending with Black- and Hispanic-led companies. Business professors and economists predicted the bank's efforts would have a ripple effect in the economy, boosting capital spent on minority-owned businesses.  In their own words: "Patience isn't a virtue for me. I'm inspired to live with purpose and positively impact the lives of others — to be bold in our thinking and hold myself and others accountable to both their personal and professional responsibility to drive sustainable change."  Melonie Parker, chief diversity officer at Google Google's Melonie Parker. Google Key accomplishments: With efforts overseen by Parker, Google added diversity, equity, and inclusion materials to orientation for all new hires along with training for managers on how to promote inclusion of employees who are neurodiverse, or people with different ways of brain processing, such as people with ADHD or autism. Google also made significant strides in hiring diverse candidates. It increased Black representation in its US workforce by nearly 20%, from 3.7% to 4.4% and increased Hispanic hiring by a third, from 6.6% to 8.8%, according to the company. Parker also interviewed former first lady Michelle Obama at Google's first Women of Color Summit aimed at promoting mentorship, sponsorship, and career development for women of color at the company.  In their own words: "I believe we need to further expand the horizon of what we do to support employees of color. To me, that means clearer pathways to leadership, mentorship opportunities, more safe spaces both on campus and virtually, and also more DEI exercise for white employees, because it is truly everybody's responsibility to create a welcoming and gainful environment for underrepresented employees." Lesley Slaton Brown, chief diversity officer at HP HP's Lesley Slaton Brown. HP Key accomplishments: Over the past year, Lesley Slaton Brown helped the tech giant increase the number of Black executives at the vice president level and up by 50% and the number of female executives by 32%. Additionally, over 60% of new US hires were from underrepresented groups, including women, people with disabilities, people from underrepresented races and ethnicities, and military veterans.In their own words: "My mantra, is 'Everyone in!' Everybody, especially leaders, must understand the business value of DEI. It's integral to drive meaningful change in the short term and long term." Tim Dismond, chief responsibility officer at the commercial real-estate firm CBRE CBRE's Tim Dismond. CBRE Key accomplishments: As a result of Dismond's efforts, over 50% of the company's promotions and nearly half of new hires in the past year were women, people of color, LGBTQ people, or people with disabilities.He also led an effort to increase spending with suppliers owned by people of color, women, or other historically marginalized group. Across 2020 and 2021, the company is projected to spend more than $1 billion with diverse suppliers. In their own words: "As a Black man, I'm not immune to the undertones of bias in professional settings, and while my experience is not unique, by sharing and showing vulnerability I can effect change and help others feel safe to share their experiences and perspectives."   Dalana Brand, VP of people experience and head of inclusion and diversity at Twitter Twitter's Dalana Brand. Twitter Key accomplishments: Brand has pushed Twitter to further diversify its leadership over the past year. Representation of women in leadership roles increased from 35.4% to 37.7% and Black representation in leadership positions increased from 5.6% to 7.3%.  Brand was also influential in Twitter announcing that employees have the option to work from home indefinitely. The move has helped attract and retain talent for whom working from home is best, such as working parents or people with disabilities.In their own words: "It's not enough for us to simply have diverse teams. We cannot check the box and keep on with our own careers because what we know is that diverse folks will remain excluded from opportunity unless we are intentional about inclusion."  Sonia Cargan, American Express' chief colleague inclusion and diversity officer American Express' Sonia Cargan. American Express Key accomplishments: This year, Cargan made pay equity a top priority. AmEx investigated salaries across gender, race, and ethnicity and made changes to correct any discrepancies, achieving 100% pay equity for colleagues across gender globally and across race and ethnicity in the US. Cargan said the company is working to achieve pay equity across race and ethnicity globally.Cargan was also instrumental in AmEx creating a new office of enterprise inclusion, diversity, and business engagement that works directly with the company's executive committee to weave DEI practices into business strategies. In their own words: "We understood that to drive real change, we needed to further intensify our focus and make inclusion and diversity the heart of not only our workplace but how we do business."  Tara Ataya, chief people and diversity officer at Hootsuite Hootsuite's Tara Ataya. Hootsuite Key accomplishments: After a powerful conversation with other Hootsuite leaders last year about how to better support employees, Ataya guided the company's redesign of its benefits package to make it more inclusive. The company now covers gender-affirmation surgeries, fertility treatment, and financial-counseling services under its health and employee-assistance plans, benefits that are highly coveted and not often offered. Hootsuite also expanded its mental-health counseling services to include more therapists of color. The company also conducted a third-party pay equity report and achieved pay equity. In their own words: "It's about time we see this level of change. Greatness comes from being challenged to be better and do better. I think it is so important that organizations understand the importance of and the business case for DEI in the workplace." Maxine Williams, chief diversity officer at Facebook Facebook's Maxine Williams. Courtesy of Maxine Williams Key accomplishments: Because of Williams' leadership, Facebook has seen a significant increase in women in technical roles (from 15% in 2014 to 24.1% in 2020), as well as Black people in nontechnical roles (from 2% in 2014 to 8.9% in 2020). In 2020, Williams helped Facebook achieve a 38.2% increase in Black leaders, according to the company's latest DEI report. In addition, Williams built a diversity advisory council, a group of 18 employees from diverse backgrounds across the globe who meet quarterly to consult on the company's content policies, products, and human-resources programs.In their own words: "Build DEI into business processes and products from day one. Don't wait for the right time. That time was yesterday." Jarvis Sam, Nike's vice president and head of global diversity, equity, and inclusion Nike's Jarvis Sam. Nike Key accomplishments: Sam drove Nike's plan to increase representation of historically marginalized communities at the leadership level. Over the past year, he helped the company increase representation of women and people of color and at the director level and above by 2 percentage points. Women now make up 43% of directors and above, and people of color make up 27%. Sam also created new coaching programs for vice presidents across all departments to gain new skills, including skills around DEI. Some 56% of the 2020 participants were promoted to new roles within the year.  In their own words: "We have to lift as we climb. If we're not bringing others along with us, we aren't doing our job right." Toni Thompson, VP of people and strategy at Etsy Etsy's Toni Thompson. Etsy Key accomplishments: Over the past year and a half, the company has doubled down on its efforts to hire and promote more people of color thanks to pressure from Thompson. Black, Latino, and Native American hires made up 20% of new hires in 2020, and Black, Latino, and Native American people now comprise 12.2% of Etsy's total workforce, according to the company's most recent diversity report. In addition, employees from these underrepresented communities now comprise 8.7% of Etsy's leadership. The company is on track to reach its goal of doubling the percentage of Black, Latino, and Native American employees by 2023.Thompson helped Etsy expand its mentorship opportunities for women and people of color in engineering. She also launched a third-party pay-equity analysis, which found no discrepancies in pay based on race, ethnicity, or gender, consistent with their first report conducted in 2018. In their own words: "It's very natural for companies to be laser-focused on the financials and goal achievement that influence the financial health of the company. There are many HR and DEI efforts that support the top and bottom line, but it's hard for people to make those connections. I'm thankful the executive team at Etsy gets it, but many leaders at other companies don't."  Kara Helander, managing director and chief diversity, equity, and inclusion officer at The Carlyle Group The Carlyle Group's Kara Helander. The Carlyle Group Key accomplishments: In early 2020, Helander led the charge at the private-equity firm to set a new goal of having 30% of board directors at all of its portfolio companies hail from historically underrepresented groups within two years of ownership. The head of DEI also developed and implemented a new set of criteria for assessing employees up for promotion to managing director, with individuals taking part in an assessment that evaluated their skills in inclusive leadership and management.  In addition, she implemented a change that DEI will be integrated into compensation as part of managers' formal year-end assessments going forward. Helander wants to continue diversifying the financial firm. In 2020, 63% of people hired in the US were women or ethnic minorities, according to the company. In their own words: "Each and every person in an organization can contribute to advancing diversity and inclusion. Accountability is key to sustaining positive change."  Lorie Valle-Yanez, head of diversity, equity, and inclusion at MassMutual MassMutual's Lorie Valle-Yanez. MassMutual Key accomplishments: Valle-Yanez shepherded MassMutual's investments in racial justice to the tune of more than $200 million, with $150 million going to diversifying the businesses the company works with and $50 million to spur job creation among diverse entrepreneurs in Massachusetts.The financial company also released its first public DEI report, which includes a detailed breakdown of its leadership and workforce demographics. In their own words: "The biggest change since George Floyd has been the increased engagement and ownership coming from so many people in the company who are raising their hands and wanting to be part of the change."  Antoine Andrews, chief diversity and social-impact officer at Momentive (formerly SurveyMonkey) Momentive's Antoine Andrews. Momentive Key accomplishments: Andrews was a key figure in Momentive's recent decision to financially recognize employees who lead the company's ERGs, though the company declined to disclose by how much. Working with CEO Zander Lurie, Andrews also shaped Momentive's initiative calling on its suppliers and vendors to increase diversity in their leadership. In their own words: "Stamina is the characteristic most needed to combat inequity, racism, and all other negative 'isms.' Those of us who do this work can easily get tired, frustrated, and discouraged when progress isn't made or is happening slowly. Change requires us to be in shape mentally and physically."  KeyAnna Schmiedl, global head of culture and inclusion at Wayfair Wayfair's KeyAnna Schmiedl. Lyndsay Hannah Key accomplishments: Schmiedl helped Wayfair conduct a third-party pay-equity survey and worked to achieve pay equity for all 16,000 employees across race, disability status, and gender and sexual identity. In addition, Schmiedl led the charge to tie executive compensation to DEI goals.She also helped diversify Wayfair's leadership. The company increased the share of women in leadership positions by 7 percentage points in six months from 25% at the end of the 2020 fourth quarter to 32.8% at the end of June. The company also hired its first two directors of Indigenous descent. In their own words: "I am more consistent in being authentically me from meeting to meeting, interaction to interaction, and I've experienced more folks in the workplace bringing more of their humanity to everyday interactions. I'm having more raw conversations."  Cynthia Bowman, chief diversity and inclusion and talent acquisition officer at Bank of America Bank of America's Cynthia Bowman. Bank of America Key accomplishments: Bowman played a key role in producing Bank of America's $1 billion, four-year commitment made in June 2020 to address underlying economic and social disparities that were exacerbated during the pandemic. In March, Bowman, CEO Brian Moynihan, and other executives expanded this commitment to $1.25 billion over five years to further support investments to advance racial justice through grants to historically Black colleges and universities, Hispanic-serving institutions, and civil-rights organizations. Bowman has helped the financial giant deepen connections with HBCUs and HSIs over the past year and a half. Because of these efforts, the bank's 2021 entry-level class is at least 50% people from historically marginalized backgrounds.  In their own words: "There is no question that achieving strong operating results on equity — the right way — starts with our teammates. Our diversity makes us stronger, and the value we deliver as a company is strengthened when we bring broad perspectives together to meet the needs of our diverse stakeholders."  Read the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 27th, 2021

Green Energy: A Bubble In Unrealistic Expectations

Green Energy: A Bubble In Unrealistic Expectations Authored by David Hay via Everegreen Gavekal blog, “You see what is happening in Europe. There is hysteria and some confusion in the markets. Why?…Some people are speculating on climate change issues, some people are underestimating some things, some are starting to cut back on investments in the extractive industries. There needs to be a smooth transition.” - Vladimir Putin (someone with whom this author rarely agrees) “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of its citizens.” – John Maynard Keynes (an interesting observation for all the modern day Keynesians to consider given their support of current inflationary US policies, including energy-related) Introduction This week’s EVA provides another sneak preview into David Hay’s book-in-process, “Bubble 3.0” discussing what he thinks is the crucial topic of “greenflation.”  This is a term he coined referring to the rising price for metals and minerals that are essential for solar and wind power, electric cars, and other renewable technologies. It also centers on the reality that as global policymakers have turned against the fossil fuel industry, energy producers are for the first time in history not responding to dramatically higher prices by increasing production.  Consequently, there is a difficult tradeoff that arises as the world pushes harder to combat climate change, driving up energy costs to painful levels, especially for lower income individuals.  What we are currently seeing in Europe is a vivid example of this dilemma.  While it may be the case that governments welcome higher oil and natural gas prices to discourage their use, energy consumers are likely to have a much different reaction. Summary BlackRock’s CEO recently admitted that, despite what many are opining, the green energy transition is nearly certain to be inflationary. Even though it’s early in the year, energy prices are already experiencing unprecedented spikes in Europe and Asia, but most Americans are unaware of the severity. To that point, many British residents being faced with the fact that they may need to ration heat and could be faced with the chilling reality that lives could be lost if this winter is as cold as forecasters are predicting. Because of the huge increase in energy prices, inflation in the eurozone recently hit a 13-year high, heavily driven by natural gas prices on the Continent that are the equivalent of $200 oil. It used to be that the cure for extreme prices was extreme prices, but these days I’m not so sure.  Oil and gas producers are very wary of making long-term investments to develop new resources given the hostility to their industry and shareholder pressure to minimize outlays. I expect global supply to peak sometime next year and a major supply deficit looks inevitable as global demand returns to normal. In Norway, almost 2/3 of all new vehicle sales are of the electric variety (EVs) – a huge increase in just over a decade. Meanwhile, in the US, it’s only about 2%. Still, given Norway’s penchant for the plug-in auto, the demand for oil has not declined. China, despite being the largest market by far for electric vehicles, is still projected to consume an enormous and rising amount of oil in the future. About 70% of China’s electricity is generated by coal, which has major environmental ramifications in regards to electric vehicles. Because of enormous energy demand in China this year, coal prices have experienced a massive boom. Its usage was up 15% in the first half of this year, and the Chinese government has instructed power providers to obtain all baseload energy sources, regardless of cost.  The massive migration to electric vehicles – and the fact that they use six times the amount of critical minerals as their gasoline-powered counterparts –means demand for these precious resources is expected to skyrocket. This extreme need for rare minerals, combined with rapid demand growth, is a recipe for a major spike in prices. Massively expanding the US electrical grid has several daunting challenges– chief among them the fact that the American public is extremely reluctant to have new transmission lines installed in their area. The state of California continues to blaze the trail for green energy in terms of both scope and speed. How the rest of the country responds to their aggressive take on renewables remains to be seen. It appears we are entering a very odd reality: governments are expending resources they do not have on weakly concentrated energy. And the result may be very detrimental for today’s modern economy. If the trend in energy continues, what looks nearly certain to be the Third Energy crisis of the last half-century may linger for years.  Green energy: A bubble in unrealistic expectations? As I have written in past EVAs, it amazes me how little of the intense inflation debate in 2021 centered on the inflationary implications of the Green Energy transition.  Perhaps it is because there is a built-in assumption that using more renewables should lower energy costs since the sun and the wind provide “free power”.  However, we will soon see that’s not the case, at least not anytime soon; in fact, it’s my contention that it will likely be the opposite for years to come and I’ve got some powerful company.  Larry Fink, CEO of BlackRock, a very pro-ESG* organization, is one of the few members of Wall Street’s elite who admitted this in the summer of 2021.  The story, however, received minimal press coverage and was quickly forgotten (though, obviously, not be me!).  This EVA will outline myriad reasons why I think Mr. Fink was telling it like it is…despite the political heat that could bring down upon him.  First, though, I will avoid any discussion of whether humanity is the leading cause of global warming.  For purposes of this analysis, let’s make the high-odds assumption that for now a high-speed green energy transition will continue to occur.  (For those who would like a well-researched and clearly articulated overview of the climate debate, I highly recommend the book “Unsettled”; it’s by a former top energy expert and scientist from the Obama administration, Dr. Steven Koonin.) The reason I italicized “for now” is that in my view it’s extremely probable that voters in many Western countries are going to become highly retaliatory toward energy policies that are already creating extreme hardship.  Even though it’s only early autumn as I write these words, energy prices are experiencing unprecedented increases in Europe.  Because it’s “over there”, most Americans are only vaguely aware of the severity of the situation.  But the facts are shocking…  Presently, natural gas is going for $29 per million British Thermal Units (BTUs) in Europe, a quadruple compared to the same time in 2020, versus “just” $5 in the US, which is a mere doubling.  As a consequence, wholesale energy cost in Great Britain rose an unheard of 60% even before summer ended.  Reportedly, nine UK energy companies are on the brink of failure at this time due to their inability to fully pass on the enormous cost increases.  As a result, the British government is reportedly on the verge of nationalizing some of these entities—supposedly, temporarily—to prevent them from collapsing.  (CNBC reported on Wednesday that UK natural gas prices are now up 800% this year; in the US, nat gas rose 20% on Tuesday alone, before giving back a bit more than half of that the next day.) Serious food shortages are expected after exorbitant natural gas costs forced most of England’s commercial production of CO2 to shut down.  (CO2 is used both for stunning animals prior to slaughter and also in food packaging.)  Additionally, ballistic natural gas prices have forced the closure of two big US fertilizer plants due to a potential shortfall of ammonium nitrate of which “nat gas” is a key feedstock.  *ESG stands for Environmental, Social, Governance; in 2021, Blackrock’s assets under management approximated $9 ½ trillion, about one-third of the total US federal debt. With the winter of 2021 approaching, British households are being told they may need to ration heat.  There are even growing concerns about the widespread loss of life if this winter turns out to be a cold one, as 2020 was in Europe.  Weather forecasters are indicating that’s a distinct possibility.   In Spain, consumers are paying 40% more for electricity compared to the prior year.  The Spanish government has begun resorting to price controls to soften the impact of these rapidly escalating costs. (The history of price controls is that they often exacerbate shortages.) Naturally, spiking power prices hit the poorest hardest, which is typical of inflation whether it is of the energy variety or of generalized price increases.  Due to these massive energy price increases, eurozone inflation recently hit a 13-year high, heavily driven by natural gas prices that are the equivalent of $200 per barrel oil.  This is consistent with what I warned about in several EVAs earlier this year and I think there is much more of this looming in the years to come. In Asia, which also had a brutally cold winter in 2020 – 2021, there are severe energy shortages being disclosed, as well.  China has instructed its power providers to secure all the coal they can in preparation for a repeat of frigid conditions and acute deficits even before winter arrives.  The government has also instructed its energy distributors to acquire all the liquified natural gas (LNG) they can, regardless of cost.  LNG recently hit $35 per million British Thermal Units in Asia, up sevenfold in the past year.  China is also rationing power to its heavy industries, further exacerbating the worldwide shortages of almost everything, with notable inflationary implications. In India, where burning coal provides about 70% of electricity generation (as it does in China), utilities are being urged to import coal even though that country has the world’s fourth largest coal reserves.  Several Indian power plants are close to exhausting their coal supplies as power usage rips higher. Normally, I’d say that the cure for such extreme prices, was extreme prices—to slightly paraphrase the old axiom.  But these days, I’m not so sure; in fact, I’m downright dubious.  After all, the enormously influential International Energy Agency has recommended no new fossil fuel development after 2021—“no new”, as in zero.  It’s because of pressure such as this that, even though US natural gas prices have done a Virgin Galactic to $5 this year, the natural gas drilling rig count has stayed flat.  The last time prices were this high there were three times as many working rigs.  It is the same story with oil production.  Most Americans don’t seem to realize it but the US has provided 90% of the planet’s petroleum output growth over the past decade.  In other words, without America’s extraordinary shale oil production boom—which raised total oil output from around 5 million barrels per day in 2008 to 13 million barrels per day in 2019—the world long ago would have had an acute shortage.  (Excluding the Covid-wracked year of 2020, oil demand grows every year—strictly as a function of the developing world, including China, by the way.) Unquestionably, US oil companies could substantially increase output, particularly in the Permian Basin, arguably (but not much) the most prolific oil-producing region in the world.  However, with the Fed being pressured by Congress to punish banks that lend to any fossil fuel operator, and the overall extreme hostility toward domestic energy producers, why would they?  There is also tremendous pressure from Wall Street on these companies to be ESG compliant.  This means reducing their carbon footprint.  That’s tough to do while expanding their volume of oil and gas.  Further, investors, whether on Wall Street or on London’s equivalent, Lombard Street, or in pretty much any Western financial center, are against US energy companies increasing production.  They would much rather see them buy back stock and pay out lush dividends.  The companies are embracing that message.  One leading oil and gas company CEO publicly mused to the effect that buying back his own shares at the prevailing extremely depressed valuations was a much better use of capital than drilling for oil—even at $75 a barrel. As reported by Morgan Stanley, in the summer of 2021, an US institutional broker conceded that of his 400 clients, only one would consider investing in an energy company!  Consequently, the fact that the industry is so detested means that its shares are stunningly undervalued.  How stunningly?  A myriad of US oil and gas producers are trading at free cash flow* yields of 10% to 15% and, in some cases, as high as 25%. In Europe, where the same pressures apply, one of its biggest energy companies is generating a 16% free cash flow yield.  Moreover, that is based up an estimate of $60 per barrel oil, not the prevailing price of $80 on the Continent. *Free cash flow is the excess of gross cash flow over and above the capital spending needed to sustain a business.  Many market professionals consider it more meaningful than earnings.  Therefore, due to the intense antipathy toward Western energy producers they aren’t very inclined to explore for new resources.  Another much overlooked fact about the ultra-critical US shale industry that, as noted, has been nearly the only source of worldwide output growth for the past 13 years, is its rapid decline nature.  Most oil wells see their production taper off at just 4% or 5% per year.  But with shale, that decline rate is 80% after only two years.  (Because of the collapse in exploration activities in 2020 due to Covid, there are far fewer new wells coming on-line; thus, the production base is made up of older wells with slower decline rates but it is still a much steeper cliff than with traditional wells.)  As a result, the US, the world’s most important swing producer, has to come up with about 1.5 million barrels per day (bpd) of new output just to stay even.  (This was formerly about a 3 million bpd number due to both the factor mentioned above and the 2 million bpd drop in total US oil production, from 13 million bpd to around 11 million bpd since 2019).  Please recall that total US oil production in 2008 was only around 5 million bpd.  Thus, 1.5 million barrels per day is a lot of oil and requires considerable drilling and exploration activities.  Again, this is merely to stay steady-state, much less grow.  The foregoing is why I wrote on multiple occasions in EVAs during 2020, when the futures price for oil went below zero*, that crude would have a spectacular price recovery later that year and, especially, in 2021.  In my view, to go out on my familiar creaky limb, you ain’t seen nothin’ yet!  With supply extremely challenged for the above reasons and demand marching back, I believe 2022 could see $100 crude, possibly even higher.  *Physical oil, or real vs paper traded, bottomed in the upper teens when the futures contract for delivery in April, 2020, went deeply negative.  Mike Rothman of Cornerstone Analytics has one of the best oil price forecasting records on Wall Street.  Like me, he was vehemently bullish on oil after the Covid crash in the spring of 2020 (admittedly, his well-reasoned optimism was a key factor in my up-beat outlook).  Here’s what he wrote late this summer:  “Our forecast for ’22 looks to see global oil production capacity exhausted late in the year and our balance suggests OPEC (and OPEC + participants) will face pressures to completely remove any quotas.”  My expectation is that global supply will likely max out sometime next year, barring a powerful negative growth shock (like a Covid variant even more vaccine resistant than Delta).  A significant supply deficit looks inevitable as global demand recovers and exceeds its pre-Covid level.  This is a view also shared by Goldman Sachs and Raymond James, among others; hence, my forecast of triple-digit prices next year.  Raymond James pointed out that in June the oil market was undersupplied by 2.5 mill bpd.  Meanwhile, global petroleum demand was rapidly rising with expectations of nearly pre-Covid consumption by year-end.  Mike Rothman ran this chart in a webcast on 9/10/2021 revealing how far below the seven-year average oil inventories had fallen.  This supply deficit is very likely to become more acute as the calendar flips to 2022. In fact, despite oil prices pushing toward $80, total US crude output now projected to actually decline this year.  This is an unprecedented development.  However, as the very pro-renewables Financial Times (the UK’s equivalent of the Wall Street Journal) explained in an August 11th, 2021, article:  “Energy companies are in a bind.  The old solution would be to invest more in raising gas production.  But with most developed countries adopting plans to be ‘net zero’ on carbon emissions by 2050 or earlier, the appetite for throwing billions at long-term gas projects is diminished.” The author, David Sheppard, went on to opine: “In the oil industry there are those who think a period of plus $100-a-barrel oil is on the horizon, as companies scale back investments in future supplies, while demand is expected to keep rising for most of this decade at a minimum.”  (Emphasis mine)  To which I say, precisely!  Thus, if he’s right about rising demand, as I believe he is, there is quite a collision looming between that reality and the high probability of long-term constrained supplies.  One of the most relevant and fascinating Wall Street research reports I read as I was researching the topic of what I have been referring to as “Greenflation” is from Morgan Stanley.  Its title asked the provocative question:  “With 64% of New Cars Now Electric, Why is Norway Still Using so Much Oil?”  While almost two-thirds of Norway’s new vehicle sales are EVs, a remarkable market share gain in just over a decade, the number in the US is an ultra-modest 2%.   Yet, per the Morgan Stanley piece, despite this extraordinary push into EVs, oil consumption in Norway has been stubbornly stable.  Coincidentally, that’s been the experience of the overall developed world over the past 10 years, as well; petroleum consumption has largely flatlined.  Where demand hasn’t gone horizontal is in the developing world which includes China.  As you can see from the following Cornerstone Analytics chart, China’s oil demand has vaulted by about 6 million barrels per day (bpd) since 2010 while its domestic crude output has, if anything, slightly contracted. Another coincidence is that this 6 million bpd surge in China’s appetite for oil, almost exactly matched the increase in US oil production.  Once again, think where oil prices would be today without America’s shale oil boom. This is unlikely to change over the next decade.  By 2031, there are an estimated one billion Asian consumers moving up into the middle class.  History is clear that more income means more energy consumption.  Unquestionably, renewables will provide much of that power but oil and natural gas are just as unquestionably going to play a critical role.  Underscoring that point, despite the exponential growth of renewables over the last 10 years, every fossil fuel category has seen increased usage.  Thus, even if China gets up to Norway’s 64% EV market share of new car sales over the next decade, its oil usage is likely to continue to swell.  Please be aware that China has become the world’s largest market for EVs—by far.  Despite that, the above chart vividly displays an immense increase in oil demand.  Here’s a similar factoid that I ran in our December 4th EVA, “Totally Toxic”, in which I made a strong bullish case for energy stocks (the main energy ETF is up 35% from then, by the way):  “(There was) a study by the UN and the US government based on the Model for the Assessment of Greenhouse Gasses Induced Climate Change (MAGICC).  The model predicted that ‘the complete elimination of all fossil fuels in the US immediately would only restrict any increase in world temperature by less than one tenth of one degree Celsius by 2050, and by less than one fifth of one degree Celsius by 2100.’  Say again?  If the world’s biggest carbon emitter on a per capita basis causes minimal improvement by going cold turkey on fossil fuels, are we making the right moves by allocating tens of trillions of dollars that we don’t have toward the currently in-vogue green energy solutions?” China's voracious power appetite increase has been true with all of its energy sources.  On the environmentally-friendly front, that includes renewables; on the environmentally-unfriendly side, it also includes coal.  In 2020, China added three times more coal-based power generation than all other countries combined.  This was the equivalent of an additional coal planet each week.  Globally, there was a reduction last year of 17 gigawatts in coal-fired power output; in China, the increase was 29.8 gigawatts, far more than offsetting the rest of the world’s progress in reducing the dirtiest energy source.  (A gigawatt can power a city with a population of roughly 700,000.) Overall, 70% of China’s electricity is coal-generated. This has significant environmental implications as far as electric vehicles (EVs) are concerned.  Because EVs are charged off a grid that is primarily coal- powered, carbon emissions actually rise as the number of such vehicles proliferate. As you can see in the following charts from Reuters’ energy expert John Kemp, Asia’s coal-fired generation has risen drastically in the last 20 years, even as it has receded in the rest of the world.  (The flattening recently is almost certainly due to Covid, with a sharp upward resumption nearly a given.) The worst part is that burning coal not only emits CO2—which is not a pollutant and is essential for life—it also releases vast quantities of nitrous oxide (N20), especially on the scale of coal usage seen in Asia today. N20 is unquestionably a pollutant and a greenhouse gas that is hundreds of times more potent than CO2.  (An interesting footnote is that over the last 550 million years, there have been very few times when the CO2 level has been as low, or lower, than it is today.)  Some scientists believe that one reason for the shrinkage of Arctic sea ice in recent decades is due to the prevailing winds blowing black carbon soot over from Asia.  This is a separate issue from N20 which is a colorless gas.  As the black soot covers the snow and ice fields in Northern Canada, they become more absorbent of the sun’s radiation, thus causing increased melting.  (Source:  “Weathering Climate Change” by Hugh Ross) Due to exploding energy needs in China this year, coal prices have experienced an unprecedented surge.  Despite this stunning rise, Chinese authorities have instructed its power providers to obtain coal, and other baseload energy sources, such as liquified natural gas (LNG), regardless of cost.  Notwithstanding how pricey coal has become, its usage in China was up 15% in the first half of this year vs the first half of 2019 (which was obviously not Covid impacted). Despite the polluting impact of heavy coal utilization, China is unlikely to turn away from it due to its high energy density (unlike renewables), its low cost (usually) and its abundance within its own borders (though its demand is so great that it still needs to import vast amounts).  Regarding oil, as we saw in last week’s final image, it is currently importing roughly 11 million barrels per day (bpd) to satisfy its 15 million bpd consumption (about 15% of total global demand).  In other words, crude imports amount to almost three-quarter of its needs.  At $80 oil, this totals $880 million per day or approximately $320 billion per year.  Imagine what China’s trade surplus would look like without its oil import bill! Ironically, given the current hostility between the world’s superpowers, China has an affinity for US oil because of its light and easy-to-refine nature.  China’s refineries tend to be low-grade and unable to efficiently process heavier grades of crude, unlike the US refining complex which is highly sophisticated and prefers heavy oil such as from Canada and Venezuela—back when the latter actually produced oil. Thus, China favors EVs because they can be de facto coal-powered, lessening its dangerous reliance on imported oil.  It also likes them due to the fact it controls 80% of the lithium ion battery supply and 60% of the planet’s rare earth minerals, both of which are essential to power EVs.     However, even for China, mining enough lithium, cobalt, nickel, copper, aluminum and the other essential minerals/metals to meet the ambitious goals of largely electrifying new vehicle volumes is going to be extremely daunting.  This is in addition to mass construction of wind farms and enormously expanded solar panel manufacturing. As one of the planet’s leading energy authorities Daniel Yergin writes: “With the move to electric cars, demand for critical minerals will skyrocket (lithium up 4300%, cobalt and nickel up 2500%), with an electric vehicle using 6 times more minerals than a conventional car and a wind turbine using 9 times more minerals than a gas-fueled power plant.  The resources needed for the ‘mineral-intensive energy system’ of the future are also highly concentrated in relatively few countries. Whereas the top 3 oil producers in the world are responsible for about 30 percent of total liquids production, the top 3 lithium producers control more than 80% of supply. China controls 60% of rare earths output needed for wind towers; the Democratic Republic of the Congo, 70% of the cobalt required for EV batteries.” As many have noted, the environmental impact of immensely ramping up the mining of these materials is undoubtedly going to be severe.  Michael Shellenberger, a life-long environmental activist, has been particularly vociferous in his condemnation of the dominant view that only renewables can solve the global energy needs.  He’s especially critical of how his fellow environmentalists resorted to repetitive deception, in his view, to undercut nuclear power in past decades.  By leaving nuke energy out of the solution set, he foresees a disastrous impact on the planet due to the massive scale (he’d opine, impossibly massive) of resource mining that needs to occur.  (His book, “Apocalypse Never”, is also one I highly recommend; like Dr. Koonin, he hails from the left end of the political spectrum.) Putting aside the environmental ravages of developing rare earth minerals, when you have such high and rapidly rising demand colliding with limited supply, prices are likely to go vertical.  This will be another inflationary “forcing”, a favorite term of climate scientists, caused by the Great Green Energy Transition. Moreover, EVs are very semiconductor intensive.  With semis already in seriously short supply, this is going to make a gnarly situation even gnarlier.  It’s logical to expect that there will be recurring shortages of chips over the next decade for this reason alone (not to mention the acute need for semis as the “internet of things” moves into primetime).  In several of the newsletters I’ve written in recent years, I’ve pointed out the present vulnerability of the US electric grid.  Yet, it will be essential not just to keep it from breaking down under its current load; it must be drastically enhanced, a Herculean task. For one thing, it is excruciatingly hard to install new power lines. As J.P. Morgan’s Michael Cembalest has written: “Grid expansion can be a hornet’s nest of cost, complexity and NIMBYism*, particularly in the US.”  The grid’s frailty, even under today’s demands (i.e., much less than what lies ahead as millions of EVs plug into it) is particularly obvious in California.  However, severe winter weather in 2021 exposed the grid weakness even in energy-rich Texas, which also has a generally welcoming attitude toward infrastructure upgrading and expansion. Yet it’s the Golden State, home to 40 million Americans and the fifth largest economy in the world, if it was its own country (which it occasionally acts like it wants to be), that is leading the charge to EVs and seeking to eliminate internal combustion engines (ICEs) as quickly as possible.  Even now, blackouts and brownouts are becoming increasingly common.  Seemingly convinced it must be a role model for the planet, it’s trying desperately to reduce its emissions, which are less than 1%, of the global total, at the expense of rendering its energy system more similar to a developing country.  In addition to very high electricity costs per kilowatt hour (its mild climate helps offset those), it also has gasoline prices that are 77% above the national average.  *NIMBY stands for Not In My Back Yard. While California has been a magnet for millions seeking a better life for 150 years, the cost of living is turning the tide the other way.  Unreliable and increasingly expensive energy is likely to intensify that trend.  Combined with home prices that are more than double the US median–$800,000!–California is no longer the land of milk and honey, unless, to slightly paraphrase Woody Guthrie about LA, even back in the 1940s, you’ve got a whole lot of scratch.  More and more people, seem to be scratching California off their list of livable venues.  Voters in the reliably blue state of California may become extremely restive, particularly as they look to Asia and see new coal plants being built at a fever pitch.  The data will become clear that as America keeps decarbonizing–as it has done for 30 years mostly due to the displacement of coal by gas in the US electrical system—Asia will continue to go the other way.  (By the way, electricity represents the largest share of CO2 emission at roughly 25%.)  California has always seemed to lead social trends in this country, as it is doing again with its green energy transition.  The objective is noble though, extremely ambitious, especially the timeline.  As it brings its power paradigm to the rest of America, especially its frail grid, it will be interesting to see how voters react in other states as the cost of power leaps higher and its dependability heads lower.  It’s reasonable to speculate we may be on the verge of witnessing the Californication of the US energy system.  Lest you think I’m being hyperbolic, please be aware the IEA (International Energy Agency) has estimated it will cost the planet $5 trillion per year to achieve Net Zero emissions.  This is compared to global GDP of roughly $85 trillion. According to BloombergNEF, the price tag over 30 years, could be as high as $173 trillion.  Frankly, based on the history of gigantic cost overruns on most government-sponsored major infrastructure projects, I’m inclined to take the over—way over—on these estimates. Moreover, energy consulting firm T2 and Associates, has guesstimated electrifying just the US to the extent necessary to eliminate the direct consumption of fuel (i.e., gasoline, natural gas, coal, etc.) would cost between $18 trillion and $29 trillion.  Again, taking into account how these ambitious efforts have played out in the past, I suspect $29 trillion is light.  Regardless, even $18 trillion is a stunner, despite the reality we have all gotten numb to numbers with trillions attached to them.  For perspective, the total, already terrifying, level of US federal debt is $28 trillion. Regardless, as noted last week, the probabilities of the Great Green Energy Transition happening are extremely high.  Relatedly, I believe the likelihood of the Great Greenflation is right up there with them.  As Gavekal’s Didier Darcet wrote in mid-August:  ““Nowadays, and this is a great first in history, governments will commit considerable financial resources they do not have in the extraction of very weakly concentrated energy.” ( i.e., less efficient)  “The bet is very risky, and if it fails, what next?  The modern economy would not withstand expensive energy, or worse, lack of energy.”  While I agree this an historical first, it’s definitely not great (with apologies for all the “greats”).  This is particularly not great for keeping inflation subdued, as well as for attempting to break out of the growth quagmire the Western world has been in for the last two decades.  What we are seeing in Europe right now is an extremely cautionary case study in just how disastrous the war on fossil fuels can be (shortly we will see who or what has been a behind-the-scenes participant in this conflict). Essentially, I believe, as I’ve written in past EVAs, we are entering the third energy crisis of the last 50 years.  If I’m right, it will be characterized by recurring bouts of triple-digit oil prices in the years to come.  Along with Richard Nixon taking the US off the gold standard in 1971, the high inflation of the 1970s was caused by the first two energy crises (the 1973 Arab Oil Embargo and the 1979 Iranian Revolution).  If I’m correct about this being the third, it’s coming at a most inopportune time with the US in hyper-MMT* mode. Frankly, I believe many in the corridors of power would like to see oil trade into the $100s, and natural gas into the teens, as it will help catalyze the shift to renewable energy.  But consumers are likely to have a much different reaction—potentially, a violently different reaction, as I noted last week.  The experience of the Yellow Vest protests in France (referring to the color of the vest protestors wore), are instructive in this regard.  France is a generally left-leaning country.  Despite that, a proposed fuel surtax in November 2018 to fund a renewable energy transition triggered such widespread civil unrest that French president Emmanuel Macron rescinded it the following month. *MMT stands for Modern Monetary Theory.  It holds that a government, like the US, which issues debt in its own currency can spend without concern about budgetary constraints.  If there are not enough buyers of its bonds at acceptable interest rates, that nation’s central bank (the Fed, in our case) simply acquires them with money it creates from its digital printing press.  This is what is happening today in the US.  Many economists consider this highly inflationary. The sharp and politically uncomfortable rise in US gas pump prices this summer caused the Biden administration to plead with OPEC to lift its volume quotas.  The ironic implication of that exhortation was glaringly obvious, as was the inefficiency and pollution consequences of shipping oil thousands of miles across the Atlantic.  (Oil tankers are a significant source of emissions.)  This is as opposed to utilizing domestic oil output, as well as crude from Canada (which is actually generally better suited to the US refining complex).  Beyond the pollution aspect, imported oil obviously worsens America’s massive trade deficit (which would be far more massive without the six million barrels per day of domestic oil volumes that the shale revolution has provided) and costs our nation high-paying jobs. Further, one of my other big fears is that the West is engaging in unilateral energy disarmament.  Russia and China are likely the major beneficiaries of this dangerous scenario.  Per my earlier comment about a stealth combatant in the war on fossil fuels, it may surprise you that a past NATO Secretary General* has accused Russian intelligence of avidly supporting the anti-fracking movements in Western Europe.  Russian TV has railed against fracking for years, even comparing it to pedophilia (certainly, a most bizarre analogy!).  The success of the anti-fracking movement on the Continent has essentially prevented a European version of America’s shale miracles (the UK has the potential to be a major shale gas producer).  Consequently, the European Union’s domestic natural gas production has been in a rapid decline phase for years.  Banning fracking has, of course, made Europe heavily reliant on Russian gas shipments with more than 40% of its supplies coming from Russia. This is in graphic contrast to the shale output boom in the US that has not only made us natural gas self-sufficient but also an export powerhouse of liquified natural gas (LNG).  In 2011, the Nord Stream system of pipelines running under the Baltic Sea from northern Russia began delivering gas west from northern Russia to the German coastal city of Greifswald.  For years, the Russians sought to build a parallel system with the inventive name of Nord Stream 2.  The US government opposed its approval on security grounds but the Biden administration has dropped its opposition.  It now appears Nord Stream 2 will happen, leaving Europe even more exposed to Russian coercion.  Is it possible the Russian government and the Chinese Communist Party have been secretly and aggressively supporting the anti-fossil fuel movements in America?  In my mind, it seems not only possible but probable.  In fact, I believe it is naïve not to come that conclusion.  After all, wouldn’t it be in both of their geopolitical interests to see the US once again caught in a cycle of debilitating inflation, ensnared by the twin traps of MMT and the third energy crisis? *Per former NATO Secretary General, Anders Fogh Rasumssen:  Russia has “engaged actively with so-called non-governmental organizations—environmental organizations working against shale gas—to maintain Europe’s dependence on imported Russian gas”. Along these lines, I was shocked to listen to a recent podcast by the New Yorker magazine on the topic of “intelligent sabotage”.  This segment was an interview between the magazine’s David Remnick and a Swedish professor, Adreas Malm.  Mr. Malm is the author of a new book with the literally explosive title “How To Blow Up A Pipeline”.   Just as it sounds, he advocates detonating pipelines to inhibit fossil fuel distribution.  Mr. Remnick was clearly sympathetic to his guest but he did ask him about the impact on the poor of driving energy prices up drastically which would be the obvious ramification if his sabotage recommendations were widely followed.  Mr. Malm’s reaction was a verbal shrug of the shoulders and words to the effect that this was the price to pay to save the planet. Frankly, I am appalled that the venerable New Yorker would provide a platform for such a radical and unlawful suggestion.  In an era when people are de-platformed for often innocuous comments, it’s incredible to me this was posted and has not been pulled down.  In my mind, this reflects just how tolerant the media is of attacks on the fossil fuel industry, regardless of the deleterious impact on consumers and the global economy. Surely, there is a far better way of coping with the harmful aspects of fossil fuel-based energy than this scorched earth (literally, in the case of Mr. Malm) approach, which includes efforts to block new pipelines, shut existing ones, and severely restrict US energy production.  In America’s case, the result will be forcing us to unnecessarily and increasingly rely on overseas imports.  (For example, per the Wall Street Journal, drilling permits on federal land have crashed to 171 in August from 671 in April.  Further, the contentious $3.5 trillion “infrastructure” plan would raise royalties and fees high enough on US energy producers that it would render them globally uncompetitive.) Such actions would only aggravate what is already a severe energy shock, one that may be worse than the 1970s twin energy crises.  America has it easy compared to Europe, though, given current US policy trends, we might be in their same heavily listing energy boat soon. Solutions include fast-tracking small modular nuclear plants; encouraging the further switch from burning coal to natural gas (a trend that is, unfortunately, going the other way now, as noted above); utilizing and enhancing carbon and methane capture at the point of emission (including improving tail pipe effluent-reduction technology); enhancing pipeline integrity to inhibit methane leaks; among many other mitigation techniques that recognize the reality the global economy will be reliant on fossil fuels for many years, if not decades, to come.  If the climate change movement fails to recognize the essential nature of fossil fuels, it will almost certainly trigger a backlash that will undermine the positive change it is trying to bring about.  This is similar to what it did via its relentless assault on nuclear power which produced a frenzy of coal plant construction in the 1980s and 1990s.  On this point, it’s interesting to see how quickly Europe is re-embracing coal power to alleviate the energy poverty and rationing occurring over there right now - even before winter sets in.  When the choice is between supporting climate change initiatives on one hand and being able to heat your home and provide for your family on the other, is there really any doubt about which option the majority of voters will select? Tyler Durden Tue, 10/26/2021 - 19:30.....»»

Category: worldSource: nytOct 26th, 2021

Democrats are set to unveil a new billionaire"s tax and some of the wealthiest Americans are glad. Here are some of the ultrawealthy who want higher taxes.

The group includes Mark Cuban, George Soros, Ray Dalio, Abigail Disney, members of the Pritzker and Gund families, and a Facebook cofounder. 'Shark Tank' star Mark Cuban Christopher Willard/ABC via Getty Images To pay for Biden's social spending agenda, Democrats are considering a new tax targeting billionaires. Billionaires including Mark Cuban, Marc Benioff, Ray Dalio, and George Soros have publicly called for higher taxes on the wealthy. A wealth tax would make ultrawealthy Americans pay the government a small percentage of their net worth each year. In 2020, Bill Gates' New Year's resolution was to get the federal government to raise taxes on the ultrawealthy - including himself. Now, that wish might come true, as Democrats eye higher taxes on America's billionaires."We've updated our tax system before to keep up with changing times, and we need to do it again, starting with raising taxes on people like me," Gates wrote on his blog at the time.That's exactly what Democrats are planning to propose this week. A plan authored by Sen. Ron Wyden would target the unrealized gains - value that assets like stock accrue - of billionaires every year. It's not quite an outright wealth tax, but it comes close. And it would pay for the social safety net bill Democrats hope to vote on this week that includes expansions to healthcare and childcare for Americans.While Elon Musk ripped the plan on Twitter, other billionaires from Warren Buffett to George Soros have proposed a wealth tax as a way to combat America's growing wealth gap and fund healthcare and education initiatives. In the run-up to the 2020 presidential election, a group of 18 ultrawealthy Americans, including Abigail Disney and members of the Pritzker and Gund families, published an open letter asking presidential candidates to support a moderate wealth tax.Politicians, too, rolled out proposals on this front: A wealth tax like the one proposed by Sen. Elizabeth Warren would make ultrawealthy Americans pay the federal government a small percentage of their net worth each year. Bernie Sanders unveiled a wealth-tax plan that is even more aggressive than Warren's.Inequality exacerbated by the pandemic has more strenuously renewed calls for a wealth tax, as America's billionaires added $2.1 trillion to their fortunes as millions dealt with with pandemic-induced unemployment and poverty. Mounting inequality isn't a new issue: In 2018, income inequality in the US reached its highest level in more than half a century. The ultrawealthy actually paid a smaller portion of their income in taxes than average Americans in 2018, an analysis of tax data by the University of California at Berkeley's Emmanuel Saez and Gabriel Zucman found.While the idea of using a wealth tax to solve America's inequality problem has gained traction in recent years, proposals have been hampered by questions over the effectiveness and the constitutionality of such a tax, Business Insider previously reported.Keep reading to learn more about some of the most high-profile billionaires and multimillionaires who have publicly supported raising taxes on the 1%, listed in chronological order. The founder of Jimmy John's says it's "bullshit" that wealthy people are taking out loans to live on that are free of taxes. Irene Jiang / Business Insider Jimmy John Liautaud told The Daily Beast that he knows a lot of people have "accumulated massive, massive wealth" — and then borrow money. As ProPublica reported, taking out loans against large fortunes is one method that the ultra-wealthy employ to reduce how much they owe in taxes, since loans aren't taxed."That's tax free. And I think it's bullshit," Liautaud told the Daily Beast.When it comes to gains for assets, he said: "Warren Buffett or Bill Gates, every year this shit's compounding. I paid more tax than Warren Buffett. And I'm worth 2 billion fucking dollars." Dallas Mavericks owner Mark Cuban proposed taxing the wealthy to offset cutting payroll taxes in a November 2017 tweet. Getty/Michael Kovac —Mark Cuban (@mcuban) November 24, 2017Now best known for his appearances on ABC's "Shark Tank," Cuban built a $4.5 billion fortune through a lifetime of business deals, including the $5.7 billion sale of Broadcast.com, and his ownership of the Dallas Mavericks, Business Insider reported. Bill Gates has said he's paid over $10 billion in taxes over his lifetime - but he doesn't think that's enough. Bill Gates speaks ahead of former U.S. President Barack Obama at the Gates Foundation Inaugural Goalkeepers event on September 20, 2017 in New York City. Yana Paskova/Getty Images "I need to pay higher taxes," Gates said in a 2018 interview with CNN's Fareed Zakaria. "I've paid more taxes, over $10 billion, than anyone else, but the government should require people in my position to pay significantly higher taxes."In a December 30, 2019, post on his blog, Gates Notes, Gates proposed raising the estate tax and removing the cap on the amount of income subject to Medicare taxes. He also suggested closing the carried interest loophole that allows fund managers to pay lower capital gains rates on their incomes and making state and local taxes fairer, Market Insider's Theron Mohamed previously reported."That's why I'm for a tax system in which, if you have more money, you pay a higher percentage in taxes," Gates wrote. "And I think the rich should pay more than they currently do, and that includes Melinda and me." On CNBC's Squawk Box, Warren Buffett said raising billionaires' taxes is the best way to help "a guy who is a wonderful citizen" but "just doesn't have market skills." Bill Pugliano/Getty "The wealthy are definitely undertaxed relative to the general population," Buffett said on CNBC's "Squawk Box" in February 2019. Buffett has suggested that Congress expand income tax credits for low-income Americans, raising taxes on high earners in the process, CNBC reported. Former Starbucks CEO Howard Schultz said he "should be paying higher taxes" at a CNN town hall in February, but called Rep. Alexandria Ocasio-Cortez's proposed 70% marginal tax rate for millionaires "punitive." Howard Schultz. Owen Hoffmann / Contributor / Getty Images Schultz built a $3.8 billion fortune running the coffee chain, Business Insider previously reported. While Schultz left Starbucks in 2018, he still held onto more than 37.7 million shares — or roughly 3% — of the company's stock. When asked if the wealthy should pay more in taxes on "60 Minutes," billionaire hedge-fund manager Ray Dalio replied: "Of course." Hollis Johnson/Business Insider In the "60 Minutes" segment, Dalio said he thinks the American dream is lost and referred to the wealth gap as a "national emergency." Dalio, 70, founded his hedge fund, Bridgewater Associates, in his apartment in 1975, Business Insider reported. It now has $150 billion in assets under management. Dalio has a net worth of $20 billion, Forbes estimates. Abigail Disney, the granddaughter of The Walt Disney Company cofounder Roy Disney, has made a name for herself as one of the biggest advocates for closing America's wealth gap. Sean Zanni/Patrick McMullan via Getty Images The granddaughter of The Walt Disney Co. cofounder Roy Disney has made a name for herself as one of the company's most outspoken critics. The 59-year-old heiress has criticized the salary of Disney CEO Bob Iger and defended Meryl Streep after she called Walt Disney a "bigot," according to CNN Business.Disney has a net worth of $120 million, she said in July 2019. "The internet says I have half a billion dollars and I might have something close to that if I'd been investing aggressively," Disney told the Financial Times.She testified in support of Elizabeth Warren's proposed wealth tax in April 2021, and called out the methods the ultra-wealthy use to evade taxes in a June essay for the Atlantic.Disney was one of 18 ultrawealthy Americas to sign an open letter in June asking presidential candidates to support a moderate wealth tax. The letter isn't the first time that Disney has spoken out about tax reform. Disney criticized the 2017 Republican tax bill in a NowThis video, saying the bill unfairly benefited the wealthy. Heiress Agnes Gund and her daughter Catherine Gund also signed the wealth tax letter. Catherine Gund, left, with her mother, Agnes Gund, and Stanley Whitney Getty Images / Sean Zanni / Contributor In 2015, Forbes estimated that the Gund family had a net worth of $3.4 billion and ranked them among the 100 wealthiest families in America.Agnes Gund, 83, used the fortune she inherited from her father, the president of an Ohio-based bank, to become a philanthropist in arts and social justice, according to The New York Times. Agnes Gund received the National Medal of the Arts in 1997 from President Bill Clinton for her work, which included serving as the president of the Museum of Modern Art in New York.Catherine Gund, 56, is an Emmy-winning film director and producer. Gund founded nonprofit production studio Aubin Pictures in 1996, according to her previous biography on the studio's website. The Gunds weren't the only family who signed the letter together. So did Facebook cofounder Chris Hughes and his husband, political activist Sean Eldridge. Chris Hughes Facebook Page Hughes is a cofounder of Facebook. He left the social network in 2007 to become the online organizer for Barack Obama's first presidential campaign. Despite calling for Facebook to be broken up in May 2019, Hughes had a stake in the company worth $850 million, Newsweek reports. In 2016, Forbes put Hughes' net worth at $430 million.In April 2021, Hughes told CNBC that Americans are "throwing out the idea that markets were ever free" and that it's time for a new capitalism.Eldridge is a political activist and former congressional candidate in New York, according to Vanity Fair. Eldridge was born in Canada. Ian and Liesel Pritzker Simmons signed the letter together. Ian Simmons, Co-Founder and Principal of Blue Haven Initiative, poses at his office in Cambridge, Mass., Friday, Oct. 18, 2019. A handful of billionaires and multimillionaires are making a renewed push for the government to raise their taxes and siphon away some of their holdings. AP Photo/Michael Dwyer "This is really a conservative position about increasing the stability of the economy in the long term and having an efficient source of taxation," Simmons told the Associated Press.Simmons, 44, serves as the cofounder and principal of impact investing firm Blue Haven Initiative alongside his wife and fellow signatory, Liesel Pritzker Simmons, according to the firm's website. Simmons is the heir to a family fortune that stems from the construction of locks on the Erie Canal, according to Forbes.Pritzker Simmons, an heir to the Pritzker family fortune, has a net worth of $600 million, according to a 2013 Forbes article. Simmons, now 35, is also a cofounder and principal of Blue Haven Initiative.As a child, she starred in several big-name Hollywood productions, including "A Little Princess" and "Air Force One," alongside Harrison Ford. In 2002, Forbes reports, she sued her father and the Pritzker family and came away from it with a $500 million payout. Simmons called retired Massachusetts real-estate developer Robert Bowditch and convinced him to sign the letter, too. Shutterstock "Charitable giving by itself simply cannot provide enough money to support public goods and services, such as public education, roads and bridges, clean air," Bowditch told the Associated Press in October 2019. "It has to be done by taxes."Bowditch has previously advocated for raising taxes on the wealthy: In 2010, he signed an open letter to President Obama asking him to allow tax cuts for millionaires to expire, according to a CBS affiliate in Boston. Billionaire financier George Soros signed the letter with his son, Alexander Soros. Manny Carabel/WireImage According to his personal website, Alexander Soros, 35, serves as deputy chair of the Open Society Foundations, a nonprofit founded by his father. George Soros told The New York Times' Andrew Ross Sorkin he supports a wealth tax even though it creates "a moral problem" for him. Yunus Kaymaz/Anadolu Agency/Getty Images "I am in favor of taxing the rich," George Soros, 89, told The New York Times' Andrew Ross Sorkin in October 2019, "including a wealth tax. A financier makes people suspicious ... and it does create a moral problem for me. As I became so successful, it basically put a self-imposed constraint on me that actually interfered with making money."The philanthropist made his fortune running Quantum Fund, which was once the largest hedge fund in the world. Soros has a net worth of $8.3 billion, Business Insider reported. Investor Nick Hanauer believes a wealth tax would be good for America's economy. Courtesy of Nick Hanauer "A wealth tax would not just be fair — it would be pro-growth," Hanauer wrote in an essay advocating for a wealth tax published on Business Insider. "And don't let the trickle-downers tell you otherwise."Hanauer, 62, was an early investor in Amazon, according to his personal website. Business Insider previously reported that Hanauer is a longtime critic of America's income inequality.Business Insider's Rich Feloni reported that Hanauer has said he's not a billionaire, but that, as both he and his wife have signed The Giving Pledge, their combined net worth at least approaches the $1 billion threshold. Heiress and attorney Molly Munger told the Associated Press that seeing empty Newport Beach mansions from her family's boat on Memorial Day made her consider a wealth tax. Lacy O'Toole/CNBC/NBCU Photo Bank via Getty Images "It's just too much to watch that happen at the top and see what is happening at the bottom," Munger told the Associated Press in October 2019. "Isn't it a waste when beautiful homes on the beach are empty for most of the summer?"Munger, 71, is the oldest daughter of Berkshire Hathaway vice chairman Charlie Munger. Munger is a Harvard Law graduate who works as a civil rights attorney in Pasadena, California, according to the Los Angeles Times. In 2012, she advocated for a tax hike in California to boost funding for the state's public schools. Billionaire philanthropist Eli Broad wrote an op-ed in The New York Times in June 2019 advocating for a wealth tax, saying American capitalism "isn't working." AP Broad doesn't believe that his philanthropic work and other policies including a $15 minimum wage, expanding access to health care, and reforming public education are doing enough to help low-income Americans, he wrote in The New York Times."It's time to start talking seriously about a wealth tax," Broad wrote in The Times. "I simply believe it's time for those of us with great wealth to commit to reducing income inequality, starting with the demand to be taxed at a higher rate than everyone else."Broad built a $6.9 billion fortune after cofounding home builder Kaufman & Broad, according to Forbes. Salesforce co-CEO Marc Benioff proposed a wealth tax in an October New York Times essay. Kimberley White/Getty Images "Local efforts — like the tax I supported last year on San Francisco's largest companies to address our city's urgent homelessness crisis — will help," Benioff wrote in The New York Times in October 2019. "Nationally, increasing taxes on high-income individuals like myself would help generate the trillions of dollars that we desperately need to improve education and health care and fight climate change."Benioff built a $6.5 billion fortune after founding software developer Salesforce. Benioff currently serves as the company's CEO. Michael Bloomberg has made raising taxes on the wealthy a key part of his 2020 presidential campaign. FILE PHOTO: Democratic U.S. presidential candidate Michael Bloomberg addresses a news conference after launching his presidential bid in Norfolk, Virginia Reuters Bloomberg has included promises to support "taxing wealthy people like me" in ads since launching his campaign in November, Bloomberg News reported at the time.As Politico reported, Bloomberg ultimately proposed a 5% surtax for people earning over $5 million annually — as well as an increase to the capital gains rate and corporate tax rate. But Bloomberg said during his campaign that he believes that Warren and Sanders' wealth tax "just doesn't work," he said at campaign stop in Phoenix in November. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 26th, 2021

Democrats are set to unveil a new billionaire"s tax. Here"s a look at the wealthiest Americans who want to pay more.

The group includes Mark Cuban, George Soros, Ray Dalio, Abigail Disney, members of the Pritzker and Gund families, and a Facebook cofounder. 'Shark Tank' star Mark Cuban Christopher Willard/ABC via Getty Images To pay for Biden's social spending agenda, Democrats are considering a new tax targeting billionaires. Billionaires including Mark Cuban, Marc Benioff, Ray Dalio, and George Soros have publicly called for higher taxes on the wealthy. A wealth tax would make ultrawealthy Americans pay the government a small percentage of their net worth each year. In 2020, Bill Gates' New Year's resolution was to get the federal government to raise taxes on the ultrawealthy - including himself. Now, that wish might come true, as Democrats eye higher taxes on America's billionaires."We've updated our tax system before to keep up with changing times, and we need to do it again, starting with raising taxes on people like me," Gates wrote on his blog at the time.That's exactly what Democrats are planning to propose this week. A plan authored by Sen. Ron Wyden would target the unrealized gains - value that assets like stock accrue - of billionaires every year. It's not quite an outright wealth tax, but it comes close. And it would pay for the social safety net bill Democrats hope to vote on this week that includes expansions to healthcare and childcare for Americans.While Elon Musk ripped the plan on Twitter, other billionaires from Warren Buffett to George Soros have proposed a wealth tax as a way to combat America's growing wealth gap and fund healthcare and education initiatives. In the run-up to the 2020 presidential election, a group of 18 ultrawealthy Americans, including Abigail Disney and members of the Pritzker and Gund families, published an open letter asking presidential candidates to support a moderate wealth tax.Politicians, too, rolled out proposals on this front: A wealth tax like the one proposed by Sen. Elizabeth Warren would make ultrawealthy Americans pay the federal government a small percentage of their net worth each year. Bernie Sanders unveiled a wealth-tax plan that is even more aggressive than Warren's.Inequality exacerbated by the pandemic has more strenuously renewed calls for a wealth tax, as America's billionaires added $2.1 trillion to their fortunes as millions dealt with with pandemic-induced unemployment and poverty. Mounting inequality isn't a new issue: In 2018, income inequality in the US reached its highest level in more than half a century. The ultrawealthy actually paid a smaller portion of their income in taxes than average Americans in 2018, an analysis of tax data by the University of California at Berkeley's Emmanuel Saez and Gabriel Zucman found.While the idea of using a wealth tax to solve America's inequality problem has gained traction in recent years, proposals have been hampered by questions over the effectiveness and the constitutionality of such a tax, Business Insider previously reported.Keep reading to learn more about some of the most high-profile billionaires and multimillionaires who have publicly supported raising taxes on the 1%, listed in chronological order. The founder of Jimmy John's says it's "bullshit" that wealthy people are taking out loans to live on that are free of taxes. Irene Jiang / Business Insider Jimmy John Liautaud told The Daily Beast that he knows a lot of people have "accumulated massive, massive wealth" — and then borrow money. As ProPublica reported, taking out loans against large fortunes is one method that the ultra-wealthy employ to reduce how much they owe in taxes, since loans aren't taxed."That's tax free. And I think it's bullshit," Liautaud told the Daily Beast.When it comes to gains for assets, he said: "Warren Buffett or Bill Gates, every year this shit's compounding. I paid more tax than Warren Buffett. And I'm worth 2 billion fucking dollars." Dallas Mavericks owner Mark Cuban proposed taxing the wealthy to offset cutting payroll taxes in a November 2017 tweet. Getty/Michael Kovac —Mark Cuban (@mcuban) November 24, 2017Now best known for his appearances on ABC's "Shark Tank," Cuban built a $4.5 billion fortune through a lifetime of business deals, including the $5.7 billion sale of Broadcast.com, and his ownership of the Dallas Mavericks, Business Insider reported. Bill Gates has said he's paid over $10 billion in taxes over his lifetime - but he doesn't think that's enough. Bill Gates speaks ahead of former U.S. President Barack Obama at the Gates Foundation Inaugural Goalkeepers event on September 20, 2017 in New York City. Yana Paskova/Getty Images "I need to pay higher taxes," Gates said in a 2018 interview with CNN's Fareed Zakaria. "I've paid more taxes, over $10 billion, than anyone else, but the government should require people in my position to pay significantly higher taxes."In a December 30, 2019, post on his blog, Gates Notes, Gates proposed raising the estate tax and removing the cap on the amount of income subject to Medicare taxes. He also suggested closing the carried interest loophole that allows fund managers to pay lower capital gains rates on their incomes and making state and local taxes fairer, Market Insider's Theron Mohamed previously reported."That's why I'm for a tax system in which, if you have more money, you pay a higher percentage in taxes," Gates wrote. "And I think the rich should pay more than they currently do, and that includes Melinda and me." On CNBC's Squawk Box, Warren Buffett said raising billionaires' taxes is the best way to help "a guy who is a wonderful citizen" but "just doesn't have market skills." Bill Pugliano/Getty "The wealthy are definitely undertaxed relative to the general population," Buffett said on CNBC's "Squawk Box" in February 2019. Buffett has suggested that Congress expand income tax credits for low-income Americans, raising taxes on high earners in the process, CNBC reported. Former Starbucks CEO Howard Schultz said he "should be paying higher taxes" at a CNN town hall in February, but called Rep. Alexandria Ocasio-Cortez's proposed 70% marginal tax rate for millionaires "punitive." Howard Schultz. Owen Hoffmann / Contributor / Getty Images Schultz built a $3.8 billion fortune running the coffee chain, Business Insider previously reported. While Schultz left Starbucks in 2018, he still held onto more than 37.7 million shares — or roughly 3% — of the company's stock. When asked if the wealthy should pay more in taxes on "60 Minutes," billionaire hedge-fund manager Ray Dalio replied: "Of course." Hollis Johnson/Business Insider In the "60 Minutes" segment, Dalio said he thinks the American dream is lost and referred to the wealth gap as a "national emergency." Dalio, 70, founded his hedge fund, Bridgewater Associates, in his apartment in 1975, Business Insider reported. It now has $150 billion in assets under management. Dalio has a net worth of $20 billion, Forbes estimates. Abigail Disney, the granddaughter of The Walt Disney Company cofounder Roy Disney, has made a name for herself as one of the biggest advocates for closing America's wealth gap. Sean Zanni/Patrick McMullan via Getty Images The granddaughter of The Walt Disney Co. cofounder Roy Disney has made a name for herself as one of the company's most outspoken critics. The 59-year-old heiress has criticized the salary of Disney CEO Bob Iger and defended Meryl Streep after she called Walt Disney a "bigot," according to CNN Business.Disney has a net worth of $120 million, she said in July 2019. "The internet says I have half a billion dollars and I might have something close to that if I'd been investing aggressively," Disney told the Financial Times.She testified in support of Elizabeth Warren's proposed wealth tax in April 2021, and called out the methods the ultra-wealthy use to evade taxes in a June essay for the Atlantic.Disney was one of 18 ultrawealthy Americas to sign an open letter in June asking presidential candidates to support a moderate wealth tax. The letter isn't the first time that Disney has spoken out about tax reform. Disney criticized the 2017 Republican tax bill in a NowThis video, saying the bill unfairly benefited the wealthy. Heiress Agnes Gund and her daughter Catherine Gund also signed the wealth tax letter. Catherine Gund, left, with her mother, Agnes Gund, and Stanley Whitney Getty Images / Sean Zanni / Contributor In 2015, Forbes estimated that the Gund family had a net worth of $3.4 billion and ranked them among the 100 wealthiest families in America.Agnes Gund, 83, used the fortune she inherited from her father, the president of an Ohio-based bank, to become a philanthropist in arts and social justice, according to The New York Times. Agnes Gund received the National Medal of the Arts in 1997 from President Bill Clinton for her work, which included serving as the president of the Museum of Modern Art in New York.Catherine Gund, 56, is an Emmy-winning film director and producer. Gund founded nonprofit production studio Aubin Pictures in 1996, according to her previous biography on the studio's website. The Gunds weren't the only family who signed the letter together. So did Facebook cofounder Chris Hughes and his husband, political activist Sean Eldridge. Chris Hughes Facebook Page Hughes is a cofounder of Facebook. He left the social network in 2007 to become the online organizer for Barack Obama's first presidential campaign. Despite calling for Facebook to be broken up in May 2019, Hughes had a stake in the company worth $850 million, Newsweek reports. In 2016, Forbes put Hughes' net worth at $430 million.In April 2021, Hughes told CNBC that Americans are "throwing out the idea that markets were ever free" and that it's time for a new capitalism.Eldridge is a political activist and former congressional candidate in New York, according to Vanity Fair. Eldridge was born in Canada. Ian and Liesel Pritzker Simmons signed the letter together. Ian Simmons, Co-Founder and Principal of Blue Haven Initiative, poses at his office in Cambridge, Mass., Friday, Oct. 18, 2019. A handful of billionaires and multimillionaires are making a renewed push for the government to raise their taxes and siphon away some of their holdings. AP Photo/Michael Dwyer "This is really a conservative position about increasing the stability of the economy in the long term and having an efficient source of taxation," Simmons told the Associated Press.Simmons, 44, serves as the cofounder and principal of impact investing firm Blue Haven Initiative alongside his wife and fellow signatory, Liesel Pritzker Simmons, according to the firm's website. Simmons is the heir to a family fortune that stems from the construction of locks on the Erie Canal, according to Forbes.Pritzker Simmons, an heir to the Pritzker family fortune, has a net worth of $600 million, according to a 2013 Forbes article. Simmons, now 35, is also a cofounder and principal of Blue Haven Initiative.As a child, she starred in several big-name Hollywood productions, including "A Little Princess" and "Air Force One," alongside Harrison Ford. In 2002, Forbes reports, she sued her father and the Pritzker family and came away from it with a $500 million payout. Simmons called retired Massachusetts real-estate developer Robert Bowditch and convinced him to sign the letter, too. Shutterstock "Charitable giving by itself simply cannot provide enough money to support public goods and services, such as public education, roads and bridges, clean air," Bowditch told the Associated Press in October 2019. "It has to be done by taxes."Bowditch has previously advocated for raising taxes on the wealthy: In 2010, he signed an open letter to President Obama asking him to allow tax cuts for millionaires to expire, according to a CBS affiliate in Boston. Billionaire financier George Soros signed the letter with his son, Alexander Soros. Manny Carabel/WireImage According to his personal website, Alexander Soros, 35, serves as deputy chair of the Open Society Foundations, a nonprofit founded by his father. George Soros told The New York Times' Andrew Ross Sorkin he supports a wealth tax even though it creates "a moral problem" for him. Yunus Kaymaz/Anadolu Agency/Getty Images "I am in favor of taxing the rich," George Soros, 89, told The New York Times' Andrew Ross Sorkin in October 2019, "including a wealth tax. A financier makes people suspicious ... and it does create a moral problem for me. As I became so successful, it basically put a self-imposed constraint on me that actually interfered with making money."The philanthropist made his fortune running Quantum Fund, which was once the largest hedge fund in the world. Soros has a net worth of $8.3 billion, Business Insider reported. Investor Nick Hanauer believes a wealth tax would be good for America's economy. Courtesy of Nick Hanauer "A wealth tax would not just be fair — it would be pro-growth," Hanauer wrote in an essay advocating for a wealth tax published on Business Insider. "And don't let the trickle-downers tell you otherwise."Hanauer, 62, was an early investor in Amazon, according to his personal website. Business Insider previously reported that Hanauer is a longtime critic of America's income inequality.Business Insider's Rich Feloni reported that Hanauer has said he's not a billionaire, but that, as both he and his wife have signed The Giving Pledge, their combined net worth at least approaches the $1 billion threshold. Heiress and attorney Molly Munger told the Associated Press that seeing empty Newport Beach mansions from her family's boat on Memorial Day made her consider a wealth tax. Lacy O'Toole/CNBC/NBCU Photo Bank via Getty Images "It's just too much to watch that happen at the top and see what is happening at the bottom," Munger told the Associated Press in October 2019. "Isn't it a waste when beautiful homes on the beach are empty for most of the summer?"Munger, 71, is the oldest daughter of Berkshire Hathaway vice chairman Charlie Munger. Munger is a Harvard Law graduate who works as a civil rights attorney in Pasadena, California, according to the Los Angeles Times. In 2012, she advocated for a tax hike in California to boost funding for the state's public schools. Billionaire philanthropist Eli Broad wrote an op-ed in The New York Times in June 2019 advocating for a wealth tax, saying American capitalism "isn't working." AP Broad doesn't believe that his philanthropic work and other policies including a $15 minimum wage, expanding access to health care, and reforming public education are doing enough to help low-income Americans, he wrote in The New York Times."It's time to start talking seriously about a wealth tax," Broad wrote in The Times. "I simply believe it's time for those of us with great wealth to commit to reducing income inequality, starting with the demand to be taxed at a higher rate than everyone else."Broad built a $6.9 billion fortune after cofounding home builder Kaufman & Broad, according to Forbes. Salesforce co-CEO Marc Benioff proposed a wealth tax in an October New York Times essay. Kimberley White/Getty Images "Local efforts — like the tax I supported last year on San Francisco's largest companies to address our city's urgent homelessness crisis — will help," Benioff wrote in The New York Times in October 2019. "Nationally, increasing taxes on high-income individuals like myself would help generate the trillions of dollars that we desperately need to improve education and health care and fight climate change."Benioff built a $6.5 billion fortune after founding software developer Salesforce. Benioff currently serves as the company's CEO. Michael Bloomberg has made raising taxes on the wealthy a key part of his 2020 presidential campaign. FILE PHOTO: Democratic U.S. presidential candidate Michael Bloomberg addresses a news conference after launching his presidential bid in Norfolk, Virginia Reuters Bloomberg has included promises to support "taxing wealthy people like me" in ads since launching his campaign in November, Bloomberg News reported at the time.As Politico reported, Bloomberg ultimately proposed a 5% surtax for people earning over $5 million annually — as well as an increase to the capital gains rate and corporate tax rate. But Bloomberg said during his campaign that he believes that Warren and Sanders' wealth tax "just doesn't work," he said at campaign stop in Phoenix in November. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 26th, 2021

Bitcoin & The US Fiscal Reckoning

Bitcoin & The US Fiscal Reckoning Authored by Avik Roy via NationalAffairs.com, Cryptocurrencies like bitcoin have few fans in Washington. At a July congressional hearing, Senator Elizabeth Warren warned that cryptocurrency "puts the [financial] system at the whims of some shadowy, faceless group of super-coders." Treasury secretary Janet Yellen likewise asserted that the "reality" of cryptocurrencies is that they "have been used to launder the profits of online drug traffickers; they've been a tool to finance terrorism." Thus far, Bitcoin's supporters remain undeterred. (The term "Bitcoin" with a capital "B" is used here and throughout to refer to the system of cryptography and technology that produces the currency "bitcoin" with a lowercase "b" and verifies bitcoin transactions.) A survey of 3,000 adults in the fall of 2020 found that while only 4% of adults over age 55 own cryptocurrencies, slightly more than one-third of those aged 35-44 do, as do two-fifths of those aged 25-34. As of mid-2021, Coinbase — the largest cryptocurrency exchange in the United States — had 68 million verified users. To younger Americans, digital money is as intuitive as digital media and digital friendships. But Millennials with smartphones are not the only people interested in bitcoin; a growing number of investors are also flocking to the currency's banner. Surveys indicate that as many as 21% of U.S. hedge funds now own bitcoin in some form. In 2020, after considering various asset classes like stocks, bonds, gold, and foreign currencies, celebrated hedge-fund manager Paul Tudor Jones asked, "[w]hat will be the winner in ten years' time?" His answer: "My bet is it will be bitcoin." What's driving this increased interest in a form of currency invented in 2008? The answer comes from former Federal Reserve chairman Ben Bernanke, who once noted, "the U.S. government has a technology, called a printing press...that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation...the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to...inflation." In other words, governments with fiat currencies — including the United States — have the power to expand the quantity of those currencies. If they choose to do so, they risk inflating the prices of necessities like food, gas, and housing. In recent months, consumers have experienced higher price inflation than they have seen in decades. A major reason for the increases is that central bankers around the world — including those at the Federal Reserve — sought to compensate for Covid-19 lockdowns with dramatic monetary inflation. As a result, nearly $4 trillion in newly printed dollars, euros, and yen found their way from central banks into the coffers of global financial institutions. Jerome Powell, the current Federal Reserve chairman, insists that 2021's inflation trends are "transitory." He may be right in the near term. But for the foreseeable future, inflation will be a profound and inescapable challenge for America due to a single factor: the rapidly expanding federal debt, increasingly financed by the Fed's printing press. In time, policymakers will face a Solomonic choice: either protect Americans from inflation, or protect the government's ability to engage in deficit spending. It will become impossible to do both. Over time, this compounding problem will escalate the importance of Bitcoin. THE FIAT-CURRENCY EXPERIMENT It's becoming clear that Bitcoin is not merely a passing fad, but a significant innovation with potentially serious implications for the future of investment and global finance. To understand those implications, we must first examine the recent history of the primary instrument that bitcoin was invented to challenge: the American dollar. Toward the end of World War II, in an agreement hashed out by 44 Allied countries in Bretton Woods, New Hampshire, the value of the U.S. dollar was formally fixed to 1/35th of the price of an ounce of gold. Other countries' currencies, such as the British pound and the French franc, were in turn pegged to the dollar, making the dollar the world's official reserve currency. Under the Bretton Woods system, foreign governments could retrieve gold bullion they had sent to the United States during the war by exchanging dollars for gold at the relevant fixed exchange rate. But enabling every major country to exchange dollars for American-held gold only worked so long as the U.S. government was fiscally and monetarily responsible. By the late 1960s, it was neither. Someone needed to pay the steep bills for Lyndon Johnson's "guns and butter" policies — the Vietnam War and the Great Society, respectively — so the Federal Reserve began printing currency to meet those obligations. Johnson's successor, Richard Nixon, also pressured the Fed to flood the economy with money as a form of economic stimulus. From 1961 to 1971, the Fed nearly doubled the circulating supply of dollars. "In the first six months of 1971," noted the late Nobel laureate Robert Mundell, "monetary expansion was more rapid than in any comparable period in a quarter century." That year, foreign central banks and governments held $64 billion worth of claims on the $10 billion of gold still held by the United States. It wasn't long before the world took notice of the shortage. In a classic bank-run scenario, anxious European governments began racing to redeem dollars for American-held gold before the Fed ran out. In July 1971, Switzerland withdrew $50 million in bullion from U.S. vaults. In August, France sent a destroyer to escort $191 million of its gold back from the New York Federal Reserve. Britain put in a request for $3 billion shortly thereafter. Finally, that same month, Nixon secretly gathered a small group of trusted advisors at Camp David to devise a plan to avoid the imminent wipeout of U.S. gold vaults and the subsequent collapse of the international economy. There, they settled on a radical course of action. On the evening of August 15th, in a televised address to the nation, Nixon announced his intention to order a 90-day freeze on all prices and wages throughout the country, a 10% tariff on all imported goods, and a suspension — eventually, a permanent one — of the right of foreign governments to exchange their dollars for U.S. gold. Knowing that his unilateral abrogation of agreements involving dozens of countries would come as a shock to world leaders and the American people, Nixon labored to re-assure viewers that the change would not unsettle global markets. He promised viewers that "the effect of this action...will be to stabilize the dollar," and that the "dollar will be worth just as much tomorrow as it is today." The next day, the stock market rose — to everyone's relief. The editors of the New York Times "unhesitatingly applaud[ed] the boldness" of Nixon's move. Economic growth remained strong for months after the shift, and the following year Nixon was re-elected in a landslide, winning 49 states in the Electoral College and 61% of the popular vote. Nixon's short-term success was a mirage, however. After the election, the president lifted the wage and price controls, and inflation returned with a vengeance. By December 1980, the dollar had lost more than half the purchasing power it had back in June 1971 on a consumer-price basis. In relation to gold, the price of the dollar collapsed — from 1/35th to 1/627th of a troy ounce. Though Jimmy Carter is often blamed for the Great Inflation of the late 1970s, "the truth," as former National Economic Council director Larry Kudlow has argued, "is that the president who unleashed double-digit inflation was Richard Nixon." In 1981, Federal Reserve chairman Paul Volcker raised the federal-funds rate — a key interest-rate benchmark — to 19%. A deep recession ensued, but inflation ceased, and the U.S. embarked on a multi-decade period of robust growth, low unemployment, and low consumer-price inflation. As a result, few are nostalgic for the days of Bretton Woods or the gold-standard era. The view of today's economic establishment is that the present system works well, that gold standards are inherently unstable, and that advocates of gold's return are eccentric cranks. Nevertheless, it's important to remember that the post-Bretton Woods era — in which the supply of government currencies can be expanded or contracted by fiat — is only 50 years old. To those of us born after 1971, it might appear as if there is nothing abnormal about the way money works today. When viewed through the lens of human history, however, free-floating global exchange rates remain an unprecedented economic experiment — with one critical flaw. An intrinsic attribute of the post-Bretton Woods system is that it enables deficit spending. Under a gold standard or peg, countries are unable to run large budget deficits without draining their gold reserves. Nixon's 1971 crisis is far from the only example; deficit spending during and after World War I, for instance, caused economic dislocation in numerous European countries — especially Germany — because governments needed to use their shrinking gold reserves to finance their war debts. These days, by contrast, it is relatively easy for the United States to run chronic deficits. Today's federal debt of almost $29 trillion — up from $10 trillion in 2008 and $2.4 trillion in 1984 — is financed in part by U.S. Treasury bills, notes, and bonds, on which lenders to the United States collect a form of interest. Yields on Treasury bonds are denominated in dollars, but since dollars are no longer redeemable for gold, these bonds are backed solely by the "full faith and credit of the United States." Interest rates on U.S. Treasury bonds have remained low, which many people take to mean that the creditworthiness of the United States remains healthy. Just as creditworthy consumers enjoy lower interest rates on their mortgages and credit cards, creditworthy countries typically enjoy lower rates on the bonds they issue. Consequently, the post-Great Recession era of low inflation and near-zero interest rates led many on the left to argue that the old rules no longer apply, and that concerns regarding deficits are obsolete. Supporters of this view point to the massive stimulus packages passed under presidents Donald Trump and Joe Biden  that, in total, increased the federal deficit and debt by $4.6 trillion without affecting the government's ability to borrow. The extreme version of the new "deficits don't matter" narrative comes from the advocates of what has come to be called Modern Monetary Theory (MMT), who claim that because the United States controls its own currency, the federal government has infinite power to increase deficits and the debt without consequence. Though most mainstream economists dismiss MMT as unworkable and even dangerous, policymakers appear to be legislating with MMT's assumptions in mind. A new generation of Democratic economic advisors has pushed President Biden to propose an additional $3.5 trillion in spending, on top of the $4.6 trillion spent on Covid-19 relief and the $1 trillion bipartisan infrastructure bill. These Democrats, along with a new breed of populist Republicans, dismiss the concerns of older economists who fear that exploding deficits risk a return to the economy of the 1970s, complete with high inflation, high interest rates, and high unemployment. But there are several reasons to believe that America's fiscal profligacy cannot go on forever. The most important reason is the unanimous judgment of history: In every country and in every era, runaway deficits and skyrocketing debt have ended in economic stagnation or ruin. Another reason has to do with the unusual confluence of events that has enabled the United States to finance its rising debts at such low interest rates over the past few decades — a confluence that Bitcoin may play a role in ending. DECLINING FAITH IN U.S. CREDIT To members of the financial community, U.S. Treasury bonds are considered "risk-free" assets. That is to say, while many investments entail risk — a company can go bankrupt, for example, thereby wiping out the value of its stock — Treasury bonds are backed by the full faith and credit of the United States. Since people believe the United States will not default on its obligations, lending money to the U.S. government — buying Treasury bonds that effectively pay the holder an interest rate — is considered a risk-free investment. The definition of Treasury bonds as "risk-free" is not merely by reputation, but also by regulation. Since 1988, the Switzerland-based Basel Committee on Banking Supervision has sponsored a series of accords among central bankers from financially significant countries. These accords were designed to create global standards for the capital held by banks such that they carry a sufficient proportion of low-risk and risk-free assets. The well-intentioned goal of these standards was to ensure that banks don't fail when markets go down, as they did in 2008. The current version of the Basel Accords, known as "Basel III," assigns zero risk to U.S. Treasury bonds. Under Basel III's formula, then, every major bank in the world is effectively rewarded for holding these bonds instead of other assets. This artificially inflates demand for the bonds and enables the United States to borrow at lower rates than other countries. The United States also benefits from the heft of its economy as well as the size of its debt. Since America is the world's most indebted country in absolute terms, the market for U.S. Treasury bonds is the largest and most liquid such market in the world. Liquid markets matter a great deal to major investors: A large financial institution or government with hundreds of billions (or more) of a given currency on its balance sheet cares about being able to buy and sell assets while minimizing the impact of such actions on the trading price. There are no alternative low-risk assets one can trade at the scale of Treasury bonds. The status of such bonds as risk-free assets — and in turn, America's ability to borrow the money necessary to fund its ballooning expenditures — depends on investors' confidence in America's creditworthiness. Unfortunately, the Federal Reserve's interference in the markets for Treasury bonds have obscured our ability to determine whether financial institutions view the U.S. fiscal situation with confidence. In the 1990s, Bill Clinton's advisors prioritized reducing the deficit, largely out of a conern that Treasury-bond "vigilantes" — investors who protest a government's expansionary fiscal or monetary policy by aggressively selling bonds, which drives up interest rates — would harm the economy. Their success in eliminating the primary deficit brought yields on the benchmark 10-year Treasury bond down from 8% to 4%. In Clinton's heyday, the Federal Reserve was limited in its ability to influence the 10-year Treasury interest rate. Its monetary interventions primarily targeted the federal-funds rate — the interest rate that banks charge each other on overnight transactions. But in 2002, Ben Bernanke advocated that the Fed "begin announcing explicit ceilings for yields on longer-maturity Treasury debt." This amounted to a schedule of interest-rate price controls. Since the 2008 financial crisis, the Federal Reserve has succeeded in wiping out bond vigilantes using a policy called "quantitative easing," whereby the Fed manipulates the price of Treasury bonds by buying and selling them on the open market. As a result, Treasury-bond yields are determined not by the free market, but by the Fed. The combined effect of these forces — the regulatory impetus for banks to own Treasury bonds, the liquidity advantage Treasury bonds have in the eyes of large financial institutions, and the Federal Reserve's manipulation of Treasury-bond market prices — means that interest rates on Treasury bonds no longer indicate the United States' creditworthiness (or lack thereof). Meanwhile, indications that investors are growing increasingly concerned about the U.S. fiscal and monetary picture — and are in turn assigning more risk to "risk-free" Treasury bonds — are on the rise. One such indicator is the decline in the share of Treasury bonds owned by outside investors. Between 2010 and 2020, the share of U.S. Treasury securities owned by foreign entities fell from 47% to 32%, while the share owned by the Fed more than doubled, from 9% to 22%. Put simply, foreign investors have been reducing their purchases of U.S. government debt, thereby forcing the Fed to increase its own bond purchases to make up the difference and prop up prices. Until and unless Congress reduces the trajectory of the federal debt, U.S. monetary policy has entered a vicious cycle from which there is no obvious escape. The rising debt requires the Treasury Department to issue an ever-greater quantity of Treasury bonds, but market demand for these bonds cannot keep up with their increasing supply. In an effort to avoid a spike in interest rates, the Fed will need to print new U.S. dollars to soak up the excess supply of Treasury bonds. The resultant monetary inflation will cause increases in consumer prices. Those who praise the Fed's dramatic expansion of the money supply argue that it has not affected consumer-price inflation. And at first glance, they appear to have a point. In January of 2008, the M2 money stock was roughly $7.5 trillion; by January 2020, M2 had more than doubled, to $15.4 trillion. As of July 2021, the total M2 sits at $20.5 trillion — nearly triple what it was just 13 years ago. Over that same period, U.S. GDP increased by only 50%. And yet, since 2000, the average rate of growth in the Consumer Price Index (CPI) for All Urban Consumers — a widely used inflation benchmark — has remained low, at about 2.25%. How can this be? The answer lies in the relationship between monetary inflation and price inflation, which has diverged over time. In 2008, the Federal Reserve began paying interest to banks that park their money with the Fed, reducing banks' incentive to lend that money out to the broader economy in ways that would drive price inflation. But the main reason for the divergence is that conventional measures like CPI do not accurately capture the way monetary inflation is affecting domestic prices. In a large, diverse country like the United States, different people and different industries experience price inflation in different ways. The fact that price inflation occurs earlier in certain sectors of the economy than in others was first described by the 18th-century Irish-French economist Richard Cantillon. In his 1730 "Essay on the Nature of Commerce in General," Cantillon noted that when governments increase the supply of money, those who receive the money first gain the most benefit from it — at the expense of those to whom it flows last. In the 20th century, Friedrich Hayek built on Cantillon's thinking, observing that "the real harm [of monetary inflation] is due to the differential effect on different prices, which change successively in a very irregular order and to a very different degree, so that as a result the whole structure of relative prices becomes distorted and misguides production into wrong directions." In today's context, the direct beneficiaries of newly printed money are those who need it the least. New dollars are sent to banks, which in turn lend them to the most creditworthy entities: investment funds, corporations, and wealthy individuals. As a result, the most profound price impact of U.S. monetary inflation has been on the kinds of assets that financial institutions and wealthy people purchase — stocks, bonds, real estate, venture capital, and the like. This is why the price-to-earnings ratio of S&P 500 companies is at record highs, why risky start-ups with long-shot ideas are attracting $100 million venture rounds, and why the median home sales price has jumped 24% in a single year — the biggest one-year increase of the 21st century. Meanwhile, low- and middle-income earners are facing rising prices without attendant increases in their wages. If asset inflation persists while the costs of housing and health care continue to grow beyond the reach of ordinary people, the legitimacy of our market economy will be put on trial. THE RETURN OF SOUND MONEY Satoshi Nakamoto, the pseudonymous creator of Bitcoin, was acutely concerned with the increasing abundance of U.S. dollars and other fiat currencies in the early 2000s. In 2009 he wrote, "the root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust." Bitcoin was created in anticipation of the looming fiscal and monetary crisis in the United States and around the world. To understand how bitcoin functions alongside fiat currency, it's helpful to examine the monetary philosophy of the Austrian School of economics, whose leading figures — especially Hayek and Ludwig von Mises — greatly influenced Nakamoto and the early developers of Bitcoin. The economists of the Austrian School were staunch advocates of what Mises called "the principle of sound money" — that is, of keeping the supply of money as constant and predictable as possible. In The Theory of Money and Credit, first published in 1912, Mises argued that sound money serves as "an instrument for the protection of civil liberties against despotic inroads on the part of governments" that belongs "in the same class with political constitutions and bills of rights." Just as bills of rights were a "reaction against arbitrary rule and the nonobservance of old customs by kings," he wrote, "the postulate of sound money was first brought up as a response to the princely practice of debasing the coinage." Mises believed that inflation was just as much a violation of someone's property rights as arbitrarily taking away his land. After all, in both cases, the government acquires economic value at the expense of the citizen. Since monetary inflation creates a sugar high of short-term stimulus, politicians interested in re-election will always have an incentive to expand the money supply. But doing so comes at the expense of long-term declines in consumer purchasing power. For Mises, the best way to address such a threat is to avoid fiat currencies altogether. And in his estimation, the best sound-money alternative to fiat currency is gold. "The excellence of the gold standard," Mises wrote, is "that it renders the determination of the monetary unit's purchasing power independent of the policies of governments and political parties." In other words, gold's primary virtue is that its supply increases slowly and steadily, and cannot be manipulated by politicians. It may appear as if gold was an arbitrary choice as the basis for currency, but gold has a combination of qualities that make it ideal for storing and exchanging value. First, it is verifiably unforgeable. Gold is very dense, which means that counterfeit gold is easy to identify — one simply has to weigh it. Second, gold is divisible. Unlike, say, cattle, gold can be delivered in fractional units both small and large, enabling precise pricing. Third, gold is durable. Unlike commodities that rot or evaporate over time, gold can be stored for centuries without degradation. Fourth, gold is fungible: An ounce of gold in Asia is worth the same as an ounce of gold in Europe. These four qualities are shared by most modern currencies. Gold's fifth quality is more distinct, however, as well as more relevant to its role as an instrument of sound money: scarcity. While people have used beads, seashells, and other commodities as primitive forms of money, those items are fairly easy to acquire and introduce into circulation. While gold's supply does gradually increase as more is extracted from the ground, the rate of extraction relative to the total above-ground supply is low: At current rates, it would take approximately 66 years to double the amount of gold in circulation. In comparison, the supply of U.S. dollars has more than doubled over just the last decade. When the Austrian-influenced designers of bitcoin set out to create a more reliable currency, they tried to replicate all of these qualities. Like gold, bitcoin is divisible, unforgeable, divisible, durable, and fungible. But bitcoin also improves upon gold as a form of sound money in several important ways. First, bitcoin is rarer than gold. Though gold's supply increases slowly, it does increase. The global supply of bitcoin, by contrast, is fixed at 21 million and cannot be feasibly altered. Second, bitcoin is far more portable than gold. Transferring physical gold from one place to another is an onerous process, especially in large quantities. Bitcoin, on the other hand, can be transmitted in any quantity as quickly as an email. Third, bitcoin is more secure than gold. A single bitcoin address carried on a USB thumb drive could theoretically hold as much value as the U.S. Treasury holds in gold bars — without the need for costly militarized facilities like Fort Knox to keep it safe. In fact, if stored using best practices, the cost of securing bitcoin from hackers or assailants is far lower than the cost of securing gold. Fourth, bitcoin is a technology. This means that, as developers identify ways to augment its functionality without compromising its core attributes, they can gradually improve the currency over time. Fifth, and finally, bitcoin cannot be censored. This past year, the Chinese government shut down Hong Kong's pro-democracy Apple Daily newspaper not by censoring its content, but by ordering banks not to do business with the publication, thereby preventing Apple Daily from paying its suppliers or employees. Those who claim the same couldn't happen here need only look to the Obama administration's Operation Choke Point, a regulatory attempt to prevent banks from doing business with legitimate entities like gun manufacturers and payday lenders — firms the administration disfavored. In contrast, so long as the transmitting party has access to the internet, no entity can prevent a bitcoin transaction from taking place. This combination of fixed supply, portability, security, improvability, and censorship resistance epitomizes Nakamoto's breakthrough. Hayek, in The Denationalisation of Money, foresaw just such a separation of money and state. "I believe we can do much better than gold ever made possible," he wrote. "Governments cannot do better. Free enterprise...no doubt would." While Hayek and Nakamoto hoped private currencies would directly compete with the U.S. dollar and other fiat currencies, bitcoin does not have to replace everyday cash transactions to transform global finance. Few people may pay for their morning coffee with bitcoin, but it is also rare for people to purchase coffee with Treasury bonds or gold bars. Bitcoin is competing not with cash, but with these latter two assets, to become the world's premier long-term store of wealth. The primary problem bitcoin was invented to address — the devaluation of fiat currency through reckless spending and borrowing — is already upon us. If Biden's $3.5 trillion spending plan passes Congress, the national debt will rise further. Someone will have to buy the Treasury bonds to enable that spending. Yet as discussed above, investors are souring on Treasurys. On June 30, 2021, the interest rate for the benchmark 10-year Treasury bond was 1.45%. Even at the Federal Reserve's target inflation rate of 2%, under these conditions, Treasury-bond holders are guaranteed to lose money in inflation-adjusted terms. One critic of the Fed's policies, MicroStrategy CEO Michael Saylor, compares the value of today's Treasury bonds to a "melting ice cube." Last May, Ray Dalio, founder of Bridgewater Associates and a former bitcoin skeptic, said "[p]ersonally, I'd rather have bitcoin than a [Treasury] bond." If hedge funds, banks, and foreign governments continue to decelerate their Treasury purchases, even by a relatively small percentage, the decrease in demand could send U.S. bond prices plummeting. If that happens, the Fed will be faced with the two unpalatable options described earlier: allowing interest rates to rise, or further inflating the money supply. The political pressure to choose the latter would likely be irresistible. But doing so would decrease inflation-adjusted returns on Treasury bonds, driving more investors away from Treasurys and into superior stores of value, such as bitcoin. In turn, decreased market interest in Treasurys would force the Fed to purchase more such bonds to suppress interest rates. AMERICA'S BITCOIN OPPORTUNITY From an American perspective, it would be ideal for U.S. Treasury bonds to remain the world's preferred reserve asset for the foreseeable future. But the tens of trillions of dollars in debt that the United States has accumulated since 1971 — and the tens of trillions to come — has made that outcome unlikely. It is understandably difficult for most of us to imagine a monetary world aside from the one in which we've lived for generations. After all, the U.S. dollar has served as the world's leading reserve currency since 1919, when Britain was forced off the gold standard. There are only a handful of people living who might recall what the world was like before then. Nevertheless, change is coming. Over the next 10 to 20 years, as bitcoin's liquidity increases and the United States becomes less creditworthy, financial institutions and foreign governments alike may replace an increasing portion of their Treasury-bond holdings with bitcoin and other forms of sound money. With asset values reaching bubble proportions and no end to federal spending in sight, it's critical for the United States to begin planning for this possibility now. Unfortunately, the instinct of some federal policymakers will be to do what countries like Argentina have done in similar circumstances: impose capital controls that restrict the ability of Americans to exchange dollars for bitcoin in an attempt to prevent the digital currency from competing with Treasurys. Yet just as Nixon's 1971 closure of the gold window led to a rapid flight from the dollar, imposing restrictions on the exchange of bitcoin for dollars would confirm to the world that the United States no longer believes in the competitiveness of its currency, accelerating the flight from Treasury bonds and undermining America's ability to borrow. A bitcoin crackdown would also be a massive strategic mistake, given that Americans are positioned to benefit enormously from bitcoin-related ventures and decentralized finance more generally. Around 50 million Americans own bitcoin today, and it's likely that Americans and U.S. institutions own a plurality, if not the majority, of the bitcoin in circulation — a sum worth hundreds of billions of dollars. This is one area where China simply cannot compete with the United States, since Bitcoin's open financial architecture is fundamentally incompatible with Beijing's centralized, authoritarian model. In the absence of major entitlement reform, well-intentioned efforts to make Treasury bonds great again are likely doomed. Instead of restricting bitcoin in a desperate attempt to forestall the inevitable, federal policymakers would do well to embrace the role of bitcoin as a geopolitically neutral reserve asset; work to ensure that the United States continues to lead the world in accumulating bitcoin-based wealth, jobs, and innovations; and ensure that Americans can continue to use bitcoin to protect themselves against government-driven inflation. To begin such an initiative, federal regulators should make it easier to operate cryptocurrency-related ventures on American shores. As things stand, too many of these firms are based abroad and closed off to American investors simply because outdated U.S. regulatory agencies — the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission, the Treasury Department, and others — have been unwilling to provide clarity as to the legal standing of digital assets. For example, the SEC has barred Coinbase from paying its customers' interest on their holdings while refusing to specify which laws Coinbase has violated. Similarly, the agency has refused to approve Bitcoin exchange-traded funds (ETFs) without specifying standards for a valid ETF application. Congress should implement SEC Commissioner Hester Peirce's recommendations for a three-year regulatory grace period for decentralized digital tokens and assign to a new agency the role of regulating digital assets. Second, Congress should clarify poorly worded legislation tied to a recent bipartisan infrastructure bill that would drive many high-value crypto businesses, like bitcoin-mining operations, overseas. Third, the Treasury Department should consider replacing a fraction of its gold holdings — say, 10% — with bitcoin. This move would pose little risk to the department's overall balance sheet, send a positive signal to the innovative blockchain sector, and enable the United States to benefit from bitcoin's growth. If the value of bitcoin continues to appreciate strongly against gold and the U.S. dollar, such a move would help shore up the Treasury and decrease the need for monetary inflation. Finally, when it comes to digital versions of the U.S. dollar, policymakers should follow the advice of Friedrich Hayek, not Xi Jinping. In an effort to increase government control over its monetary system, China is preparing to unveil a blockchain-based digital yuan at the 2022 Beijing Winter Olympics. Jerome Powell and other Western central bankers have expressed envy for China's initiative and fret about being left behind. But Americans should strongly oppose the development of a central-bank digital currency (CBDC). Such a currency could wipe out local banks by making traditional savings and checking accounts obsolete. What's more, a CBDC-empowered Fed would accumulate a mountain of precise information about every consumer's financial transactions. Not only would this represent a grave threat to Americans' privacy and economic freedom, it would create a massive target for hackers and equip the government with the kind of censorship powers that would make Operation Choke Point look like child's play. Congress should ensure that the Federal Reserve never has the authority to issue a virtual currency. Instead, it should instruct regulators to integrate private-sector, dollar-pegged "stablecoins" — like Tether and USD Coin — into the framework we use for money-market funds and other cash-like instruments that are ubiquitous in the financial sector. PLANNING FOR THE WORST In the best-case scenario, the rise of bitcoin will motivate the United States to mend its fiscal ways. Much as Congress lowered corporate-tax rates in 2017 to reduce the incentive for U.S. companies to relocate abroad, bitcoin-driven monetary competition could push American policymakers to tackle the unsustainable growth of federal spending. While we can hope for such a scenario, we must plan for a world in which Congress continues to neglect its essential duty as a steward of Americans' wealth. The good news is that the American people are no longer destined to go down with the Fed's sinking ship. In 1971, when Washington debased the value of the dollar, Americans had no real recourse. Today, through bitcoin, they do. Bitcoin enables ordinary Americans to protect their savings from the federal government's mismanagement. It can improve the financial security of those most vulnerable to rising prices, such as hourly wage earners and retirees on fixed incomes. And it can increase the prosperity of younger Americans who will most acutely face the consequences of the country's runaway debt. Bitcoin represents an enormous strategic opportunity for Americans and the United States as a whole. With the right legal infrastructure, the currency and its underlying technology can become the next great driver of American growth. While the 21st-century monetary order will look very different from that of the 20th, bitcoin can help America maintain its economic leadership for decades to come. Tyler Durden Tue, 10/19/2021 - 23:25.....»»

Category: worldSource: nytOct 20th, 2021

3 Tips To Help Junior Partners Avoid Lifestyle Creep

Lifestyle creep, or lifestyle inflation – when expenses rapidly rise to match newfound income – ensnares countless newly minted partners. Often there are underlying social pressures from peers or colleagues to keep up with new levels of conspicuous consumption. New indulgences and one-time splurges quickly become everyday necessities. It may begin innocently enough with a […] Lifestyle creep, or lifestyle inflation – when expenses rapidly rise to match newfound income – ensnares countless newly minted partners. Often there are underlying social pressures from peers or colleagues to keep up with new levels of conspicuous consumption. New indulgences and one-time splurges quickly become everyday necessities. It may begin innocently enough with a new car, a small remodel to an existing home, or a generous contribution to one’s alma mater, but it can quickly snowball into completely spending bonus checks before they have even been deposited. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2021 hedge fund letters, conferences and more So, who cares? After all, you have sacrificed a lot to get where you are today and rewarding yourself for a job well done is your right. However, many junior partners have not considered what they are giving up by having their expenses match their income – namely, true financial freedom or the ability to say no. It is difficult to downshift your lifestyle, especially if you have no resources to fall back on other than your future earning potential. Make sure you do not find yourself in this situation by following these tips. Prepare for Lumpy Cash Flow It is important to be fiscally prepared for lumpy cash flow – expenses like estimated tax payments, firm capital commitments, and new firm sponsorship contributions, just to name a few, can potentially catch you off-guard. Without adequate planning and forethought, you can find yourself flat-footed at a very inopportune moment. The first step to addressing lifestyle creep is to be prepared. Create a short-term cash strategy to help you avoid common cashflow missteps. Start by identifying what your major outstanding liabilities will likely be for the next 12 months. After you have identified these cash needs find a ready source of liquidity to cover them. When reviewing your cash strategy look for potential mismatches between liabilities and cash flow, consider all your options. Be prepared to cover an unexpected expense in addition to the ones you identified. Remember alternative sources of potential liquidity that you could use to smooth over any cash crunches, such as: A margin loan against assets held in investment accounts. A cash reserve built up over the course of time specifically for these types of surprise liquidity events. Short term financing solutions offered by the firm. If you do not research your options in advance, it is difficult to know in the moment what your best options is. Sometimes the terms of short-term margin loans are equal or better than terms offered to new partners from other sources sometime not – having options in place and knowing what they are is paramount to helping you address your need when it arises. Preparing a short-term cash strategy will give you a better sense of what to hold in reserves for future expenditures, what you can spend on your current lifestyle needs, and what to invest for long-term growth – allowing you to avoid the trap of lifestyle inflation. Identify Your Goals and Values Making conscious decisions about what is important to you is one of the most crucial steps in combating lifestyle inflation. You may really like the idea of: Having the option to slow down when you want to. Buying a vacation home to spend quality time with family. Providing meaningful philanthropic support to a cause you believe in. Being able to offer monetary support to aging parents. There are no right or wrong choices, but you should make a choice. One of my favorite quotes is, “If you don’t know where you are going, you might wind up someplace else.” Not having your long-term goals well-defined makes it easier to succumb to lifestyle creep, potentially leaving you someplace you didn’t intend to be. Balancing short-term needs with long-term goals is a lifelong pursuit, so it is vital not to focus solely on one or the other at any given time. Clearly outlining your goals and having a financial plan in place to achieve them will help you feel comfortable living the life you want today, knowing you are going to end up where you truly want to be. Create a Financial Roadmap Without knowing what you are aiming at, you can miss your target and let other seemingly pressing things drain your ability to accomplish what you really want. After identifying what matters most to you, the next step is to create a financial roadmap to help guide you to your destination. This is done through a comprehensive financial plan that considers not only your resources and liabilities, but also incorporates an in-depth cash flow and investment return projection as well. Having your plan in place will help guide you towards your goals and remind you to maintain focus on them. To create a financial roadmap, you should gather and review information regarding: Partner Benefits: 401(k), deferred compensations plans, etc. Investment Assets: taxable and retirement accounts, physical assets, etc. Liabilities: existing mortgages, home equity lines of credit (HELOCs), credit cards, student loans, etc. Insurance: personal and group benefits – disability, life, property & casualty, etc. Estate Plan: current wills, Powers of Attorney (POAs), revocable and irrevocable trusts, etc. Tax Returns: recent returns from your accountant for reviewing income, expenses, deductions, etc. These data points allow you to create a more meaningful individual guide to help you stay on track to reach your financial goals. As assets and income projections change, risk profiles are modified, and other aspects of your personal and financial life develop with time, you should revisit and adjust your financial roadmap to reflect your new situation and goals. Your financial roadmap is a living document that will always be there to reorient you, helping to combat lifestyle creep. Conclusion Some level of lifestyle inflation is inevitable and necessary, continuing to live like you are a first-year associate is not the answer to preventing lifestyle creep. As with most things in life, the key is moderation. The transition to partner can be a challenging one – creating a comprehensive financial roadmap that takes your personal and professional situation and goals into consideration is the best way to develop and implement a plan that will help you avoid the kind of overextension that could materially impact your ability to achieve what you really want – whatever you decide that is. About the Author Eric Dostal, J.D., CFP®, Vice President at Wealthspire Advisors, works extensively with clients to help them feel in control of their financial lives. Eric has demonstrated a high degree of skill developing and overseeing the investment, insurance, retirement, tax and estate planning strategies of his clients. He seeks to understand a clients’ unique financial circumstances, get them organized and on the path to financial independence. Wealthspire Advisors LLC is a registered investment adviser and subsidiary company of NFP Corp. Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, Certified Financial Planner, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements. This information should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The commentary provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Wealthspire Advisors cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use. ©2021 Wealthspire Advisors. Updated on Sep 24, 2021, 4:05 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkSep 24th, 2021

Some House Democrats warn they will tank Biden"s big bill if a hefty tax cut for the rich is dropped

"No SALT, no dice!," tweeted Rep. Josh Gottheimer. Other Democratic lawmakers made similar threats to oppose the stalled package. Democratic Rep. Josh Gottheimer of New Jersey speaks to reporters outside of the House Chambers of the U.S. Capitol on September 23, 2021.Anna Moneymaker/Getty Images Some House Democrats threatened to oppose BBB if it comes back to the House without a hefty tax cut for the wealthy. "No SALT, No Dice!" tweeted Rep. Josh Gottheimer. It could complicate the bill's path to final passage if Manchin tanks the SALT provision in the Senate. Negotiations around the future of President Joe Biden's Build Back Better legislation is slipping behind closed doors. Resistance from Sen. Joe Manchin of West Virginia has put the package on ice while Democrats make a renewed push to strengthen voting rights.One part of the sprawling social and climate legislation left unresolved was the rollback of a $10,000 cap on the state and local taxes that taxpayers are able to deduct from their federal bill, known as SALT. Taxpayers used to have unlimited deductions before the new cap was introduced in the 2017 Trump tax law. A group of Democrats from high-tax states like New Jersey and California added the rollback of the cap into the Build Back Better bill that passed the House in November, and they're vocally standing behind the measure in the face of possible opposition from Manchin. It's caused angst among many Democrats, given that it hands wealthier households a hefty tax cut. Senate Democrats hadn't settled on a compromise over the SALT deduction yet last month when Manchin came out against the economic plan, slamming it from advancing in the 50-50 Senate with Republicans lined up against it.The Hill's Alexander Bolton reported earlier this month that Manchin had expressed private skepticism about the measure. It could be why some House Democrats are starting to come out and threaten to oppose the bill once, or if, it  returns to the House for final passage."If they're passing Build Back Better legislation, it's got to address SALT," Rep. Mikie Sherrill of New Jersey told Insider on Wednesday, adding that it "remains" her position to oppose the package if it's dropped.Other House Democrats are also threatening to tank the bill over SALT, including Reps. Josh Gottheimer of New Jersey and Tom Suozzi of New York.—Rep Josh Gottheimer (@RepJoshG) January 12, 2022—Tom Suozzi (@RepTomSuozzi) January 12, 2022Speaker Nancy Pelosi can only afford three defections because Democrats narrowly control the House. That threadbare majority was a big reason it took the party months to settle fierce disputes about the plan's size and scope and eventually muscle it through the chamber in November without any Republican votes.The House bill lifted the cap to $80,000 from $10,000, the amount set under the 2017 Republican tax law. But Senate Democrats criticized it since it provided outsized benefits to the wealthiest people, prompting some to map out an alternate plan.Some Senate proposals that were on the table included restricting the higher cap to individuals and couples earning below $400,000, an approach backed by Sens. Bernie Sanders of Vermont and Michael Bennet of Colorado. Another from Sen. Bob Menendez of New Jersey favored a higher income threshold for singles making $450,000 and couples earning $950,000 or below. "Talks continue on a path forward on BBB including how to address SALT and other issues," a Senate Democratic aide familiar with the discussions told Insider.Not everyone who favors the SALT provision was willing to make the same threat as Gottheimer, Suozzi, and Sherrill. "That's never been my position," Rep. Bill Pascrell of New Jersey told Insider on Thursday. "I'm working everyday to bring [that] about as much as possible."Asked about Sherrill's threat, Pascrell responded: "That's her problem, not mine."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 13th, 2022

CONAGRA BRANDS REPORTS SECOND QUARTER RESULTS

CHICAGO, Jan. 6, 2022 /PRNewswire/ -- Today Conagra Brands, Inc. (NYSE:CAG) reported results for the second quarter of fiscal year 2022, which ended on November 28, 2021. All comparisons are against the prior-year fiscal period, unless otherwise noted.  Certain terms used in this release, including "Organic net sales," "EBITDA," "Two-year compounded annualized," and certain "adjusted" results, are defined under the section entitled "Definitions."  See page 5 for more information. Highlights Second quarter net sales increased 2.1%; organic net sales increased 2.6%. On a two-year compounded annualized basis, fiscal 2022 second quarter net sales increased 4.1% and organic net sales increased 5.3%. Operating margin decreased 435 basis points to 13.4%; adjusted operating margin decreased 500 basis points to 14.6%. Diluted earnings per share (EPS) for the second quarter decreased 26.0% to $0.57, and adjusted EPS decreased 21.0% to $0.64. On a two-year compounded annualized basis, second quarter EPS increased 3.7% and adjusted EPS increased 0.8%. The Company is reiterating its adjusted EPS guidance for fiscal 2022 and updating its organic net sales and adjusted operating margin guidance to reflect continued top line strength, higher inflation expectations, and the timing of additional pricing actions. The Company's updated fiscal 2022 guidance is as follows: Organic net sales growth is expected to be approximately +3% versus prior guidance of approximately +1% Gross inflation (input cost inflation before the impacts of hedging and other sourcing benefits) is expected to be approximately 14% versus prior guidance of approximately 11% Adjusted operating margin is expected to be approximately 15.5% versus prior guidance of approximately 16% Adjusted EPS is expected to be approximately $2.50, representing no change to prior guidance CEO Perspective Sean Connolly, president and chief executive officer of Conagra Brands, commented, "Our business delivered another quarter of strong net sales growth as we continued to experience elevated levels of demand across our portfolio. I am proud of our team for continuing to demonstrate great agility in navigating the dynamic external landscape with a refuse to lose attitude and dedication to executing our Conagra Way playbook every day. Our focus on strategic innovation and our intentional approach to investment helped us maintain brand momentum in the second quarter and continue capturing share across each of our domains – frozen, snacks, and staples." He continued, "Looking ahead, we expect to continue experiencing cost pressures above original expectations in the second half of fiscal 2022. However, we believe the sustained elevated consumer demand coupled with the mitigating actions we have successfully executed, and will continue executing, put us on track to overcome these near-term challenges, improve margins in the back half of the fiscal year, and deliver on our profit plan." Total Company Second Quarter Results In the quarter, net sales increased 2.1% to $3.1 billion.  The increase in net sales primarily reflects: a 0.7% net decrease from the divestitures of the H.K. Anderson business, the Peter Pan peanut butter business, and the Egg Beaters business (collectively, the Sold Businesses); a 0.2% increase from the favorable impact of foreign exchange; and a 2.6% increase in organic net sales. The 2.6% increase in organic net sales was driven by a 6.8% improvement in price/mix, which was partially offset by a 4.2% decrease in volume. Price/mix was driven by favorable brand mix and net pricing as the company's inflation-driven pricing actions were reflected in the marketplace throughout the quarter. The volume decrease was primarily a result of lapping the prior year's surge in at-home food demand due to the COVID-19 pandemic. The year-over-year comparison negatively impacted fiscal 2022 second quarter volume growth rates in the company's retail reporting segments. Gross profit decreased 15.1% to $755 million in the quarter, and adjusted gross profit decreased 14.4% to $767 million.  Second quarter gross profit benefited from higher organic net sales, supply chain realized productivity, lower COVID-19 pandemic-related expenses, and cost synergies associated with the Pinnacle Foods acquisition. These benefits, however, were not enough to offset the impacts of cost of goods sold inflation of 16.4% and the lost profit from the Sold Businesses. Gross margin decreased 500 basis points to 24.7% in the quarter, and adjusted gross margin decreased 483 basis points to 25.1%. Adjusted gross margin declined more than originally expected as the company experienced higher-than-expected cost of goods sold inflation, made additional investments to prioritize servicing orders to maximize food supply for consumers, and experienced additional transitory supply chain costs. Selling, general, and administrative expense (SG&A), which includes advertising and promotional expense (A&P), decreased 3.5% to $345 million in the quarter.  Adjusted SG&A, which excludes A&P, was relatively flat compared to the prior-year period, increasing 1.7% to $248 million.  A&P for the quarter increased 12.5% to $71 million, driven primarily by higher eCommerce investments.  Net interest expense was $95 million in the quarter.  Compared to the prior-year period, net interest expense decreased 11.8% or $13 million, primarily due to a lower weighted average interest rate on outstanding debt. The average diluted share count decreased 1.8% compared to the prior-year period to 482 million, driven by the company's share repurchase activity in prior quarters. In the quarter, net income attributable to Conagra Brands decreased 27.3% to $275 million, or $0.57 per diluted share.  Adjusted net income attributable to Conagra Brands decreased 22.8% to $306 million, or $0.64 per diluted share, in the quarter.  The decreases were driven primarily by the decrease in gross profit. The combination of higher than expected inflation, investments to service orders, and additional transitory costs is estimated to have impacted adjusted EPS by approximately $0.04 to $0.06 in the quarter.   Adjusted EBITDA, which includes equity method investment earnings and pension and postretirement non-service income, decreased 17.9% to $585 million in the quarter, primarily driven by the decrease in adjusted gross profit. Grocery & Snacks Segment Second Quarter Results Net sales for the Grocery & Snacks segment decreased 1.4% to $1.3 billion in the quarter reflecting: a 0.8% decrease from the impact of the Sold Businesses; and a 0.6% decrease in organic net sales. On an organic net sales basis, volume decreased 5.3% and price/mix increased 4.7%.  The volume decline was primarily due to lapping the prior year's surge in at-home food demand from the COVID-19 pandemic.  Price/mix was primarily driven by favorability in inflation-driven pricing coupled with favorable brand mix. In the quarter, the company gained share in staples categories such as beans, and in snacking categories, including popcorn and seeds. Operating profit for the segment decreased 21.2% to $249 million in the quarter.  Adjusted operating profit decreased 14.1% to $274 million, primarily driven by cost of goods inflation, the organic net sales decline, incremental transitory supply chain costs, and the lost profit from the Sold Businesses. These negative impacts were partially offset by supply chain realized productivity, cost synergies associated with the Pinnacle Foods acquisition, and lower COVID-19 pandemic-related expenses. Refrigerated & Frozen Segment Second Quarter Results Net sales for the Refrigerated & Frozen segment increased 3.0% to $1.3 billion in the quarter reflecting: a 0.9% decrease from the impact of the Sold Businesses; and a 3.9% increase in organic net sales. On an organic net sales basis, volume decreased 4.7% and price/mix increased 8.6%.  The volume decline was primarily due to lapping the prior year's surge in at-home food demand from the COVID-19 pandemic.  The price/mix increase was driven by favorable brand mix and favorability in inflation-driven pricing. In the quarter, the company gained share in categories such as frozen single serve meals, whipped topping, and frozen desserts. Operating profit for the segment decreased 36.3% to $168 million in the quarter.  Adjusted operating profit decreased 30.4% to $189 million primarily due to cost of goods sold inflation, additional investments the company made to service orders, increased A&P investment, and the lost profit from the Sold Businesses. These impacts were partially offset by the benefits of supply chain realized productivity, higher organic net sales, lower COVID-19 pandemic-related expenses, and cost synergies associated with the Pinnacle Foods acquisition. International Segment Second Quarter Results Net sales for the International segment increased 5.0% to $262 million in the quarter reflecting: a 0.1% decrease from the impact of the Sold Businesses, a 3.0% increase from the favorable impact of foreign exchange; and a 2.1% increase in organic net sales. On an organic net sales basis, volume decreased 5.8% and price/mix increased 7.9%. Volume decreased primarily due to lapping the prior year's surge in demand from the COVID-19 pandemic. The price/mix increase was driven by inflation-driven pricing and favorable product mix.  Operating profit for the segment decreased 5.8% to $37 million in the quarter.  Adjusted operating profit decreased 5.9% to $37 million as the negative impacts of cost of goods sold inflation and increased A&P investment more than offset the benefits from favorable foreign exchange, supply chain realized productivity, and higher organic net sales. Foodservice Segment Second Quarter Results Net sales for the Foodservice segment increased 14.9% to $246 million in the quarter reflecting: a 0.3% decrease from the impact of the Sold Businesses; and a 15.2% increase in organic net sales. On an organic net sales basis, volume increased 9.1% as restaurant traffic continued to improve from the impacts of the COVID-19 pandemic. Price/mix was favorable at 6.1% in the quarter driven by inflation-driven pricing and favorable product mix. Operating profit for the segment decreased 39.1% to $14 million and adjusted operating profit decreased 18.1% to $19 million in the quarter as the impacts of cost of goods sold inflation more than offset the benefits of higher organic net sales and favorable supply chain realized productivity. Other Second Quarter Items Corporate expenses decreased 47.0% to $59 million in the quarter primarily from lapping incremental expenses related to the extinguishment of debt in the prior year period. Adjusted corporate expense increased 10.1% to $71 million in the quarter driven by increased employee related costs. Pension and post-retirement non-service income was $16 million in the quarter compared to $14 million of income in the prior-year period. In the quarter, equity method investment earnings were $30 million.  The $7 million increase was primarily driven by favorable market conditions for the Ardent Mills joint venture. In the quarter, the effective tax rate was 23.4% compared to 17.6% in the prior-year period.  The adjusted effective tax rate was 22.9% compared to 23.2% in the prior-year period. In the quarter, the company paid a dividend of $0.3125 per share, the first dividend payment at the increased rate.  Outlook The company is reiterating its adjusted EPS guidance for fiscal 2022 and updating its organic net sales and adjusted operating margin guidance. The outlook reflects expectations for continued top line strength, and higher cost of goods sold inflation, and the timing effect of additional pricing actions. The company previously shared its expectations that consumer demand for its retail products would remain elevated versus historical levels throughout fiscal 2022, as consumers have developed new habits during the COVID-19 pandemic. Given the trends to date, including stronger-than-expected consumer demand and lower-than-anticipated elasticities of demand, as well as additional planned pricing actions, organic net sales growth is now expected to be higher than previously anticipated. The company also continues to experience elevated cost of goods sold inflation, the rate of which was higher than expected during the second quarter of fiscal 2022. The company has taken, and plans to continue taking, a variety of actions to counteract the impact of this inflation, including incremental pricing actions and cost savings measures. The company continues to expect that the timing of the associated benefits from these margin lever actions will increase as the fiscal year progresses and, as a result, the company continues to expect margins to improve in the second half of the fiscal year. The Company's updated fiscal 2022 guidance is as follows: Organic net sales growth is expected to be approximately +3% versus prior guidance of approximately +1% Gross inflation (input cost inflation before the impacts of hedging and other sourcing benefits) is expected to be approximately 14% versus prior guidance of approximately 11% Adjusted operating margin is expected to be approximately 15.5% versus prior guidance of approximately 16% Adjusted EPS is expected to be approximately $2.50, representing no change to prior guidance. The above guidance is the company's best estimate of its expected financial performance in fiscal 2022. The company's ultimate fiscal 2022 performance will be highly dependent on factors including, without limitation: how consumers purchase food as foodservice establishments continue to reopen and people return to in-office work and in-person school; the cost of goods sold inflation the company experiences; consumers' response to inflation-driven price increases; and the ability of the end-to-end supply chain to continue to operate effectively as the COVID-19 pandemic continues to evolve. The inability to predict the amount and timing of the impacts of foreign exchange, acquisitions, divestitures, and other items impacting comparability makes a detailed reconciliation of forward-looking non-GAAP financial measures impracticable.  Please see the end of this release for more information. Items Affecting Comparability of EPS The following are included in the $0.57 EPS for the second quarter of fiscal 2022 (EPS amounts are rounded and after tax).  Please see the reconciliation schedules at the end of this release for additional details. Approximately $0.02 per diluted share of net expense related to restructuring plans Approximately $0.02 per diluted share of net benefit related to legal matters Approximately $0.01 per diluted share of net benefit related to proceeds received from the sale of a legacy investment Approximately $0.07 per diluted share of net expense related to impairment on businesses held for sale Approximately $0.01 per diluted share of net impact due to rounding The following are included in the $0.77 EPS for the second quarter of fiscal 2021 (EPS amounts are rounded and after tax).  Please see the reconciliation schedules at the end of this release for additional details. Approximately $0.03 per diluted share of net expense related to restructuring plans Approximately $0.01 per diluted share of net benefit related to corporate hedging derivative gains Approximately $0.01 per diluted share of net benefit related to the gain on divestiture of a business Approximately $0.07 per diluted share of net expense related to the early extinguishment of debt Approximately $0.05 per diluted share of net benefit related to a release of a valuation allowance on our capital loss carryforward Approximately $0.01 per diluted share of net impact due to rounding Definitions Organic net sales excludes, from reported net sales, the impacts of foreign exchange, divested businesses and acquisitions, as well as the impact of any 53rd week.  All references to changes in volume and price/mix throughout this release are on an organic net sales basis. References to adjusted items throughout this release refer to measures computed in accordance with GAAP less the impact of items impacting comparability. Items impacting comparability are income or expenses (and related tax impacts) that management believes have had, or are likely to have, a significant impact on the earnings of the applicable business segment or on the total corporation for the period in which the item is recognized, and are not indicative of the company's core operating results.  These items thus affect the comparability of underlying results from period to period. References to earnings before interest, taxes, depreciation, and amortization (EBITDA) refer to net income attributable to Conagra Brands before the impacts of discontinued operations, income tax expense (benefit), interest expense, depreciation, and amortization.  References to adjusted EBITDA refer to EBITDA before the impacts of items impacting comparability. References to two-year compounded annualized numbers are calculated as: ([(1 + current year period's growth rate) * (1 + prior year period's growth rate)] ^ 0.5) – 1. Please note that certain prior year amounts have been reclassified to conform with current year presentation Discussion of Results Conagra Brands will host a webcast and conference call at 9:30 a.m. Eastern time today to discuss the results.  The live audio webcast and presentation slides will be available on www.conagrabrands.com/investor-relations under Events & Presentations. The conference call may be accessed by dialing 1-877-883-0383 for participants in the U.S. and 1-412-902-6506 for all other participants and using passcode 3428984. Please dial in 10 to 15 minutes prior to the call start time. Following the Company's remarks, the conference call will include a question-and-answer session with the investment community.  A replay of the webcast will be available on www.conagrabrands.com/investor-relations under Events & Presentations until January 6, 2023. About Conagra Brands Conagra Brands, Inc. (NYSE:CAG), headquartered in Chicago, is one of North America's leading branded food companies. Guided by an entrepreneurial spirit, Conagra Brands combines a rich heritage of making great food with a sharpened focus on innovation. The company's portfolio is evolving to satisfy people's changing food preferences. Conagra's iconic brands, such as Birds Eye®, Marie Callender's®, Banquet®, Healthy Choice®, Slim Jim®, Reddi-wip®, and Vlasic®, as well as emerging brands, including Angie's® BOOMCHICKAPOP®, Duke's®, Earth Balance®, Gardein®, and Frontera®, offer choices for every occasion. For more information, visit www.conagrabrands.com. Note on Forward-looking Statements This document contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Readers of this document should understand that these statements are not guarantees of performance or results. Many factors could affect our actual financial results and cause them to vary materially from the expectations contained in the forward-looking statements, including those set forth in this document. These risks, uncertainties, and factors include, among other things: the risk that the cost savings and any other synergies from the acquisition of Pinnacle Foods Inc. (the Pinnacle acquisition) may not be fully realized or may take longer to realize than expected; the risk that the Pinnacle acquisition may not be accretive within the expected timeframe or to the extent anticipated; the risks that the Pinnacle acquisition and related integration will create disruption to the Company and its management and impede the achievement of business plans; risks related to our ability to achieve the intended benefits of other recent acquisitions and divestitures; risks associated with general economic and industry conditions; risks associated with our ability to successfully execute our long-term value creation strategies; risks related to our ability to deleverage on currently anticipated timelines, and to continue to access capital on acceptable terms or at all; risks related to our ability to execute operating and restructuring plans and achieve targeted operating efficiencies from cost-saving initiatives, and to benefit from trade optimization programs; risks related to the effectiveness of our hedging activities and ability to respond to volatility in commodities; risks related to the Company's competitive environment and related market conditions; risks related to our ability to respond to changing consumer preferences and the success of our innovation and marketing investments; risks related to the ultimate impact of any product recalls and litigation, including litigation related to the lead paint and pigment matters, as well as any securities litigation, including securities class action lawsuits; risk associated with actions of governments and regulatory bodies that affect our businesses, including the ultimate impact of new or revised regulations or interpretations; risks related to the impact of the COVID-19 pandemic on our business, suppliers, consumers, customers and employees; risks related to our forecasts of consumer eat-at-home habits as the impacts of the COVID-19 pandemic abate; risks related to the availability and prices of supply chain resources, including raw materials, packaging, and transportation including any negative effects caused by changes in inflation rates, weather conditions, or health pandemics; disruptions or inefficiencies in our supply chain and/or operations, including from the COVID-19 pandemic; risks associated with actions by our customers, including changes in distribution and purchasing terms; risks and uncertainties associated with intangible assets, including any future goodwill or intangible assets impairment charges; risks related to a material failure in or breach of our or our vendors' information technology systems; the amount and timing of future dividends, which remain subject to Board approval and depend on market and other conditions; and other risks described in our reports filed from time to time with the Securities and Exchange Commission. We caution readers not to place undue reliance on any forward-looking statements included in this document, which speak only as of the date of this document. We undertake no responsibility to update these statements, except as required by law. Note on Non-GAAP Financial Measures This document includes certain non-GAAP financial measures, including adjusted EPS, organic net sales, adjusted gross profit, adjusted operating profit, adjusted SG&A, adjusted corporate expenses, adjusted gross margin, adjusted operating margin, adjusted effective tax rate, adjusted net income attributable to Conagra Brands, two-year compounded annualized organic net sales, two-year compounded annualized adjusted EPS, free cash flow, net debt, net leverage ratio, and adjusted EBITDA. Management considers GAAP financial measures as well as such non-GAAP financial information in its evaluation of the Company's financial statements and believes these non-GAAP measures provide useful supplemental information to assess the Company's operating performance and financial position. These measures should be viewed in addition to, and not in lieu of, the Company's diluted earnings per share, operating performance and financial measures as calculated in accordance with GAAP. Certain of these non-GAAP measures, such as organic net sales, adjusted operating margin, and adjusted EPS, are forward-looking.  Historically, the Company has excluded the impact of certain items impacting comparability, such as, but not limited to, restructuring expenses, the impact of the extinguishment of debt, the impact of foreign exchange, the impact of acquisitions and divestitures, hedging gains and losses, impairment charges, the impact of legacy legal contingencies, and the impact of unusual tax items, from the non-GAAP financial measures it presents.  Reconciliations of these forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures are not provided because the Company is unable to provide such reconciliations without unreasonable effort, due to the uncertainty and inherent difficulty of predicting the occurrence and the financial impact of such items impacting comparability and the periods in which such items may be recognized.  For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results. Hedge gains and losses are generally aggregated, and net amounts are reclassified from unallocated corporate expense to the operating segments when the underlying commodity or foreign currency being hedged is expensed in segment cost of goods sold. The Company identifies these amounts as items that impact comparability within the discussion of unallocated Corporate results.   Conagra Brands, Inc. Consolidated Statements of Earnings (in millions) (unaudited) SECOND QUARTER Thirteen Weeks Ended Thirteen Weeks Ended November 28, 2021 November 29, 2020 Percent Change Net sales $ 3,058.9 $ 2,995.2 2.1 % Costs and expenses: Cost of goods sold 2,304.1 2,106.3 9.4 % Selling, general and administrative expenses 345.4 357.7 (3.5) % Pension and postretirement non-service income (16.1) (13.7) 17.7 % Interest expense, net 94.9 107.7 (11.8) % Income before income taxes and equity method investment earnings 330.6 437.2 (24.4) % Income tax expense 84.2 80.7 4.3 % Equity method investment earnings 29.5 23.0 28.3 % Net income $ 275.9 $ 379.5 (27.3) % Less: Net income attributable to noncontrolling interests 0.4 0.6 (23.2) % Net income attributable to Conagra Brands, Inc. $ 275.5 $ 378.9 (27.3) % Earnings per share - basic Net income attributable to Conagra Brands, Inc. $ 0.57 $ 0.77 (26.0) % Weighted average shares outstanding 480.2 489.1 (1.8) % Earnings per share - diluted Net income attributable to Conagra Brands, Inc. $ 0.57 $ 0.77 (26.0) % Weighted average share and share equivalents outstanding 481.9 490.9 (1.8) %   Conagra Brands, Inc. Consolidated Statements of Earnings (in millions) (unaudited) SECOND QUARTER YEAR TO DATE Twenty-Six Weeks Ended Twenty-Six Weeks Ended November 28, 2021 November 29, 2020 Percent Change Net sales $ 5,712.2 $ 5,674.1 0.7 % Costs and expenses: Cost of goods sold 4,284.0 3,975.0 7.8 % Selling, general and administrative expenses 655.5 658.0 (0.4) % Pension and postretirement non-service income (32.2) (27.5) 17.0 % Interest expense, net 189.1 221.4 (14.6) % Income before income taxes and equity method investment earnings 615.8 847.2 (27.3) % Income tax expense 153.9 167.4 (8.1) % Equity method investment earnings 49.7 29.5 68.5 % Net income $ 511.6 $ 709.3 (27.9) % Less: Net income attributable to noncontrolling interests 0.7 1.4 (50.5) % Net income attributable to Conagra Brands, Inc. $ 510.9 $ 707.9 (27.8) % Earnings per share - basic Net income attributable to Conagra Brands, Inc. $ 1.06 $ 1.45 (26.9) % Weighted average shares outstanding 480.3 488.6 (1.7) % Earnings per share - diluted Net income attributable to Conagra Brands, Inc. $ 1.06 $ 1.44 (26.4) % Weighted average share and share equivalents outstanding 482.1 490.3 (1.7) %   Conagra Brands, Inc. Consolidated Balance Sheets (in millions) (unaudited) November 28, 2021 May 30, 2021 ASSETS Current assets Cash and cash equivalents $ 68.7 $ 79.2 Receivables, less allowance for doubtful accounts of $3.0 and $3.2 977.2 793.9 Inventories 1,858.7 1,709.7 Prepaid expenses and other current assets 111.1 95.0 Current assets held for sale 23.6 24.3 Total current assets 3,039.3 2,702.1 Property, plant and equipment, net 2,622.8 2,572.0 Goodwill 11,332.0 11,338.9 Brands, trademarks and other intangibles, net 4,092.2 4,124.6 Other assets 1,441.0 1,344.7 Noncurrent assets held for sale 64.7 113.3 $ 22,592.0 $ 22,195.6 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable $ 585.8 $ 707.4 Current installments of long-term debt 270.6 23.1 Accounts payable 1,596.9 1,655.9 Accrued payroll 114.6 175.2 Other accrued liabilities 707.4 743.0 Current liabilities held for sale 1.7 1.6 Total current liabilities 3,277.0 3,306.2 Senior long-term debt, excluding current installments 8,527.8 8,275.2 Other noncurrent liabilities 2,027.9 1,979.6 Noncurrent liabilities held for sale 2.4 3.2 Total stockholders' equity 8,756.9 8,631.4 $ 22,592.0 $ 22,195.6   Conagra Brands, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (in millions) (unaudited) Twenty-Six Weeks Ended November 28, 2021 November 29, 2020 Cash flows from operating activities: Net income $ 511.6 $ 709.3 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 193.5 193.0 Asset impairment charges 41.6 3.9 Loss on extinguishment of debt — 44.3 Gain on divestitures — (5.3) Equity method investment earnings in excess of distributions (24.2) (8.4) Stock-settled share-based payments expense 14.3 30.9 Contributions to pension plans (4.9) (20.7) Pension benefit (25.5) (19.1) Other items (14.5) 14.2 Change in operating assets and liabilities excluding effects of business acquisitions and dispositions: Receivables (183.3) (88.3) Inventories (148.4) (247.2) Deferred income taxes and income taxes payable, net (13.9) (39.9) Prepaid expenses and other current assets (10.4) (39.8) Accounts payable (14.1) 111.2 Accrued payroll (60.6) (58.0) Other accrued liabilities 0.9 (67.9) Deferred employer payroll taxes — 29.2 Net cash flows from operating activities 262.1 541.4 Cash flows from investing activities: Additions to property, plant and equipment (257.5) (282.0) Sale of property, plant and equipment 9.9 1.0 Purchase of marketable securities (1.9) (4.1) Sale of marketable securities 1.9 6.0 Proceeds from divestitures, net of cash divested 0.1 8.6 Other items 3.3 - Net cash flows from investing activities (244.2) (270.5) Cash flows from financing activities: Issuance of short-term borrowings, maturities greater than 90 days 392.6 298.6 Repayment of short-term borrowings, maturities greater than 90 days (249.8) — Net issuance (repayment) of other short-term borrowings (264.4) 68.9 Issuance of long-term debt 499.1 988.2 Repayment of long-term debt (29.4) (1,881.7) Debt issuance costs (2.5) (5.4) Repurchase of Conagra Brands, Inc. common shares (50.0) — Payment of intangible asset financing arrangement (12.6) (12.9) Cash dividends paid (282.0) (207.3) Exercise of stock options and issuance of other stock awards, including tax withholdings (17.4) (8.4) Other items (7.3) — Net cash flows from financing activities (23.7) (760.0) Effect of exchange rate changes on cash and cash equivalents and restricted cash (5.7) 3.8 Net change in cash and cash equivalents and restricted cash (11.5) (485.3) Cash and cash equivalents and restricted cash at beginning of period 80.2 554.3 Cash and cash equivalents and restricted cash at end of period $ 68.7 $ 69.0   Conagra Brands, Inc. Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Q2 FY22 Grocery &Snacks Refrigerated & Frozen International Foodservice Total Conagra Brands Net Sales $ 1,264.5 $ 1,285.9 $ 262.2 $ 246.3 $ 3,058.9 Impact of foreign exchange — — (7.5) — (7.5) Organic Net Sales $ 1,264.5 $ 1,285.9 $ 254.7 $ 246.3 $ 3,051.4 Year-over-year change - Net Sales (1.4) % 3.0 % 5.0 % 14.9 % 2.1 % Impact of foreign exchange (pp) — — (3.0) — (0.2) Net sales from divested businesses (pp) 0.8 0.9 0.1 0.3 0.7 Organic Net Sales (0.6) % 3.9 % 2.1 % 15.2 % 2.6 % Volume (Organic) (5.3) % (4.7) % (5.8) % 9.1 % (4.2) % Price/Mix 4.7 % 8.6 % 7.9 % 6.1 % 6.8 % Q2 FY21 Grocery & Snacks Refrigerated & Frozen International Foodservice Total Conagra Brands Net Sales $ 1,283.1 $ 1,248.0 $ 249.8 $ 214.3 $ 2,995.2 Net sales from divested businesses (10.8) (10.1) (0.4) (0.5) (21.8) Organic Net Sales $ 1,272.3 $ 1,237.9 $ 249.4 $ 213.8 $ 2,973.4 Q2 FY21 Grocery &Snacks Refrigerated & Frozen International Foodservice Total Conagra Brands Net Sales $ 1,283.1 $ 1,248.0 $ 249.8 $ 214.3 $ 2,995.2 Impact of foreign exchange — — 6.0 — 6.0 Net sales from divested businesses (1.6) — — (0.3) (1.9) Organic Net Sales $ 1,281.5 $ 1,248.0 $ 255.8 $ 214.0 $ 2,999.3 Year-over-year change - Net Sales 12.6 % 6.8 % 6.6 % (23.1) % 6.2 % Impact of foreign exchange (pp) — — 2.5 — 0.2 Net sales from divested businesses (pp) 2.8 1.0 — 1.6 1.7 Organic Net Sales 15.4 % 7.8 % 9.1 % (21.5) % 8.1 % Volume (Organic) 13.7 % 6.4 % 6.4 % (25.4) % 6.6 % Price/Mix 1.7 %.....»»

Category: earningsSource: benzingaJan 6th, 2022

Biden wanted to build back better, but Manchin shot down his signature $2 trillion bill, preserving America as it is for now

A bipartisan group of senators supports rebuilding roads and bridges but Joe Manchin and 50 Republicans think a larger rebuild is a no-go. President Joe Biden speaks with Senate Majority Leader Chuck Schumer of N.Y., and House Speaker Nancy Pelosi of Calif., about the American Rescue Plan at the White House in March 2021.Jabin Botsford/The Washington Post via Getty Images Biden's economic agenda was thrown into jeopardy by Sen. Joe Manchin. It set off a scramble among Democrats to rescue the $2 trillion centerpiece of their agenda. Instead of Build Back Better, the Democrats could be left with the country pretty much as is. President Joe Biden entered office in January with a straightforward pledge from his campaign: to Build Back Better.The alliterative phrase was Biden's version of Donald Trump's "Make America Great," and its vagueness and grammatical oddity provoked some criticism over what it truly meant. For instance, British comedy writer Ian Martin wrote in the Guardian that it was "catchy, unoriginal and spectacularly meaningless."But as Biden's legislative agenda became clear after he won election, it was clear he wanted to build America back to a point that was better than it has been. That's been a hard sell.In the spring, Biden laid out a pair of plans to overhaul the economy with new investments in roads and bridges along with another package to expand the social safety net and combat the climate emergency.The first plan became law with support from some Republicans in late summer, but drawn-out negotiations on the latter culminated in a spectacular blow-up with a member from Democrats' own ranks on Sunday: Sen. Joe Manchin of West Virginia. He rejected the sprawling package in a national interview on Fox News, effectively putting him in league with 50 Republican senators who stand in opposition. It set off a scramble among Democrats to rescue the $2 trillion centerpiece of their agenda that many of them view as critical investments to level the playing field for Americans.Here's why 51 members of the senate want to leave the country pretty much as it is, roads and bridges aside, and what might still be possible to salvage from Biden's sweeping agenda.'Sen. Manchin and I are going to get something done'The legislation now in jeopardy would amount to the largest expansion of the American safety net in a generation. It would set up universal pre-K, renew monthly child tax credit payments to American families for another year, establish federal subsidies for childcare, set up a national paid leave program, address the climate crisis and more. It would be financed with new taxes on rich Americans and large corporations currently paying little or nothing. Biden campaigned on reversing the widening inequality between the richest Americans and everyone else. A recent report from the left-leaning Economic Policy Institute found that wages for the top 1% grew almost ten times faster compared to the bottom 90% in 2020, Insider's Juliana Kaplan reported. "Democrats have a once-in-a-generation opportunity to improve American society, not just for a few years, but permanently," Ben Ritz, a budget expert at the centrist Progressive Policy Institute, wrote in a New York Times op-ed. "Doing so would give them some clear victories they can point to with voters that lay the groundwork for future success."That's part of the reason Biden has staked the success of his presidency into the Build Back Better plan. "For much too long, the working people of this nation and the middle class of this country have been dealt out of the American deal, and it's time to deal them back in," he said in October.GOP lawmakers cite exactly this reason for their opposition, assailing the package as one that would saddle businesses with job-killing tax hikes and lead to a bloated federal government.Senate Minority Leader Mitch McConnell of Kentucky lauded Manchin for torpedoing the social and climate legislation. "He gave the American people the Christmas gift they needed," McConnell said in a Fox News interview on Wednesday. "He killed this bill in its current form, which would have been really bad for America."Manchin has expressed support, though, for some climate-change initiatives that are tech-neutral. He also included an extension of Affordable Care Act subsidies and universal pre-K in his reported pitch to the White House.Manchin's vote is so crucial because of the  difficult legislative math: A three-seat majority in the House and a 50-50 Senate where he can't lose a single Senate Democratic vote, including Manchin's, due to the wall of GOP opposition. Biden isn't throwing up his hands in defeat yet. Democrats are reconvening in January with the aim of getting a newer, slimmer version of the legislation over the finish line. Assuaging Manchin's concerns about excessive government spending may take months, but Democrats want to demonstrate to voters they're capable of delivering tangible improvements to people's lives."Sen. Manchin and I are going to get something done," Biden told reporters on Tuesday.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 23rd, 2021

Sen. Joe Manchin says he won"t back $2 trillion social spending bill, dooming huge part of Biden"s agenda: "I can"t vote for it"

The moderate Democratic senator said during a Fox News interview that he will oppose President Joe Biden's signature bill. Sen. Joe Manchin of West Virginia.AP Photo/J. Scott Applewhite Manchin said on Sunday he cannot support the centerpiece of Biden's economic agenda. "This is a no on this piece of this legislation," he said. His opposition torpedoes its passage since all Senate Democrats must get behind it. Sen. Joe Manchin of West Virginia on Sunday said he was opposed to President Joe Biden's $2 trillion social spending bill, effectively dooming the centerpiece of the president's economic agenda in its current form."If I can't go home and explain it to the people of West Virginia I can't vote for it," he said in a "Fox News Sunday" interview. "I've tried everything humanly possible, I can't get there. This is a no."—The Recount (@therecount) December 19, 2021He continued: "This is a no on this legislation. I have tried everything I know to do."Manchin later put out a statement chastising Democrats for trying to usher in transformative changes to the country."My Democratic colleagues in Washington are determined to dramatically reshape our society in a way that leaves our country even more vulnerable to the threats we face," he said in a statement, adding he "cannot take that risk" with federal debt and inflation on the rise.To overcome unanimous GOP opposition to the package, all 50 Senate Democrats need to coalesce behind the plan so it passes the 50-50 chamber. The conservative Democrat's opposition effectively pulls the plug on it.The legislation would represent a major expansion of the American safety net. It would set up universal pre-K, renew monthly child tax credit payments to American families for another year, establish federal subsidies for childcare, combat the climate emergency and more. Democrats wanted to finance it with new taxes on rich Americans and large corporations currently paying little or no federal tax.The path ahead for Democrats was not immediately clear. To assuage Manchin's concerns, they may cut the size of the bill even further, already down to about $2 billion from the original $3.5 trillion price tag they envisioned, or attempt to strike bipartisan deals on parts of it with the GOP.Manchin has cited a range of reasons for Democrats to pull back from their ambitious package throughout the summer and fall, urging a "strategic pause" on it since August. But inflation has risen as a concern near the top of his list, alongside the increasing level of government spending."We've done everything that we can to help people," Manchin told Insider earlier this month, referring to $5.4 trillion in emergency federal spending that Congress authorized to combat the pandemic.Progressives expressed outrage on Sunday at Manchin. Sen. Bernie Sanders of Vermont said that the legislation should still put up for a vote on the Senate floor next year."Let Mr. Manchin explain to the people of West Virginia why he doesn't have the guts to stand up to the powerful special interests," he said on CNN's "State of the Union."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 19th, 2021

Sen. Joe Manchin says he won"t back $2 trillion social spending bill, dooming a huge part of Biden"s agenda: "I can"t vote for it"

The moderate Democratic senator said during a Fox News interview that he will oppose President Joe Biden's signature bill. Sen. Joe Manchin of West Virginia.AP Photo/J. Scott Applewhite Manchin said on Sunday he cannot support the centerpiece of Biden's economic agenda. "This is a no on this piece of this legislation," he said. His opposition torpedoes its passage since all Senate Democrats must get behind it. Sen. Joe Manchin of West Virginia on Sunday effectively killed President Joe Biden's $2 trillion social spending bill, stating his opposition to the sweeping legislation, effectively dooming the centerpiece of the president's economic agenda in its current form."If I can't go home and explain it to the people of West Virginia I can't vote for it," he said in a "Fox News Sunday" interview. "I've tried everything humanly possible, I can't get there. This is a no."—The Recount (@therecount) December 19, 2021He continued: "This is a no on this legislation. I have tried everything I know to do."Manchin later put out a statement chastising Democrats for trying to usher in transformative changes to the country."My Democratic colleagues in Washington are determined to dramatically reshape our society in a way that leaves our country even more vulnerable to the threats we face," he said in a statement, adding he "cannot take that risk."To overcome unanimous GOP opposition to the package, all 50 Senate Democrats need to coalesce behind the plan so it passes the 50-50 chamber. The conservative Democrat's opposition effectively pulls the plug on the sprawling social and climate legislation.The legislation would amount to the major expansion of the American safety net. It would set up universal pre-K, renew monthly child tax credit payments to American families for another year, establish federal subsidies for childcare, combat the climate emergency and more. Democrats wanted to finance it with new taxes on rich Americans and large corporations currently paying little or nothing.The path ahead for Democrats was not immediately clear from here. To assuage Manchin's concerns, they may cut the size of the bill even further from the original $3.5 trillion price tag they envisioned or attempt to strike bipartisan deals on parts of it with Republicans.Manchin has cited a range of reasons for Democrats pull back from their ambitious package throughout the summer and fall, urging a "strategic pause" on it since August. But inflation has risen as a concern near the top of his list, alongside the increasing level of government spending."We've done everything that we can to help people," Manchin told Insider earlier this month, referring to $5.4 trillion in emergency federal spending that Congress authorized to combat the pandemic.Progressives expressed outrage on Sunday at Manchin. Sen. Bernie Sanders of Vermont said that the legislation should still put up for a vote on the Senate floor next year."Let Mr. Manchin explain to the people of West Virginia why he doesn't have the guts to stand up to the powerful special interests," he said on CNN's "State of the Union."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 19th, 2021

Our Shopping Obsession Is Causing a Literal Stink

Box factories are enjoying a revival since the pandemic spurred more online shopping, but neighborhoods downwind of box makers say the smell is making life miserable The world is on a spending spree, and no matter what you’re buying, it’s probably going to have been in a box at some point along its route to you. That means companies are rushing to build pulp mills and box factories to meet demand, and many of them are in the United States. About 40 billion boxes—equal to 407 billion square feet, which is roughly the size of Switzerland —were shipped in the U.S. in 2020, surpassing the previous record from 1999 set amidst a hot economy and burgeoning e-commerce. This year is likely to beat that record; in the first nine months of 2021, box shipments were up 3.9% from 2020, according to the Fibre Box Association. [time-brightcove not-tgx=”true”] But making paper products is a smelly operation, and as more box factories expand into U.S. neighborhoods, there’s come a pushback from people who don’t want to be downwind of an American manufacturing revival. In South Carolina, three groups of plaintiffs filed lawsuits this summer against New-Indy, a company that converted a paper mill to make containerboard, saying the conversion has made the air dangerous and unhealthy; the state received more than 17,000 complaints of noxious odors from citizens near the New-Indy plant in the first half of this year, which it calls “an unprecedented number.” New York state fined a Niagara Falls paper mill $375,000 in September for “intolerable odors” that it said impacted the health of the surrounding neighborhood, especially in the summer; the mill, Cascades Containerboard Packaging, agreed to spend millions of dollars in equipment upgrades. The mill says the smell comes from sludge created when the plant processes recycled paper into cardboard, and this recycled sludge was generated at higher rates this year to meet higher demand for boxes. David Goldman—APThe Midwest Paper Group mill in Combined Locks, Wis., is seen from across the the river in Little Chute, Wis., on Aug. 18, 2020. The mill is one of many that switched its focus from producing paper to cardboard for boxes as online shopping soared. And in Kalamazoo, Mich., residents filed a lawsuit against paperboard maker Graphic Packaging International after they say the company started production on a machine that would increase output by 500,000 tons a year; the residents say the mill has “discharged discrete and offensive noxious odors, air particulates, and fugitive dust” into the air. Adding to the tensions: many of these odor-emitting factories are in communities of color, which by virtue of zoning laws find themselves tucked against industrial zones. People of color account for the bulk of exposure to industrial pollutants in the United States, according to a study published in April in ScienceAdvances. How the pandemic changed shopping The complaints about the box factories coincide with the reversal of a long-term trend in the U.S. that saw mills shutting down as demand for printer paper and newspapers waned. Now, shuttered mills that once printed newspapers and magazines in places like Old Town, Maine and Port Angeles, Wash., are reopening to make pulp and containerboard—the liner and brown paper used to make a cardboard box. There are even new mills opening in places like Green Bay, Wisc. and Wapakoneta, Ohio, and new mills planned in places like Henderson, Ky. Though e-commerce has long driven an increase in the boxes passing through the average American’s home, until now it had not led to a huge uptick in box production; the boxes being sent to people’s homes were merely in lieu of the boxes carrying goods to brick and mortar stores. The pandemic changed that. Read more: I Tried Buying Only Used Holiday Gifts. It Changed How I Think About Shopping “There was this extraordinary shift from spending on services to spending on goods,” says Adam Josephson, a paper and packaging analyst at KeyBanc Capital Markets. “Higher purchases of goods leads to higher use of boxes.” Now, people are buying so much stuff—a record $16.3 trillion in October in the U.S. alone—that there’s more demand for boxes than ever before. E-commerce and mail order use seven times more corrugated cardboard per dollar of sales than traditional retail does, according to Fastmarkets RISI, which tracks the industry. The new and updated mills in the U.S.—30 since 2017 by the count of the Northeast Recycling Council—are a boon to efforts to jumpstart American manufacturing and create new jobs in a long dwindling industry. But the manufacturing process can create hydrogen sulfide and other substances that smell like rotten eggs. In some places where mills have come on line or increased production, residents say that the problem goes beyond stench and that the operations, running at full capacity, are polluting the air and water. The downside of ‘Made in America’ For decades, Americans have bought things made from minerals extracted elsewhere, assembled in faraway factories where the stench and pollution impacted someone else. Now that more boxes are being made in the United States, some residents are confronting one of the pitfalls to making things in America again. “It started as rotten eggs but recently it’s been a sweet port-a-potty, urinal cake smell,” says Kerri Bishop, 34, who runs a Facebook group for people trying to do something about the smell in Catawba, S.C., where the New-Indy mill is located. “I don’t really leave my house—it’s worse when I go outside, and I never know when it’s going to hit,” she says. Bishop, who moved her family to South Carolina from Rochester, N.Y., in 2016, says that before the conversion, the mill would make the air smell like rotten eggs a few times a year, but it didn’t bother her. Then, New-Indy Containerboard, a joint venture part-owned by the Kraft Group, bought the mill in 2018 and converted it to making brown paper for containerboard. The mill began high-volume production in February of 2021, and people working within a 30-mile radius started complaining of strong odors and physical reactions, according to the lawsuit. As Robert Kraft, the owner of the New England Patriots and New-Indy Containerboard, headed to his plane, he drove by me, photojournalist Chelsea Pomales, and our big @wcnc sign. We hope Mr. Kraft will follow through and call us. pic.twitter.com/ntV39RZQPn — Brandon Goldner (@BrandonWCNC) November 7, 2021 In order to start making brown paper at the mill, New-Indy had to apply for a new permit; the permit application estimated that hydrogen sulfide emissions would not significantly increase because of the conversion, according to the South Carolina Department of Health and Environmental Control, or DHEC. The state began receiving thousands of complaints about foul odors in the vicinity in February 2021; when it investigated, it found the odors were coming from the mill. When it asked for information about current sludge management at the facility, the state says, New-Indy provided documents from 2014 and 2017, before the conversion. “It started as rotten eggs, but recently it’s been a sweet port-a-potty, urinal cake smell.” In May 2021, the EPA issued an emergency order under the Clean Air Act requiring the company to reduce hydrogen sulfide emissions and install air quality monitors on its fence line. But for Bishop and other residents, that’s not enough; the company was only required to install a few monitors, and air quality has not improved since May, she says. She and other residents blame the odor on something called a steam-stripper, which treats foul condensate; they say that because of the increased volume at the plant, the steam-stripper can’t handle all the waste the company is producing. Bishop has a cranial nerve disorder, which means the smells hit her even harder, making her physically ill; she gets dizzy and starts seeing spots, she says. Her youngest son developed a rash on his face. She and others say that the environmental agencies are monitoring for the wrong chemicals and that the wastewater the mill is sending into surrounding lagoons is contaminating the groundwater. They say that the problem isn’t just the smell, but that the mill is polluting the air, causing nausea, rashes, and other health problems. Other residents say they can’t take their dogs outside when the smell hits, that they can’t sleep at night; one woman says she keeps a gas mask by her bed to wear when the air seems particularly dirty. New-Indy declined to comment for this story. Paul Hennessy—NurPhoto/Getty ImagesBoaters pass near the Georgia-Pacific pulp and paper mill on Dec. 14, 2020 in Brunswick, Georgia. The China connection There’s another reason that there’s a boom in paper mills in the U.S. In 2018, China stopped accepting most types of recycled material from the U.S., including paper and cardboard. That created an opportunity for paper mills that previously couldn’t compete with China on cost. There was cardboard available to recycle, so mills just had to be retrofitted to turn that cardboard into more cardboard. “The Chinese import restrictions changed the recycling equation and spurred a revitalization of the U.S. mill industry,” says Colin Staub, senior reporter at Resource Recycling, who compiled a map of more than two dozen conversions and new mills announced across the U.S. “We’re certainly seeing more interest in buying and opening paper mills.” China consumes 107 million tons of paper per year, but it has fewer trees to use for pulp and less of a recycling infrastructure than the U.S. Its import restrictions mean that it can primarily import pulp, not cardboard, so some Chinese companies are funding new mills in the U.S. to make pulp that can then be sent overseas. A Chinese company, Nine Dragons, reopened the shuttered mill in Old Town, Maine to make pulp to export to China for boxes. (The mill spilled more than 30,700 gallons of chemicals into the Penobscot River in 2020, violating state and federal laws, causing a rise in the river’s PH level and prompting the Penobscot Nation to advocate for greater stewardship of the river.) Of course, the pulp mills and containerboard factories opening now are much more sustainable than the mills of the past. These mills are an important part of the circular economy in which nothing is thrown away and everything is reused; without mills to recycle cardboard, it would be going to a landfill. Jon Cherry—Getty Images Amanda Eversole, a UPS employee and package handler, watches boxes rush past after clearing a chute jam on Dec. 6, 2021 in Louisville, Kentucky. But the communities hosting these mills often don’t want to have to bear the brunt of our obsession with shopping. “They’re causing pollution that’s never going to leave; they’re turning their own community into a superfund site,” says Jackie Lane, a marine biologist who lives near an International Paper mill in Cantonment, Fla., that she and others say has long polluted Perdido Bay. International Paper failed to meet its wastewater treatment plant permit limits for toxicity on 19 documented occasions from 2015 to 2019, according to a final consent order executed by the state in May. The consent order fines International Paper $190,000 in penalties and requires it to pay a $10,000 fine every time it fails certain water quality tests, an order Lane says is a slap on the wrist. International Paper said in a statement that its monitoring, done in coordination with the state, has shown that the wetlands are “biologically rich and diverse” and that it works closely with the state to preserve the wetlands. International Paper employs more than 500 Alabama and Florida residents, the company said. ‘Environmental racism’ Most of the new and improved paper mills are on sites that have long held paper mills—it’s much easier to get the permits and infrastructure on an existing site than to build a new factory. But that’s meant that because of historical zoning practices that located polluting plants near Black neighborhoods, it’s minority neighborhoods who are subject to much of this pollution. Earlier this year, a former resident filed a complaint against the city of Kalamazoo with the Michigan Department of Civil Rights, alleging that leaders discriminated against Black residents by approving a tax break that allowed Graphic Packaging to expand in a predominantly Black neighborhood. The city also agreed to cut down 721 trees for the company, according to the complaint. George Rose—Getty ImagesHoliday shopping contributes to a backlog of boxes outside a U.S. Post Office in Solvang, Calif., on Nov. 27, 2021. Brandi Crawford-Johnson, the plaintiff, also filed a complaint against Michigan’s Department of Environment, Great Lakes, and Energy, alleging that it discriminated against a predominantly Black neighborhood when it approved changes to an air permit allowing Graphic Packaging to expand in November of 2020. In November, the EPA’s Civil Rights Compliance Office said that it would investigate this complaint. “It’s environmental racism,” says Crawford-Johnson, who after moving to the neighborhood was shocked to learn how many of her neighbors had asthma and other health problems. Graphic Packaging said in a statement that the expansion is not yet fully operational and that it has taken several steps over the years to mitigate potential odors. Though it does not comment on pending litigation, the company that there are several other local manufacturers and a city wastewater treatment plant near its operations, and the odors are caused by “a number of complex factors.” And in Brunswick, Georgia, which is 55% Black, residents have long been accustomed to the smell of rotten eggs from a nearby Georgia-Pacific pulp mill. But starting in December of 2020, residents started having such severe health reactions to the smell that some called 911 because they couldn’t breathe in their homes, says Rachael Thompson, the executive director of the Glynn Environmental Coalition. “I feel like if this were a Caucasian neighborhood and community, more would be done about it,” one resident who called 911, Spanline Dixon, told The Current, a news site covering coastal Georgia. Brunswick is home to four Superfund sites, but the University of Georgia worked with the Glynn Environmental Coalition to analyze weather reports and track what was upstream from the odor complaints. The study showed definitively a direct correlation between the mill and the odors, Thompson says. Her group has received 130 complaints since last year; the only time it did not receive any complaints was during a month the mill was temporarily closed. A Georgia-Pacific spokesman said, in an email, that the company is aware of the odor complaints and shares the community’s concern. The company is working with the state environmental regulatory agency and other stakeholders to identify and mitigate the potential sources of the odor, the spokesman said. More from TIME Read more: How American Shoppers Broke the Supply Chain Tensions between growing demand for paper and the environmental problems that causes aren’t limited to the U.S. In Indonesia, more than 30 community groups sent a letter to Asia Pulp & Paper in August arguing that the mill’s plan to triple pulp production will risk the respiratory health of millions of people. And a community in Nova Scotia is divided after a paper company is taking legal action to reopen a mill that was shut in 2020 after community concerns about its wastewater discharge. One thing’s for sure, says Joshua Martin, director of the Environmental Paper Network—these conflicts are likely to mount as the world consumes more packaging. The problem isn’t just that mills create bad odors; despite high cardboard recycling rates, trees are still cut down to make packaging—around 3 billion a year, according to EPN. Although cardboard is easier to recycle than other products like plastic, it can only be recycled about 5-7 times before it can’t be used any more. Recycled cardboard is often mixed with virgin pulp to make boxes. The U.S. drives that demand—it consumes 202 kg of paper and paperboard per capita, compared to Africa’s 6 kg per capita, Latin America’s 44 kg per capita, and Asia’s 44 kg per capita, according to the Food and Agricultural Organization of the United Nations. “If the entire world used the amount of paper as America currently does, it would be completely unsustainable,” he says. The only way to reverse this trend, he says, is to change the way we buy things to have less dependence on paper and packaging. Consumers can send messages to companies by patronizing businesses that use packaging certified by the Forest Stewardship Council; they can try brands like Loop that deliver groceries in reusable packaging, which Loop then collects. Perhaps the easiest solution, though, is to buy less stuff that you’re going to toss soon—disposable coffee cups or takeout packaging or multiple e-commerce orders. “It’s this culture of disposability and single-use, no matter what the product is made from, that needs to change,” he says. It’s something Kerri Bishop, the South Carolina resident, is taking to heart. Bishop spent her career working in manufacturing and says she didn’t join the class-action lawsuit and didn’t even want the mill to shut down at first. She just hoped they would upgrade their equipment. Now, though, she’s worried she moved to a state that values manufacturing and jobs more than the quality of life and health of its residents. She’s considering getting a home air filtration system. Once a frequent Amazon shopper, she tired of ordering a few different things and having them arrive in many different boxes, even if she tried to get them to all come the same day. She’d heard from a local politician that the New-Indy boxes were being used by Amazon, so she started boycotting the online retailer. She lifted the boycott for the holidays, as higher prices and supply chain problems made it hard to buy things elsewhere, but Bishop says she plans to stop shopping at Amazon again in January.    .....»»

Category: topSource: timeDec 17th, 2021

Our Shopping Obsession Is a Boon to Box Makers, But Not to Their Neighbors

Box factories smell, and the neighborhoods near them say ramped-up production to meet online shopping needs is making life miserable The world is on a spending spree, and no matter what you’re buying, it’s probably going to have been in a box at some point along its route to you. That means companies are rushing to build pulp mills and box factories to meet demand, and many of them are in the United States. About 40 billion boxes—equal to 407 billion square feet, which is roughly the size of Switzerland —were shipped in the U.S. in 2020, surpassing the previous record from 1999 set amidst a hot economy and burgeoning e-commerce. This year is likely to beat that record; in the first nine months of 2021, box shipments were up 3.9% from 2020, according to the Fibre Box Association. [time-brightcove not-tgx=”true”] But making paper products is a smelly operation, and as more box factories expand into U.S. neighborhoods, there’s come a pushback from people who don’t want to be downwind of an American manufacturing revival. In South Carolina, three groups of plaintiffs filed lawsuits this summer against New-Indy, a company that converted a paper mill to make containerboard, saying the conversion has made the air dangerous and unhealthy; the state received more than 17,000 complaints of noxious odors from citizens near the New-Indy plant in the first half of this year, which it calls “an unprecedented number.” New York state fined a Niagara Falls paper mill $375,000 in September for “intolerable odors” that it said impacted the health of the surrounding neighborhood, especially in the summer; the mill, Cascades Containerboard Packaging, agreed to spend millions of dollars in equipment upgrades. The mill says the smell comes from sludge created when the plant processes recycled paper into cardboard, and this recycled sludge was generated at higher rates this year to meet higher demand for boxes. David Goldman—APThe Midwest Paper Group mill in Combined Locks, Wis., is seen from across the the river in Little Chute, Wis., on Aug. 18, 2020. The mill is one of many that switched its focus from producing paper to cardboard for boxes as online shopping soared. And in Kalamazoo, Mich., residents filed a lawsuit against paperboard maker Graphic Packaging International after they say the company started production on a machine that would increase output by 500,000 tons a year; the residents say the mill has “discharged discrete and offensive noxious odors, air particulates, and fugitive dust” into the air. Adding to the tensions: many of these odor-emitting factories are in communities of color, which by virtue of zoning laws find themselves tucked against industrial zones. People of color account for the bulk of exposure to industrial pollutants in the United States, according to a study published in April in ScienceAdvances. How the pandemic changed shopping The complaints about the box factories coincide with the reversal of a long-term trend in the U.S. that saw mills shutting down as demand for printer paper and newspapers waned. Now, shuttered mills that once printed newspapers and magazines in places like Old Town, Maine and Port Angeles, Wash., are reopening to make pulp and containerboard—the liner and brown paper used to make a cardboard box. There are even new mills opening in places like Green Bay, Wisc. and Wapakoneta, Ohio, and new mills planned in places like Henderson, Ky. Though e-commerce has long driven an increase in the boxes passing through the average American’s home, until now it had not led to a huge uptick in box production; the boxes being sent to people’s homes were merely in lieu of the boxes carrying goods to brick and mortar stores. The pandemic changed that. Read more: I Tried Buying Only Used Holiday Gifts. It Changed How I Think About Shopping “There was this extraordinary shift from spending on services to spending on goods,” says Adam Josephson, a paper and packaging analyst at KeyBanc Capital Markets. “Higher purchases of goods leads to higher use of boxes.” Now, people are buying so much stuff—a record $16.3 trillion in October in the U.S. alone—that there’s more demand for boxes than ever before. E-commerce and mail order use seven times more corrugated cardboard per dollar of sales than traditional retail does, according to Fastmarkets RISI, which tracks the industry. The new and updated mills in the U.S.—30 since 2017 by the count of the Northeast Recycling Council—are a boon to efforts to jumpstart American manufacturing and create new jobs in a long dwindling industry. But the manufacturing process can create hydrogen sulfide and other substances that smell like rotten eggs. In some places where mills have come on line or increased production, residents say that the problem goes beyond stench and that the operations, running at full capacity, are polluting the air and water. The downside of ‘Made in America’ For decades, Americans have bought things made from minerals extracted elsewhere, assembled in faraway factories where the stench and pollution impacted someone else. Now that more boxes are being made in the United States, some residents are confronting one of the pitfalls to making things in America again. “It started as rotten eggs but recently it’s been a sweet port-a-potty, urinal cake smell,” says Kerri Bishop, 34, who runs a Facebook group for people trying to do something about the smell in Catawba, S.C., where the New-Indy mill is located. “I don’t really leave my house—it’s worse when I go outside, and I never know when it’s going to hit,” she says. Bishop, who moved her family to South Carolina from Rochester, N.Y., in 2016, says that before the conversion, the mill would make the air smell like rotten eggs a few times a year, but it didn’t bother her. Then, New-Indy Containerboard, a joint venture part-owned by the Kraft Group, bought the mill in 2018 and converted it to making brown paper for containerboard. The mill began high-volume production in February of 2021, and people working within a 30-mile radius started complaining of strong odors and physical reactions, according to the lawsuit. As Robert Kraft, the owner of the New England Patriots and New-Indy Containerboard, headed to his plane, he drove by me, photojournalist Chelsea Pomales, and our big @wcnc sign. We hope Mr. Kraft will follow through and call us. pic.twitter.com/ntV39RZQPn — Brandon Goldner (@BrandonWCNC) November 7, 2021 In order to start making brown paper at the mill, New-Indy had to apply for a new permit; the permit application estimated that hydrogen sulfide emissions would not significantly increase because of the conversion, according to the South Carolina Department of Health and Environmental Control, or DHEC. The state began receiving thousands of complaints about foul odors in the vicinity in February 2021; when it investigated, it found the odors were coming from the mill. When it asked for information about current sludge management at the facility, the state says, New-Indy provided documents from 2014 and 2017, before the conversion. “It started as rotten eggs, but recently it’s been a sweet port-a-potty, urinal cake smell.” In May 2021, the EPA issued an emergency order under the Clean Air Act requiring the company to reduce hydrogen sulfide emissions and install air quality monitors on its fence line. But for Bishop and other residents, that’s not enough; the company was only required to install a few monitors, and air quality has not improved since May, she says. She and other residents blame the odor on something called a steam-stripper, which treats foul condensate; they say that because of the increased volume at the plant, the steam-stripper can’t handle all the waste the company is producing. Bishop has a cranial nerve disorder, which means the smells hit her even harder, making her physically ill; she gets dizzy and starts seeing spots, she says. Her youngest son developed a rash on his face. She and others say that the environmental agencies are monitoring for the wrong chemicals and that the wastewater the mill is sending into surrounding lagoons is contaminating the groundwater. They say that the problem isn’t just the smell, but that the mill is polluting the air, causing nausea, rashes, and other health problems. Other residents say they can’t take their dogs outside when the smell hits, that they can’t sleep at night; one woman says she keeps a gas mask by her bed to wear when the air seems particularly dirty. New-Indy declined to comment for this story. Paul Hennessy—NurPhoto/Getty ImagesBoaters pass near the Georgia-Pacific pulp and paper mill on Dec. 14, 2020 in Brunswick, Georgia. The China connection There’s another reason that there’s a boom in paper mills in the U.S. In 2018, China stopped accepting most types of recycled material from the U.S., including paper and cardboard. That created an opportunity for paper mills that previously couldn’t compete with China on cost. There was cardboard available to recycle, so mills just had to be retrofitted to turn that cardboard into more cardboard. “The Chinese import restrictions changed the recycling equation and spurred a revitalization of the U.S. mill industry,” says Colin Staub, senior reporter at Resource Recycling, who compiled a map of more than two dozen conversions and new mills announced across the U.S. “We’re certainly seeing more interest in buying and opening paper mills.” China consumes 107 million tons of paper per year, but it has fewer trees to use for pulp and less of a recycling infrastructure than the U.S. Its import restrictions mean that it can primarily import pulp, not cardboard, so some Chinese companies are funding new mills in the U.S. to make pulp that can then be sent overseas. A Chinese company, Nine Dragons, reopened the shuttered mill in Old Town, Maine to make pulp to export to China for boxes. (The mill spilled more than 30,700 gallons of chemicals into the Penobscot River in 2020, violating state and federal laws, causing a rise in the river’s PH level and prompting the Penobscot Nation to advocate for greater stewardship of the river.) Of course, the pulp mills and containerboard factories opening now are much more sustainable than the mills of the past. These mills are an important part of the circular economy in which nothing is thrown away and everything is reused; without mills to recycle cardboard, it would be going to a landfill. Jon Cherry—Getty Images Amanda Eversole, a UPS employee and package handler, watches boxes rush past after clearing a chute jam on Dec. 6, 2021 in Louisville, Kentucky. But the communities hosting these mills often don’t want to have to bear the brunt of our obsession with shopping. “They’re causing pollution that’s never going to leave; they’re turning their own community into a superfund site,” says Jackie Lane, a marine biologist who lives near an International Paper mill in Cantonment, Fla., that she and others say has long polluted Perdido Bay. International Paper failed to meet its wastewater treatment plant permit limits for toxicity on 19 documented occasions from 2015 to 2019, according to a final consent order executed by the state in May. The consent order fines International Paper $190,000 in penalties and requires it to pay a $10,000 fine every time it fails certain water quality tests, an order Lane says is a slap on the wrist. International Paper said in a statement that its monitoring, done in coordination with the state, has shown that the wetlands are “biologically rich and diverse” and that it works closely with the state to preserve the wetlands. International Paper employs more than 500 Alabama and Florida residents, the company said. ‘Environmental racism’ Most of the new and improved paper mills are on sites that have long held paper mills—it’s much easier to get the permits and infrastructure on an existing site than to build a new factory. But that’s meant that because of historical zoning practices that located polluting plants near Black neighborhoods, it’s minority neighborhoods who are subject to much of this pollution. Earlier this year, a former resident filed a complaint against the city of Kalamazoo with the Michigan Department of Civil Rights, alleging that leaders discriminated against Black residents by approving a tax break that allowed Graphic Packaging to expand in a predominantly Black neighborhood. The city also agreed to cut down 721 trees for the company, according to the complaint. George Rose—Getty ImagesHoliday shopping contributes to a backlog of boxes outside a U.S. Post Office in Solvang, Calif., on Nov. 27, 2021. Brandi Crawford-Johnson, the plaintiff, also filed a complaint against Michigan’s Department of Environment, Great Lakes, and Energy, alleging that it discriminated against a predominantly Black neighborhood when it approved changes to an air permit allowing Graphic Packaging to expand in November of 2020. In November, the EPA’s Civil Rights Compliance Office said that it would investigate this complaint. “It’s environmental racism,” says Crawford-Johnson, who after moving to the neighborhood was shocked to learn how many of her neighbors had asthma and other health problems. Graphic Packaging said in a statement that the expansion is not yet fully operational and that it has taken several steps over the years to mitigate potential odors. Though it does not comment on pending litigation, the company that there are several other local manufacturers and a city wastewater treatment plant near its operations, and the odors are caused by “a number of complex factors.” And in Brunswick, Georgia, which is 55% Black, residents have long been accustomed to the smell of rotten eggs from a nearby Georgia-Pacific pulp mill. But starting in December of 2020, residents started having such severe health reactions to the smell that some called 911 because they couldn’t breathe in their homes, says Rachael Thompson, the executive director of the Glynn Environmental Coalition. “I feel like if this were a Caucasian neighborhood and community, more would be done about it,” one resident who called 911, Spanline Dixon, told The Current, a news site covering coastal Georgia. Brunswick is home to four Superfund sites, but the University of Georgia worked with the Glynn Environmental Coalition to analyze weather reports and track what was upstream from the odor complaints. The study showed definitively a direct correlation between the mill and the odors, Thompson says. Her group has received 130 complaints since last year; the only time it did not receive any complaints was during a month the mill was temporarily closed. A Georgia-Pacific spokesman said, in an email, that the company is aware of the odor complaints and shares the community’s concern. The company is working with the state environmental regulatory agency and other stakeholders to identify and mitigate the potential sources of the odor, the spokesman said. Read more: How American Shoppers Broke the Supply Chain Tensions between growing demand for paper and the environmental problems that causes aren’t limited to the U.S. In Indonesia, more than 30 community groups sent a letter to Asia Pulp & Paper in August arguing that the mill’s plan to triple pulp production will risk the respiratory health of millions of people. And a community in Nova Scotia is divided after a paper company is taking legal action to reopen a mill that was shut in 2020 after community concerns about its wastewater discharge. One thing’s for sure, says Joshua Martin, director of the Environmental Paper Network—these conflicts are likely to mount as the world consumes more packaging. The problem isn’t just that mills create bad odors; despite high cardboard recycling rates, trees are still cut down to make packaging—around 3 billion a year, according to EPN. Although cardboard is easier to recycle than other products like plastic, it can only be recycled about 5-7 times before it can’t be used any more. Recycled cardboard is often mixed with virgin pulp to make boxes. The U.S. drives that demand—it consumes 202 kg of paper and paperboard per capita, compared to Africa’s 6 kg per capita, Latin America’s 44 kg per capita, and Asia’s 44 kg per capita, according to the Food and Agricultural Organization of the United Nations. “If the entire world used the amount of paper as America currently does, it would be completely unsustainable,” he says. The only way to reverse this trend, he says, is to change the way we buy things to have less dependence on paper and packaging. Consumers can send messages to companies by patronizing businesses that use packaging certified by the Forest Stewardship Council; they can try brands like Loop that deliver groceries in reusable packaging, which Loop then collects. Perhaps the easiest solution, though, is to buy less stuff that you’re going to toss soon—disposable coffee cups or takeout packaging or multiple e-commerce orders. “It’s this culture of disposability and single-use, no matter what the product is made from, that needs to change,” he says. It’s something Kerri Bishop, the South Carolina resident, is taking to heart. Bishop spent her career working in manufacturing and says she didn’t join the class-action lawsuit and didn’t even want the mill to shut down at first. She just hoped they would upgrade their equipment. Now, though, she’s worried she moved to a state that values manufacturing and jobs more than the quality of life and health of its residents. She’s considering getting a home air filtration system. Once a frequent Amazon shopper, she tired of ordering a few different things and having them arrive in many different boxes, even if she tried to get them to all come the same day. She’d heard from a local politician that the New-Indy boxes were being used by Amazon, so she started boycotting the online retailer. She lifted the boycott for the holidays, as higher prices and supply chain problems made it hard to buy things elsewhere, but Bishop says she plans to stop shopping at Amazon again in January.    .....»»

Category: topSource: timeDec 15th, 2021

Personal finance links: relatively rich

Wednesdays are all about personal finance here at Abnormal Returns. You can check out last week’s links including a look at why... PodcastsLaurie Santos talks with psychologists Joshua Green about how to give money away more effectively. (podcasts.apple.com)Jordan Harbinger talks minimalism with Joshua Fields Millburn. (jordanharbinger.com)Moira Aaarons-Mele talks anxiety and burnout with Dr. Judson Brewer and Charles Duhigg. (hbr.org)FamilyWhy discussions about money are so important in a relationship. (wealthfoundme.com)Early Roth contributions for children are a great way to take advantage of compounding. (humbledollar.com)RetirementSix things you can do to stretch assets in retirement. (morningstar.com)A Monte Carlo simulation is a beginning point for your retirement plan, not the be all, end all. (humbledollar.com)Should retirees adjust their portfolio based on high equity valuations? (morningstar.com)On the benefits of optionality later in life. (rogersplanning.blogspot.com)Retirement means more when you are healthier. (humbledollar.com)TaxesThe circumstances under which tax-loss harvesting works best. (wsj.com)More states are using tax incentives to increase 529 contributions. (wsj.com)Some tax-efficient things to do with a year-end bonus. (financialducksinarow.com)InvestingThe pros and cons of direct indexing. (wsj.com)What it's like to live with a one-fund portfolio. (obliviousinvestor.com)Cameron Rufus, "When you have your values in order – your why – it makes investing and building ‘wealth’ a whole lot easier." (wealthfoundme.com)PlanningWhen it comes to your money you should focus on process over outcomes. (italkaboutmoney.com)Hiring an advisor frees up time to do other things in life. (peterlazaroff.com)Why you should have a bias toward action. (youngmoneyweekly.substack.com)Personal financeChris Guillebeau, "The easiest asymmetrical risk you can take is to simply go through life asking for what you want." (chrisguillebeau.com)Don't begrudge some one because they got a good deal. (humbledollar.com)Your job will never love you back. (tonyisola.com)The best personal finance books to gift this holiday season including "Invest Your Way to Financial Freedom" by Ben Carlson and Robin Powell. (bankeronwheels.com)What to know before going to buy a new car. (moneyunder30.com)How many subscriptions is too many? (wired.com).....»»

Category: blogSource: abnormalreturnsDec 8th, 2021