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The Wall Street Journal is a business-focused, English-language international daily newspaper based in New York City. The Journal is published six days a week by Dow Jones & Company, a division of News Corp, along with its Asian and European editions. The Wall Street Journal is the largest newspaper in the United States by circulation. According to the Alliance for Audited Media, the Journal had a circulation of about 2.4 million copies (including nearly 900,000 digital subscriptions), as of March 2013, compared with USA Today‍ '​s 1.7 million. The Wall Street Journal has won 39 Pulitzer Prizes through 2015 and derives its name from Wall Street in the heart of the Financial District of Lower Manhattan. The Journal has been printed continuously since its inception on July 8, 1889, by Charles Dow, Edward Jones, and Charles Bergstresser.

Articles by Journal WallStreet

The EU’s New Bomb Is Ticking in the Netherlands—–It’s New Referendum Law Puts The People In Charge

November 20, 2016

….This referendum law is a potential bomb under the EU, as both Dutch politicians and Brussels officials are well aware. Mr. Baudet believes he now has the means to block any steps the EU might seek to take to deepen European integration or stabilize the eurozone if they require Dutch legislation. This could potentially include aid to troubled Southern European countries such as Greece and Italy, rendering the eurozone unworkable.

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The So-Called OPEC Cartel Whiffs Again——Marathon Talks, No Deal

October 31, 2016

A weekend marathon of talks between major oil producers failed to finalize plans to implement an output cut, threatening the viability of an agreement reached last month to reduce production by as much as 2%. The talks were also aimed at securing coordinated cuts with producers outside OPEC, such as Russia, the world’s largest oil producer. Instead, Iraq and Iran’s insistence on exemptions emerged as a big sticking point Friday as those members refused to agree to cut their burgeoning output.

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Bankruptcy Bust: How Zombie Companies Are Killing the Oil Rally

October 25, 2016

Energy investors have long hoped that falling prices would solve themselves by driving producers into bankruptcy and stanching the flood of excess supply, but it hasn’t worked out that way

By Timothy Puko and John W. Miller for The Wall Street Journal
October 24, 2016
Their owners may be bankrupt, but the sprawling mines of Wyoming’s Powder River Basin are still churning out coal. It is the same story in oil fields along the Gulf Coast and with shale-gas wells in the Rocky Mountains.
Energy investors have long hoped that falling prices would solve themselves by driving producers into bankruptcy and stanching the flood of excess supply. It turns out that while bankruptcy filings are up, they have barely impacted fossil-fuel markets.
About 70 U.S. oil and gas companies filed for bankruptcy in 2015 and 2016. They now produce the equivalent of about 1 million barrels a day, about the same as before they declared bankruptcy, according to Wood Mackenzie. That represents about 5% of U.S. oil-and-gas output.
That resilience has kept energy inventories flush and prices capped. Oil shot to $50 a barrel this summer, but has had trouble making much progress beyond that mark. On Friday, oil futures in New York rose 0.4% to $50.85 a barrel.

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Subprime Frenzy, China Style——Beijing Median Home Price Rises To 34X Median Income

October 24, 2016

As banks focus on mortgage lending, and urban property prices surge, some people are bending the rules to come up with down payments
A billboard at a Beijing construction site pitches a new housing complex. In some instances, Chinese banks are offering credit lines to borrowers with few questions asked. PHOTO: GREG BAKER/AGENCE FRANCE-PRESSE/GETTY IMAGES
By Lingling Wei at The Wall Street JournalOct. 19, 2016 5:41 a.m. ET
BEIJING— Xiong Meifang was about $30,000 short two months ago for a 30% down payment on an $895,000 apartment in the southern part of China’s capital.
To make up the difference, the 31-year-old graphic designer took out a line of credit from a national bank. She said the bank told her she could use the loan however she wanted.
China bans borrowing for down payments. A surge in such financing offered by nonbank lenders earlier this year led to a regulatory clampdown. But as banks increasingly turn to mortgage lending, there are new signs of risky practices. In some instances, banks offer credit lines to borrowers buying apartments with few questions asked. In others, banks work with independent loan brokers or property agents to funnel money into down-payment financing.

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Three Risks to the Global Financial System as Debt Hits Record Levels

October 7, 2016

By IAN TALLEY
In recent years, the global financial system has weathered Brexit, China’s deceleration and emerging market mayhem.
But there’s no reason to be complacent, the International Monetary Fund warns in its latest reports on global financial stability and the fiscal health of economies around the world.
“The passing of these near-term risks has seen volatility fall and equity prices in advanced economies rise,” says Peter Dattels, deputy director of the fund’s monetary and capital markets department. “But medium-term risks are building because we are entering a new era of challenges.”
An unprecedented era of ultralow interest rates and feeble growth has led to a record buildup in global debt levels.

Historic debt levels and dwindling policy ammunition risk derailing the meager recovery forecast for next year.
Anemic global growth is “setting the stage for a vicious feedback loop in which lower growth hampers deleveraging and the debt overhang exacerbates the slowdown,” the emergency lender warned.
The IMF lays out three major risks to the financial system.
First, European banks are facing a chronic profitability crisis. Many haven’t been able to clear the legacy debt off their balance sheets and investors are increasingly skeptical they’ll be remain profitable based on their current structures.
But it’s not just market perceptions.

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Nein! Bundesbank Head Rejects Calls For German Fiscal Stimulus

September 30, 2016

By TOM FAIRLESS

Jens Weidmann, president of the German Bundesbank, speaks during a news conference in February. PHOTO: BLOOMBERG NEWS
FRANKFURT—It’s absurd to ask Germany’s government to spend more to bolster eurozone growth, German Central Bank President Jens Weidmann said on Thursday, rejecting growing pressure on Berlin to loosen its purse strings.
Speaking in the German capital, Mr. Weidmann said a fiscal stimulus program in Germany was unnecessary given the nation’s robust economy, and would have few positive effects for other countries anyway.
Earlier this month, European Central Bank President Mario Draghi joined the chorus of voices that have criticized Germany for reining in its spending at a time of weak economic growth.
“Countries that have fiscal space should use it,” Mr. Draghi said at a news conference. “Germany has fiscal space.”
But Mr. Weidmann argued that Germany’s national debt was already high, and the country’s aging population “calls for lower rather than higher debts.”
Mr. Draghi tempered his remarks on Wednesday after a meeting in Berlin with German lawmakers, who grilled him over the ECB’s easy-money policies and their impact on German savers and banks.
“Germany does have fiscal space [but] we need to be nuanced,” Mr. Draghi said. “I never argued for irresponsible fiscal expansion.

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Trump Tees Up a Necessary Debate on the Fed—-60% Of Stock Gains Since 2008 On Meeting Days

September 29, 2016

By RUCHIR SHARMA

After Monday’s presidential debate at Hofstra University in Hempstead, N.Y. PHOTO: GETTY IMAGES

The press spends a lot of energy tracking the many errors in Donald Trump’s loose talk, and during Monday’s presidential debate Hillary Clinton expressed hope that fact checkers were “turning up the volume” on her rival. But when it comes to the Federal Reserve, Mr. Trump isn’t all wrong.
In a looping debate rant, Mr. Trump argued that an increasingly “political” Fed is holding interest rates low to help Democrats in November, driving up a “big, fat, ugly bubble” that will pop when the central bank raises rates. This riff has some truth to it.
Leave the conspiracy theory aside and look at the facts: Since the Fed began aggressive monetary easing in 2008, my calculations show that nearly 60% of stock market gains have come on those days, once every six weeks, that the Federal Open Market Committee announces its policy decisions.
Put another way, the S&P 500 index has gained 699 points since January 2008, and 422 of those points came on the 70 Fed announcement days. The average gain on announcement days was 0.49%, or roughly 50 times higher than the average gain of 0.01% on other days.
This is a sign of dysfunction. The stock market should be a barometer of the economy, but in practice it has become a barometer of Fed policy.

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Q3 Estimates Now In The Red——-Sixth Straight Quarter Of Profits Decline

September 26, 2016

By CORRIE DRIEBUSCH

Analysts have reduced their third-quarter earnings forecasts for Exxon Mobil Corp. since the end of June. The energy sector has been a major drag on overall S&P 500 earnings in recent quarters. PHOTO: MATT BROWN/ASSOCIATED PRESS

The third quarter was supposed to be when earnings growth returned to U.S. companies. Not anymore.

Companies in the S&P 500 are now expected to report an earnings decline for the sixth consecutive quarter in the coming weeks, according to analysts polled by FactSet. That slump would be the longest since FactSet began tracking the data in 2008.
The prolonged contraction has raised questions about how far stocks can rise without corresponding strengthening in corporate earnings.

As recently as three months ago, analysts estimated U.S. corporate earnings growth would return to positive territory by the third quarter. As of Friday, they were predicting a 2.3% contraction from the year-earlier period.
Many of the factors pressuring U.S. corporate earnings in recent quarters—including a stronger dollar and falling oil prices—have abated in 2016. The WSJ Dollar Index, which measures the U.S. dollar against a basket of 16 currencies, is down 4% this year, versus up 8.6% for all of last year, and the price of U.S.-traded crude oil has risen 20% in 2016, rebounding from its extreme lows.

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What Fiscal Stimulus? Next President Will Inherit Trillions Of Built-In Deficits

September 26, 2016

By NICK TIMIRAOS

Images of Hillary Clinton and Donald Trump on a CNN vehicle, behind a security fence, Saturday at Hofstra University. PHOTO: PAUL J. RICHARDS/AGENCE FRANCE-PRESSE/GETTY IMAGES

Donald Trump and Hillary Clinton are likely to recite their varied promises for fresh government spending at Monday’s first presidential debate. One reality they’re unlikely to note: Whoever wins in November will enjoy far less latitude to spend money or cut taxes than any president since World War II.
Not since Harry Truman will a new leader enter office with a higher debt-to-GDP ratio. And for the first time in decades, the new president will face the specter of widening deficits despite a growing economy.
“The next president, no doubt, is going to be very constrained,” said Rep. Charlie Dent, a Pennsylvania Republican who sits on the House appropriations committee and hasn’t endorsed anyone for president.
A President Trump or Clinton could try to barrel ahead anyway, of course. But Mrs. Clinton, in particular, is likely to be checked by the opposing party’s control of at least one chamber of Congress. And that doesn’t take into account what would happen if the U.S. enters another recession, when falling revenue would send deficits even higher.

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Mind The Incomings—–Port of LA/Long Beach Import Containers Down 4.3% Y/Y, Implying Weak Holiday Outlook Among Retailers

September 20, 2016

By ERICA E. PHILLIPS

Shipping containers sit at the ports of Los Angeles and Long Beach, Calif. PHOTO: REUTERS

Imports slumped at the nation’s largest port complex in August, a sign that retailers remain cautious in their outlook for holiday sales amid changing patterns in consumer spending.
The nation’s two largest container ports, in neighboring Los Angeles and Long Beach, Calif., imported a combined 732,992 20-foot equivalent units, a standard measure for container cargo, in the month of August. That was down 4.3% from the same month last year. Long Beach’s import volume declined 10.2% while inbound loads in Los Angeles rose less than 1%.
Retailers usually step up imports from Asia in late summer and early fall to prepare for the annual surge in holiday consumer spending. This year’s peak shipping season was expected to be weak as retailers focused on slimming store inventories as more of their customers shop online. U.S. retail sales declined in August, raising concerns about how much consumers would spend for the remainder of the year.
But the volumes coming through Southern California were worse than anticipated. The National Retail Federation and research firm Hackett Associates predicted nationwide imports through major ports would slip 0.4% in August.
Some major East Coast hubs reported strong monthly growth last month.

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Second Half Rebound—–MIA Again!

September 16, 2016

By ERIC MORATH

Recent data show few signs of stronger momentum for consumer spending, manufacturing output or hiring. That, along with inflation that remains soft, has many other economists expecting the Federal Reserve to hold rates steady at its policy meeting next week. PHOTO:BRIAN HILL/DAILY HERALD/ASSOCIATED PRESS

Cautious consumers, retrenching manufacturers and scant signs of inflation are diminishing optimism about a breakout in economic growth in the final stretch of the year.

Retail sales declined last month for the first time since March and manufacturing production slipped, government data released Thursday showed. Meanwhile, prices businesses receive for their goods and services were unchanged last month, a sign of still-soft demand at home and abroad. Companies also remain cautious about building up too much inventory, new figures showed.
Recent economic gauges, including evidence of a slowdown in August hiring, suggest the economy could be constrained for the rest of the year to a growth rate only slightly above the expansion’s overall 2% pace—the weakest of any since World War II.
Forecasters long expected an acceleration in the economy starting in the summer after nine months of economic growth around a 1% rate.

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Thanks, Obamacare! Average Employer Family Plan Now Costs $18,000

September 15, 2016

By ANNA WILDE MATHEWS

Dr. Leonid Basovich examines Medi-Cal patient Michael Epps at WellSpace Health, a clinic in Sacramento, Calif., in February. A new survey finds more employees are enrolled in health plans with high deductibles. PHOTO: RICH PEDRONCELLI/ASSOCIATED PRESS

The average cost of health coverage offered by employers pushed above $18,000 for a family plan this year, though the growth was slowed by the accelerating shift into high-deductible plans, according to a major survey.
Annual premium cost rose 3% to $18,142 for an employer family plan in 2016, from$17,545 last year, according to the annual poll of employers performed by the nonprofit Kaiser Family Foundation along with the Health Research & Educational Trust, a nonprofit affiliated with the American Hospital Association.
Employees paid 30% of the premiums for a family plan in 2016, compared with 29% last year, according to Kaiser. For an individual worker, the average annual cost of employer coverage was $6,435 in this year’s survey, with employees paying 18% of that total. The change in annual premium for individual coverage from 2015 wasn’t statistically significant.
Economists have long debated the reasons for the slow pace of growth in premiums, which has continued for several years.

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Here Comes Operation Reverse Twist——-BOJ Style

September 14, 2016

By ANJANI TRIVEDI

We’re thinking long-term rates should be about this much higher. PHOTO: KIYOSHI OTA/BLOOMBERG NEWS

Higher interest rates may not be so bad after all, especially if you’re in Japan.

Japan’s subzero-rates policy has had a “powerful impact,” as Bank of Japan Gov. Haruhiko Kuroda recently said, in pushing down interest rates. But judging by the collateral damage—record low profits at Japanese banks, which are charged with transmitting the BOJ’s easy-money policy to stimulate the economy—it has likely gone a touch too far.
Signs have emerged that the central bank intends to steepen its yield curve—that is, push long-term rates up and suppress short-term rates. It has shifted around its bond purchases, buying more short-term Japanese government bonds and on the whole buying fewer bonds. Long-term rates rose are up almost half a percentage point since July. Yet even after the recent steepening, the difference between two-year bonds and 10-year bonds is half what it was before negative rates came into effect.
To alleviate further pain, the BOJ at its policy meeting Sept. 21 could nudge the yield curve steeper by committing to lowering the short-term rates that banks typically borrow at, while letting long-term rates that they lend at float higher.
That should boost Japanese banks’ margins.

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Here Come The Bombshells—–Chinese Billionaire Linked to Giant Aluminum Stockpile in Mexican Desert

September 9, 2016

By SCOTT PATTERSON in Los Angeles, JOHN W. MILLER in San José Iturbide, Mexico, and CHUIN-WEI YAP in Liaoning, China

An aerial view of the aluminum stockpile around Aluminicaste Fundición de México’s San José Iturbide plant in June 2016. PHOTO: MIKE RAPPORT

Two years ago, a California aluminum executive commissioned a pilot to fly over the Mexican town of San José Iturbide, at the foot of the Sierra Gorda mountains, and snap aerial photos of a remote desert factory.

He made a startling discovery. Nearly one million metric tons of aluminum sat neatly stacked behind a fortress of barbed-wire fences. The stockpile, worth some $2 billion and representing roughly 6% of the world’s total inventory—enough to churn out 2.2 million Ford F-150s or 77 billion beer cans—quickly became an obsession for the U.S. aluminum industry.
Now it is a new source of tension in U.S.-Chinese trade relations. U.S. executives contend that the mysterious cache was part of a brazen scheme by one of China’s richest men to game the global trade system.

Liu Zhongtian, chairman of China Zhongwang Holdings Ltd., toasts the company’s share listing in Hong Kong on May 8, 2009. PHOTO: IMAGINECHINA/ZUMA PRESS

Aluminum-industry representative Jeff Henderson says he is convinced that China Zhongwang Holdings Ltd., a Chinese aluminum giant controlled by billionaire Liu Zhongtian, tried to evade U.S.

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Central Banks Could Be This Market’s Pets.com

August 19, 2016

By JAMES MACKINTOSH

If Pets.com’s IPO and failure in 2000 epitomizes internet excess, investors in the future might look back in wonder at the willingness of today’s investors to justify lending money to highly indebted governments. PHOTO: BOB RIHA/LIAISON/GETTY IMAGES

The stock market is partying like it’s 1999, and for exactly the opposite reason. Last week the S&P 500, Dow Jones Industrial Average and Nasdaq Composite hit a synchronized high for the first time since the eve of the millennium. America’s most valuable company is a tech stock (Apple today, Microsoft back then). The tech sector is back above a fifth of S&P 500 market capitalization, and just as then bears worry that the market is overvalued, although not by anywhere near as much.

In 1999, wild optimism was elevating the market as investors piled into anything with “.com” after its name—leading to a rash of stock-price-boosting name changes. Investors punished dividend payers for not having enough ways to spend money on transformative tech. The number of clicks beat cash flow as an investment tool.
The contrary is true this year. Wild pessimism about the global economy has led investors to chase dividend payments, demand buybacks and punish companies that invest. Cash is king.
And yet, the market rises. “Nobody seems to be particularly optimistic about much of anything and yet the stock market in the U.S.

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Thanks, Barry! Only 37% of Borrowers Are Actually Paying Down Their Student Loans

August 17, 2016

By Daniel Pianko
In her speech at the Democratic National Convention, Hillary Clinton exclaimed, “ Bernie Sanders and I will work together to make college tuition-free for the middle class and debt-free for all!” How she intends to do that remains something of a mystery, beyond higher taxes on “Wall Street, corporations, and the super-rich.” But it’s hard to imagine the student-loan industry and the burden of student debt getting any worse for taxpayers and borrowers than it is now.
A largely overlooked report released in February by the Government Accountability Office suggests that the Obama administration’s policies have exacerbated student debt, which equals nearly a quarter of annual federal borrowing. With only 37% of borrowers actually paying down their loans, the federal student-loan program more closely resembles the payday-lending industry than a benevolent source of funds for college.
As this newspaper reported in April, “43% of the roughly 22 million Americans with federal student loans weren’t making payments as of Jan. 1,” and a staggering “1 in 6 borrowers, or 3.6 million, were in default on $56 billion in student debt.” If student debt continues to skyrocket, the federal government may have to deal with as much as a $500 billion write-down when future defaults and loan-forgiveness programs are factored in.

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California’s Cow Police——Bovine Emissions Must Stop!

August 15, 2016

By Wall Street Journal

PHOTO: GETTY IMAGES
First they came after the oil producers, then manufacturers, and now they’re coming for the cows. Having mandated emissions reductions from fossil fuels, California’s relentless progressives are seeking to curb the natural gas emanating from dairy farms.
The California Air Resources Board has pumped out regulations to cut the state’s greenhouse gas emissions to 1990 levels by 2020, and the board worries that its climate agenda could be jeopardized by natural phenomena. To wit, cow manure and “enteric fermentation” (flatulence), which account for half of the state’s methane emissions. According to the board, methane is a “short-lived climate pollutant” with “an outsized impact on climate change in the near term.” Democratic lawmakers want to mandate a 40% reduction in methane by 2030, and the board is pondering ways to do it.
“If dairy farms in California were to manage manure in a way to further reduce methane emissions,” the board explains, “a gallon of California milk might be the least GHG intensive in the world.” And the most expensive. Many California dairy farms have already been converted into nut farms, which are more economical amid the state’s high regulatory costs.
The board suggests that dairy farms purchase technology to capture methane and then sell the biogas to consumers.

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Malinvestment, Tumbling Freight Rates And Cargo Ships To The Scrap Heap

August 15, 2016

By Costas Paris

Fewer ships at Alang, India, have resulted in many workers losing their jobs in the recent months. PHOTO: AMIT DAVE/REUTERS
Up until a year ago, the shipping industry was ordering ships in droves. This year, orders of new vessels have fallen to a record low and companies can’t get rid of ships fast enough.
About 1,000 ships that have the combined capacity to haul 52 million metric tons of cargo will be dragged onto beaches, cut into pieces and sold for scrap metal this year. That is second only to the record amount of capacity of 61 million so-called dead weight tons that were scrapped and recycled in 2012.
The global economic slowdown is putting shipping through its most bruising period since the 2008 financial crisis. Companies including Maersk Line, a unit of Danish conglomerate A.P. Møller Maersk A/S, Germany’s Hapag-Lloyd AG and China Cosco Bulk Shipping Co. have 30% more capacity in the water than cargo. As the companies, mostly based in Europe and Asia, fight for bigger shares of the global market, freight rates have dropped so low they barely cover fuel costs.
In the five years through 2015, owners ordered an average of 1,450 ships annually. This year orders through July fell to 293 vessels, or 11.6 million tons, according to U.K. marine data provider Vessels Value.

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Lopsided Housing Rebound Leaves Millions of People Out in the Cold

August 11, 2016

By Laura Kusisto

A real estate consultant shows a condominium to a prospective buyer in Miami. Economists expected the homeownership rate to begin edging up this year, but the rate fell to a 51-year low of 62.9% in the second quarter from 63.4% year earlier. PHOTO: JOE RAEDLE/GETTY IMAGES

The housing recovery that began in 2012 has lifted the overall market but left behind a broad swath of the middle class, threatening to create a generation of permanent renters and sowing economic anxiety and frustration for millions of Americans.

Home prices rose in 83% of the nation’s 178 major real-estate markets in the second quarter, according to figures released Wednesday by the National Association of Realtors. Overall prices are now just 2% below the peak reached in July 2006, according to S&P CoreLogic Case-Shiller Indices.
But most of the price gains, economists said, stem from a lack of fresh supply rather than a surge of buyers. The pace of new home construction remains at levels typically associated with recessions, while the homeownership rate in the second quarter was at its lowest point since the Census Bureau began tracking quarterly data in 1965 and the share of first-time home purchases remains mired near three-decade lows.

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The Bizarro World Of Bonds Keeps Get More Bizarre

August 11, 2016

By Richard Barley

Central banks have always been able to make waves in markets. But never have they had such far-reaching effects, nor so quickly. The world of bonds is being turned upside down as a result.
Monetary policy traditionally has involved adjusting a short-term rate of interest that can then, over time, affect the structure of long-term rates that are set by markets. But central banks’ bond purchases and ultralow interest rates mean that distortions are rife.
Some ripples are having immediate impacts: the Bank of England’s new quantitative easing program, for instance, has turbocharged the U.K. bond market. The failure of the BOE to buy as many bonds as it wanted Tuesday pushed long-dated gilt yields to new historic lows: the 30-year yield, which three months ago was 2.3%, now stands at 1.3%. Gilts maturing in 25 years or more have returned an extraordinary 34.8% so far in 2016, according to Barclays.

But the pernicious ripple effects from ultralow interest rates are more to do with their persistence. This is clearest perhaps in Germany, where the long decline in yields driven by the European Central Bank has produced a strange new breed of zero-coupon bonds.
A traditional zero-coupon bond is sold at a deep discount to face value. Investors don’t get any interest payments, but the bond’s price should rise as it gets closer to maturity.

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Negative Rates Are Backfiring——Here’s Some Early Evidence

August 9, 2016

By Georgi Kantchev, Christopher Whittle and Miho Inada

The European Central Bank cut interest rates below zero to encourage consumers and businesses to spend more. PHOTO: MARTIN LEISSL/BLOOMBERG NEWS

KORSCHENBROICH, Germany—Two years ago, the European Central Bank cut interest rates below zero to encourage people such as Heike Hofmann, who sells fruits and vegetables in this small city, to spend more.
Policy makers in Europe and Japan have turned to negative rates for the same reason—to stimulate their lackluster economies. Yet the results have left some economists scratching their heads. Instead of opening their wallets, many consumers and businesses are squirreling away more money.
When Ms. Hofmann heard the ECB was knocking rates below zero in June 2014, she considered it “madness” and promptly cut her spending, set aside more money and bought gold. “I now need to save more than before to have enough to retire,” says Ms. Hofmann, 54 years old.

Heike Hofmann, who sells fruits and vegetables in Korschenbroich, Germany, reacted to negative rates by cutting her spending.

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All About Those “Earnings Beats’——-It’s Rigged!

August 5, 2016

By Thomas Gryta, Serena Ng and Theo Francis

An AT&T store in New York City’s Times Square. Before announcing earnings in April, the company’s investor-relations employees encouraged analysts to look back at an executive’s comments that suggested revenue might be hurt because some customers were waiting longer to upgrade their mobile phones. PHOTO: RICHARD DREW/ASSOCIATED PRESS

In April, AT&T Inc. shares rose after it reported quarterly revenue that narrowly topped the average estimate from analysts.
The surprise wasn’t as surprising as it looked. Before AT&T’s announcement, investor-relations employees at the telecommunications giant encouraged analysts to look back at comments made by finance chief John Stephens in early March, say analysts who spoke with the company. He had implied some customers were waiting longer to upgrade their mobile phones, an important revenue source.
Analysts at three research firms cut their sales estimates by an average of about $1 billion in the week before AT&T issued first-quarter numbers. William Blair & Co. analysts cited Mr. Stephens’s comments. The average estimate of all 22 firms following AT&T fell $323 million in three weeks, according to FactSet.

AT&T wound up reporting $40.54 billion in quarterly revenue, beating the lowered target by $76 million.

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Another Reason for Investors to Worry About ‘Earnings Before Bad Stuff’

August 4, 2016

By Michael Rapoport

LendingClub is a heavy user of pro forma metrics. PHOTO: VIVIAN JOHNSON FOR THE WALL STREET JOURNAL
Regulators and investors are increasingly wary when companies overemphasize their own customized earnings metrics. New research shows they may have a point.
Companies that report significantly stronger earnings by using tailored figures like “adjusted net income” or “adjusted operating income” are more likely to encounter some kinds of accounting problems than those that stick to standard measures, according to research by consulting firm Audit Analytics.
The rules allow companies to report such tailored figures, and the research, conducted for The Wall Street Journal, doesn’t necessarily mean such companies are less scrupulous in their bookkeeping. But it does suggest that heavy use of metrics outside of generally accepted accounting principles—sometimes referred to derisively as “earnings before bad stuff”—could be a warning sign.
“I would say an overprominent user of non-GAAP metrics would justify more attention and is a red flag,” said Olga Usvyatsky, Audit Analytics’s vice president of research. Heavy use of non-GAAP metrics may indicate a company’s accounting is “more aggressive,” she said.
The study focused on companies in the S&P 1500 index. It found that just 3.

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US Homeownership Rate Fall To Five-Decade Low

July 29, 2016

By JEFFREY SPARSHOTT

The homeownership rate, the proportion of households that are owner-occupied, fell to 62.9%, half a percentage point lower than the second quarter of 2015 and 0.6 percentage point lower than the first quarter 2016, the Census Bureau said on Thursday. PHOTO: DREW ANGERER/GETTY IMAGES

The U.S. homeownership rate fell to the lowest level in more than 50 years in the second quarter of 2016, a reflection of the lingering effects of the housing bust, financial hurdles to buying and shifting demographics across the country.
But the bigger picture also suggests more Americans are gaining the confidence to strike out on their own, albeit as renters rather than buyers.
The homeownership rate, the proportion of households that are owner-occupied, fell to 62.9%, half a percentage point lower than the second quarter of 2015 and 0.6 percentage point lower than the first quarter 2016, the Census Bureau said on Thursday. That was the lowest figure since 1965.

There are many ways to interpret the numbers. Part of the story is the catastrophic housing market collapse, which was especially severe for Generation X—those born from 1965 to 1984.
Younger households may struggle to save amid student debt, growing rents, rising home prices and limited inventories of starter homes. Indeed, the homeownership rate for 18- to 35-year-olds slipped to 34.

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The Chang’An Expressway——A Tale Of The Red Ponzi’s Infrastructure Road To Nowhere

July 28, 2016

By Mark Magnier

The Chang’An Expressway in central Hunan province has been beset by delays, cost overruns and resident protests that show why infrastructure projects are becoming an increasingly ineffective way to boost growth in China. PHOTO: MARK MAGNIER/THE WALL STREET JOURNAL

CHANGTANG, China—A highway project here that is four years behind schedule and hundreds of millions of dollars over budget helps explain why Beijing’s effort to raise infrastructure spending is an increasingly​ineffective way to boost the​economy.
When construction on the Chang’An Expressway began in 2008 it seemed a sure bet. Its private partners stood to collect decades of lucrative toll revenue. The economy and the environment would benefit by slashing three hours off a four-hour trip.
But the project, in central Hunan province, has been beset by financial problems, resident protests and a corruption probe, issues that also have hindered hundreds of other projects in China. Such setbacks are hurting Beijing’s efforts to halt a decline in economic growth that is rippling across the globe and threatening political stability at home.
China also is drawing less benefit from the infrastructure projects it completes. After a 15-year period in which the country built thousands of roads, airports, bridges and buildings, the economic benefit of adding even more is decidedly less valuable.

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Private Debt Piles Loom Over Emerging Economies

July 22, 2016

By Jon Sindreu
The failed coup in Turkey is spotlighting a problem that threatens to sandbag emerging markets more broadly: burgeoning private debt.
In the wake of Turkey’s political turmoil, credit-rating firms warned this week that heightened uncertainty threatens to undermine the country’s economy and the ability of companies to repay their debts. Standard & Poor’s Global Ratings on Wednesday cut Turkey’s credit rating to double-B, deeper into junk territory. Moody’s Investors Service is weighing a downgrade.
Economists often point to external debt as a key danger for emerging markets. In the case of Turkey and many other such nations, however, the growing debt pile is mostly home-based.
Domestic credit to the Turkish nonfinancial sector has exploded to roughly 70% of gross domestic product, from around 20% in 2000, according to the Bank for International Settlements. By comparison, other sources of lending—which include foreign credit—have hovered around 10% of GDP for the last two decades.
Access to cheap credit means households and companies can spend more, a boon for the economy. At some point, however, this burden tends to become too large, which often leads consumption and investment to slow as everybody starts paying down debt. This is why economies often experience debt cycles.

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35-Year-Old Bond Bull Is on Its Last Legs

July 14, 2016

By James Mackintosh
They have been saying it for 35 years. But after 3½ decades of stunning returns, the biggest bond bull market in history looks to be entering its final stages. Why? Changing politics and the perverse, looking-glass world of negative yields.
Bonds are meant to be safe, dull investments. But there is nothing boring, and not a lot of safety, in Japanese government bonds this year: The 40-year has returned an extraordinary 48% in six months, including the paltry coupon, and other long-dated JGBs have also had their best returns on record. U.K. and German long-dated bonds have produced similar returns to those after the collapse of Lehman.
Returns on U.S. Treasurys are less exotic, but the 30-year has returned 22% this year—a gain big enough to worry longtime bond watchers.
It would have been easy to make the mistake of thinking the bull run in bonds was over many times since then-Federal Reserve Chairman Paul Volcker got it started by taking control of inflation. The bet that the Japanese bond market—which long had the lowest yields in the world—would finally buckle has lost so much money for so many people that it is known as the “widowmaker” among traders.
That hasn’t stopped Eric Lonergan, who runs a multistrategy fund for M&G in London.

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Too Big To Prosecute—–How Obama/Holder Took A Powder On HSBC Frauds

July 12, 2016

By Christopher M. Matthews
U.S. Justice Department officials overruled their prosecutors’ recommendation to pursue criminal charges against  HSBC  Holdings PLC over money-laundering failings, according to a House committee report prepared by Republicans that sheds new light on the bank’s 2012 settlement.
The report, which was reviewed by The Wall Street Journal ahead of its release Monday morning and was prepared by the Republican staff of the Financial Services Committee, concluded that former Attorney General Eric Holder overruled the internal recommendation and subsequently misled Congress about the Justice Department’s decision not to prosecute the U.K. bank.
“Rather than lacking adequate evidence to prove HSBC’s criminal conduct, internal Treasury documents show that DOJ leadership declined to pursue [the] recommendation to prosecute HSBC because senior DOJ leaders were concerned that prosecuting the bank ‘could result in a global financial disaster,’ ” the 282-page report stated.
The report also said the Justice Department refused to respond to subpoenas from the committee about the settlement, so committee staff based its findings on documents turned over by the Treasury Department, which was also involved in the settlement.
Spokesmen at the Justice Department and Treasury Department declined to comment.
In December 2012, HSBC agreed to pay a then-record $1.

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Black Hole of Negative Rates Is Dragging Down Yields Everywhere

July 11, 2016

By Christopher Whittall and Sam Goldfarb
The free fall in yields on developed-world government debt is dragging down rates on global bonds broadly, from sovereign debt in Taiwan and Lithuania to corporate bonds in the U.S., as investors fan out further in search of income.
The ever-widening rush for yield could create problems if interest rates snap back, which would cause losses on investors’ low-yielding portfolios, or if credit quality falls. And the global yield grab is raising questions about whether rates can prove reliable economic indicators.
Yields in the U.S., Europe and Japan have been plummeting as investors pile into government debt in the face of tepid growth, low inflation and high uncertainty, and as central banks cut rates into negative territory in many countries.
Even Friday, despite a strong U.S. jobs report that helped send the S&P 500 to nearly a record, yields on the 10-year Treasury note ultimately declined to a record close of 1.366% as investors took advantage of a brief rise in yields on the report’s headlines to buy more bonds. Yields move in the opposite direction of price.
As yields keep falling in these haven markets, investors are looking for income elsewhere, creating a black hole that is sucking down rates in ever longer maturities, emerging markets and riskier corporate debt.

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The Absurd Result Of Massive Global QE——-Government Bonds Are Becoming Scarce

July 7, 2016

By Min Zeng and Christopher Whittall
A buying spree by central banks is reducing the availability of government debt for other buyers and intensifying the bidding wars that break out when investors get jittery.

Christopher Sullivan, a money manager in New York, is worried that when he needs U.S. Treasury bonds one day, he might not be able to get them.
On the surface, the concern might seem unwarranted: The U.S. Treasury has $13.4 trillion in debt securities outstanding, making the U.S. bond market the largest in the world and Treasurys among the most easily traded asset classes.
But Mr. Sullivan, who oversees $2.3 billion as…
See more at the Wall Street Journal…
Source: Central Bank Buying Puts Squeeze on Bond Market

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