Economic Stories of Relevance in Today's World -- May 27, 2012

Number of the Week: Half of U.S. Lives in Household Getting Benefits - Wall Street Journal - Phil Izzo - May 26, 2012 - 49.1%: Percent of the population that lives in a household where at least one member received some type of government benefit in the first quarter of 2011.                  Cutting government spending is no easy task, and it’s made more complicated by recent Census Bureau data showing that nearly half of the people in the U.S. live in a household that receives at least one government benefit, and many likely received more than one.               The 49.1% of the population in a household that gets benefits is up from 30% in the early 1980s and 44.4% as recently as the third quarter of 2008.                         The increase in recent years is likely due in large part to the lingering effects of the recession. As of early 2011, 15% of people lived in a household that received food stamps, 26% had someone enrolled in Medicaid and 2% had a member receiving unemployment benefits. Families doubling up to save money or pool expenses also is likely leading to more multigenerational households. But even without the effects of the recession, there would be a larger reliance on government.

JPMorgan sued over employee retirement plan losses - Reuters - Jonathan Stempel - May 22, 2012 - JPMorgan Chase & Co has been hit with a lawsuit brought on behalf of employees whose retirement holdings fell in value after the largest U.S. bank revealed a surprise $2 billion trading loss earlier this month.               The complaint, filed late Monday in U.S. District Court in Manhattan, also names individual defendants, including Chief Executive Jamie Dimon and Ina Drew, who stepped down last week as head of JPMorgan's chief investment office, where the loss occurred.           The defendants were accused of violating their duties to 401(k) and other retirement plan participants by including company stock as an investment option, hiding the stock's risk, and failing to move participants to safer choices.


JP Morgan 'faces £4bn loss' from trading blunders in one of Square Mile's worst catastrophes - The Daily Mail (London) - Ruth Sutherland - May 22, 2012 - British losses at the JP Morgan bank could double initial estimates and top £4billion – making it one of the worst trading catastrophes ever to hit the Square Mile.                The warning came as details emerged of bitter rows between the firm’s offices on Wall Street and in London, where the ill-fated deals took place.                 The bank chief executive Jamie Dimon admitted earlier this month that the losses racked up by a team of traders in London amounted to around £1.25billion and could rise to £1.875billion.                But rival dealers now believe the black hole could swell to as much as £4.4billion as the bank struggles to unravel the highly complex deals amid turmoil in the eurozone....


CBO: 'Fiscal Cliff' Could Push US Back Into Recession - Money News.com - May 23, 2012 - A stalemate over how to tackle a series of fiscal deadlines at year's end would likely push the United States economy into recession in the first half of next year, the Congressional Budget Office warned.              A wave of U.S. tax hikes and automatic spending cuts — dubbed the "fiscal cliff" — are set to take effect in January unless Congress and the White House agree on ways to delay or revise at least some of them.                  The CBO, the official budget and economic analyst for lawmakers, said the U.S. economy would contract at an annual rate of 1.3 percent for the first half of 2013 if lawmakers take no action to prevent the looming tax hikes and spending cuts.

Marc Faber: 100% Chance of Global Recession - CNBC - Lee Brodie - May 25, 2012 - ...in a live interview on CNBC’s Fast Money Halftime Report, Faber again warned that economies of the world may be on the brink of a serious slowdown.                Faber indicated that while investors remain focused on Greece and Europe – other issues, bigger issues are looming. And they’re more threatening.                           “As an observer of markets – whenever everyone focuses on one thing – like Greece and Europe – maybe they miss issues that are far more important – such as a meaningful slowdown in India and China.”                      The latest reports from Beijing would support Faber's assertion.  The HSBC Flash Purchasing Managers Index, slipped to 48.7 in May from 49.3 in April. That marks the seventh straight month that the index has been below 50, a level which indicates economic activity is contracting.....                     “I think we could have a global recession either in Q4 or early 2013." When asked what were the odds, Faber replied, "100%."

Peter Schiff: The Worst Has Yet To Come -  - The Business Insider - William Wei - May 24, 2012 - While we experienced a devastating crash in 2009, it was just a preview for the catastrophe that's coming next, says perma-bear Peter Schiff.                  The real crash will come from the "government's phony cure" for the economic troubles that have swept our nation, Schiff details in his new book The Real Crash: How To Save Yourself And Your Country.                   Find out what the crash will look like and why it could have been avoided in the interview with Business Insider editor-in-chief Henry Blodget:


PETER SCHIFF: The Housing Bust Was Just A Preview For The Coming Catastrophe - Euro Pacific Capital - Peter Schiff - May 23, 2012 - I first came to national attention back in 2008 and 2009 when the housing and credit markets imploded. I became known as the guy that other market “experts” laughed at when I warned of trouble brewing in the seemingly indestructible American economy. After the wheels ground to a halt in mid-2008, people noticed that my book Crash Proof, originally released in early 2007, read like a detailed preview of many of the events that eventually unfolded.                       Three years later I am now catching heat from many who assume that my predictions actually fell short. They argue that I was able to anticipate the crash but that I severely underestimated the resiliency of the American economy. They admit that we took an “unexpected” blow to the chin, and that it left a lingering bruise, but they argue that we never hit the canvas like I predicted we would.                      However, they mistakenly assumed that the crash I was warning about was solely a housing led credit bubble. While that was part of it, I never saw it ending there. The crash that most concerned me was the one that would result from the government’s response to the initial crisis. My concern was not that our economy would succumb to the disease that I had diagnosed, but instead would be taken down by the “cure” that the government unleashed to combat it.....



HP prepares to announce mass layoffs - CNN Money - David Goldman and Michal Lev-Ram - May 23, 2012 -  Hewlett-Packard will announce another round of substantial job cuts Wednesday afternoon in an effort to streamline its teetering PC and services businesses, a source familiar with the plans told Fortune.               The layoffs will be "in the ballpark" of 25,000 workers, the source said, which would amount to about 7% of HP's global workforce. The nation's largest technology company by revenue currently employs 349,600 people worldwide, according to its latest regulatory filing.                      CEO Meg Whitman is trying to reorganize the tech giant into a leaner, more efficient powerhouse, but she faces a massively uphill battle.                    The overall PC industry is stuck in neutral, but HP (HPQ, Fortune 500), the world's largest computer maker, is traveling in reverse at high speed. The company's PC sales fell 15% during the holiday season, with consumer computer sales tumbling 25%.....                  HP has deep problems in the market. It missed the boat on tablets and failed to produce a viable smartphone. As the world goes mobile and leaves PCs behind, HP is struggling to stay relevant.
It's not alone. Dell (DELL, Fortune 500), which faces similar struggles, reported Tuesday that the company's lackluster PC sales dragged on its overall profit and revenue last quarter. Its stock fell more than 12% in after-hours trading.                    Whitman can trim some of HP's fat, realign the organization and make other iterative improvements, but there's not much she can do to significantly alter the company's prospects without making some drastic -- and painful -- changes.                      HP's past attempts to cut its way to better health haven't worked.  Then-CEO Mark Hurd axed 9,000 positions in June 2010. HP shed another 275 workers in February after the company discontinued the webOS lineup that it purchased from Palm.


Fake Chinese Parts 'Found In US Planes' - Sky News - May 22, 2012 - More than a million fake electronic parts from China have been found in US military aircraft, posing a risk to national security, an investigation has revealed.                        A report by the US Senate uncovered 1,800 cases of bogus parts - including some in special operations helicopters and the US Air Force's largest cargo plane. The total number of individual components involved in these cases exceeded one million, the Committee on Armed Services publication said.                          "This flood of counterfeit parts, overwhelmingly from China, threatens national security, the safety of our troops and American jobs," committee chairman Senator Carl Levin said."It underscores China's failure to police the blatant market in counterfeit parts - a failure China should rectify," he added....


Buffett Says Free News Unsustainable, May Add More Papers - Bloomberg - Zachary Tracer - May 24, 2012 -  Warren Buffett, whose Berkshire Hathaway Inc. (BRK/A) struck a deal this month to acquire 63 newspapers, said he may buy more publications as the industry rethinks whether to offer free content on the Internet.                     “This is an unsustainable model and certain of our papers are already making progress in moving to something that makes more sense,” Buffett wrote in a letter to editors and publishers of Berkshire’s daily newspapers. “We want your best thinking as we work out the blend of digital and print that will attract both the audience and the revenue we need.”.....                            While circulation may slip, papers only fail when there are dailies competing in the same town, a publication forfeits its position as the primary source of locally important information or the market doesn’t have a sense of identity, he said.                    “We don’t face those problems,” Buffett, 81, wrote in the letter dated yesterday and posted on the website of Berkshire’s Omaha World-Herald, which is in the Nebraska town where Buffett’s company is based. “Berkshire will probably purchase more papers in the next few years. We will favor towns and cities with a strong sense of community.”                 The billionaire investor said that editors should focus on making the papers “indispensable” to local communities.     “Our future depends on remaining the primary source of information in certain subjects of great importance to our readers,” Buffett wrote. “Technological change has caused us to lose primacy in various key areas, including national news, national sports, stock quotations and employment opportunities. So be it. Our job is to reign supreme in matters of local importance.”
          


Center of gravity in oil world shifts to Americas - Washington Post - Juan Forero - May 25, 2012 - ... From Canada to Colombia to Brazil, oil and gas production in the Western Hemisphere is booming, with the United States emerging less dependent on supplies from an unstable Middle East. Central to the new energy equation is the United States itself, which has ramped up production and is now churning out 1.7 million more barrels of oil and liquid fuel per day than in 2005...            Since 2006, exports to the United States have fallen from all but one major member of the Organization of the Petroleum Exporting Countries, the net decline adding up to nearly 1.8 million barrels a day. Canada, Brazil and Colombia have increased exports to the United States by 700,000 barrels daily in that time and now provide nearly 3.4 million barrels a day.                       Six Persian Gulf suppliers provide just 22 percent of all U.S. imports, the nonpartisan U.S. Energy Information Administration said this month. The United States’ neighbors in the Western Hemisphere, meanwhile, provide more than half — a figure that has held steady for years because, as production has fallen in the oil powers of Venezuela and Mexico, it has gone up elsewhere.                          Production has risen strikingly fast in places such as the tar sands of Alberta, Canada, and the “tight” rock formations of North Dakota and Texas — basins with resources so hard to refine or reach that they were not considered economically viable until recently. Oil is gushing in once-dangerous regions of Colombia and far off the coast of Brazil, under thick salt beds thousands of feet below the surface.


Oil boom strikes Kansas - CNN Money - Blake Ellis - May 23, 2012

How Alcatel-Lucent made the Internet 5 times faster - CNN Money - David Goldman - May 22, 2012

Americans concerned about Bank Runs