LONDON - Three of the City’s most powerful figures face a grilling from MPs over suggestions banks and other financial services firms exaggerated the threat posed by Brexit. Douglas Flint, chairman of HSBC, London Stock Exchange boss Xavier Rolet, and Elizabeth Corley, vice chairman asset manager Allianz Global Investors, will appear before the Treasury Select Committee (TSC) on Tuesday.  The influential panel of MPs has launched an inquiry into the future of Britain’s economic relationship with Europe once it leaves the EU. It is understood MPs’ will investigate whether City firms have embellished the likely impact of Brexit on the Square Mile, in an attempt to pressure the government into prioritising the financial services industry during negotiations with Brussels....It comes after the chief economist of the Bank of England conceded last week that the warnings of an economic downturn forecasters sounded before the EU referendum had been a “Michael Fish” moment - the infamous episode in 1987 when the BBC weatherman said there would be no hurricane the night before the Great Storm.

The surge in public borrowing has several important effects, exposing governments to higher interest rates as well as constraining their options at a time when economists would like extra fiscal stimulus from some countries.

“Higher borrowing costs could raise concerns about debt sustainability,” warned the IIF. “With the focus in 2017 likely to be on prospects for fiscal stimulus, already-high levels of mature market debt may act as a constraint.”. Borrowers in Britain have been working hard to pay down their debts, slashing the total debt to GDP ratio by 65 percentage points between 2011 and 2015. That is now in reverse, as the government keeps borrowing and banks stop deleveraging – in the first nine months of the year, debts rose by 15 percentage points to more than 465pc of GDP. Governments in emerging markets have increased their debt more slowly – debt to GDP increased by only two percentage points. Those nations could be particularly hit by higher interest rates in the US, however, as investors looking for yield in riskier markets may be tempted back to the States, as they were in the so-called taper tantrum of 2012.  The biggest emerging market borrower in 2016 was China – it accounted for $710bn of the total $855bn of bond issuance from the governments.

The country’s households were also keen borrowers in the nine-month period. Individuals took on loans amounting to an additional 3pc of GDP, while overall emerging market household debt hit a new high of 35pc of GDP.
“This suggests that for some households, debt service capacity could be challenged in a rising interest rate environment,” the IIF warned.

Good on Andy Haldane, the chief economist of the Bank of England, for telling it as it is. In an explosive intervention, Haldane has just compared the financial crisis and Brexit to the Bank of England’s Michael Fish moments. He was referring, of course, to the day just before the greatest storm for 300 years hit Britain on Oct 15, 1987, when the famous weather forecaster got it spectacularly wrong. “Earlier on today, apparently, a woman rang the BBC and said she heard there was a hurricane on the way… well, if you’re watching, don’t worry, there isn’t!” he said.  In the case of the Great Recession, the analogy is perfect. In the case of Brexit, the error was a reverse Michael Fish, another case of the Y2K millennium bug: a prediction of immediate disaster which failed to materialise. The Bank expected a hurricane but none came, as it was put to Haldane (it’s a “fair cop”, he replied).

The Bank of England’s chief economist has admitted his profession is in crisis having failed to foresee the 2008 financial crash and having misjudged the impact of the Brexit vote.  Andrew Haldane, said it was “a fair cop” referring to a series of forecasting errors before and after the financial crash which had brought the profession’s reputation into question.  Blaming the failure of economic models to cope with “irrational behaviour” in the modern era, the economist said the profession needed to adapt to regain the trust of the public and politicians.... Haldane described the collapse of Lehman Brothers as the economics profession’s “Michael Fish moment” (a reference to when the BBC weather forecaster predicted in 1987 that the UK would avoid a hurricane that went on to devastate large parts of southern England). Speaking at the Institute for Government in central London, Haldane said meteorological forecasting had improved markedly following that embarrassing mistake and that the economics profession could follow in its footsteps.  The bank has come under intense criticism for predicting a dramatic slowdown in the UK’s fortunes in the event of a vote for Brexit only for the economy to bounce back strongly and remain one of the best performing in the developed world.  Haldane is known to be concerned about mounting criticism of experts and the potential for Threadneedle Street’s forecasts to be dismissed by politicians if errors persist.  Former Tory ministers, including the former foreign secretary William Hague and the former justice secretary Michael Gove, last year attacked the Bank of England governor, Mark Carney, for predicting a dramatic slowdown in growth if the country voted to leave the EU.

As the old year draws to a close, there is more encouraging news on the economic front which is again quite out of kilter with the largely gloomy predictions of mainstream forecasters. According to a survey of chief financial officers by the professional services company, Deloitte, optimism among Britain’s leading companies is at an 18-month high. Business leaders are notably more upbeat about prospects than they were three months ago.  This is obviously very welcome news, but it is small thanks to a Government which seems to be doing its level best to make the costs and complexity of doing business in Britain ever more burdensome. The latest example of such wrong-headedness is in changes to the business rates system, due to come into effect next April. For some businesses, they mean an immediate increase in the tax on their properties of 42 per cent, with still worse to come in future years. Particularly badly hit will be smaller traders in London and the South East. Many face an eventual doubling or worse in their rates bill.  A significant number will be broken by the increases, and in despair close up shop. Others will find ways of passing the extra costs on to their customers, or alternatively demand rent reductions from landlords. Still more will simply take the hit to profits and invest less. Yet however they choose to absorb the impact, it’s going to do lasting damage to some of the most prosperous parts of the UK economy.

Elderly Germans may have to keep working until the age of 69 if a Bundesbank proposal is adopted.

It says Berlin should consider raising the retirement age to that level by 2060, from around 65 at the moment.  The central bank says that otherwise the country may struggle to honour its pension commitments. It points out that the state pension system is in good financial health at present, but will come under pressure in coming decades. The Bundesbank says that as baby-boomers - those born in the post-World War Two period - retire, there will be fewer younger workers to replace them.. The retirement age for Germans is set to rise gradually to 67 by 2030.  However, the bank believes that from 2050 this increase will not be enough for the German government to keep state pensions at their target level of at least 43% of the average income.  It is therefore proposing pushing the retirement age up to 69.  "Further changes are unavoidable to secure the financial sustainability (of the state pension system)," the Bundesbank said in its monthly report.  But German government spokesman Steffen Seibert said they stood by retirement at 67.  "Retirement at 67 is a sensible and necessary measure given the demographic development in Germany. That's why we will implement it as we agreed - step by step," he added.

Britain’s economy will slow down but should not go anywhere close to a recession, according to economists at credit ratings agency Moody’s, while growth in the rest of the world is also “stabilising.” Although markets dived on the referendum result in June, stock prices have recovered and now economists also believe the impact of the vote will be relatively modest, compared with some early fears.  The lower pound should support economic growth in the UK, Moody’s said, while the government is expected to loosen the purse strings to shore up GDP.

Moody’s economists predict growth of 1.5pc this year and 1.2pc in 2017.

 

SAN FRANCISCO — Cisco Systems, the computer-networking giant that is in the midst of a major technological pivot, on Wednesday said it will eliminate up to 5,500 jobs.

The job reduction is Cisco's second major one in two years. The San Jose, Calif.-based company laid off 6,000 in a restructuring in 2014.  The Silicon Valley company announced the cuts — about 7% of its global workforce — during its fiscal fourth-quarter earnings report. Sluggish spending by corporations and telecom carriers on network switches and routers, Cisco's big moneymakers, have prompted it to shake up staff ranks as it turns toward other fields, such as cloud computing.  The news sent Cisco shares (CSCO) down 1%, to $30.36, in after-hours trading.

Cisco slightly beat analysts’ estimates with a quarterly profit of $2.8 billion, or 56 cents a share, on revenue of $12.64 billion, off 1.6% from a year ago. Adjusted profits would have been 63 cents. Analysts surveyed by FactSet predicted adjusted earnings of 60 cents a share on revenue of $12.57 billion.

Gossipers are saying that in a conversation (a private one, of course) Queen Elizabeth the 2nd has asked for three reasons why Great Britain should continue to be a member of the European Union. Because she didn't get them, more than half of the people she rules over has voted in favor of the UK exiting the EU, thus putting themselves at odds, with the other half, which voted to stay!! The queen's skepticism, otherwise well tempered and apparently benign, has generated a vote that has already caused her to lose her people, is about to cause the loss of her Kingdom, and in the end, unavoidably, the Crown! Perhaps, for a sovereign that has already ruled for more than 60 years, these losses are not so great! To us, however, who have difficulty understanding how Shakespeare, Keynes and Churchill could be expelled from Europe, based on the vote of the British, even through a referendum, this loss is hard to gauge and impossible to accept. Even though it may seem tardy, here in Bucharest, we can now provide the British sovereign the reasons she is looking for. How did we come up with them? Easy!

The US Federal Reserve’s retreat from four rate rises this year has had a catalytic effect, reviving the fortunes of emerging markets and once again lifting the Sword of Damocles hanging over the heads of those who have borrowed $11 trillion in dollars outside US jurisdiction.

The Fed is in effect acting as the central bank for the whole world, giving a shot in the arm to an international financial system that is has never been so tightly-linked to the dollar or to US borrowing costs – at least since the end of the Gold Standard.  The Japanese are launching a giant fiscal package – in theory 5.7pc of GDP – while France, Italy, and other eurozone states have taken advantage of the Brexit scare to end austerity more quickly than planned and to prime pump their economies. The net effect is double-barrelled monetary and fiscal stimulus across the world probably overwhelms any of the inchoate and mostly political worries stemming from Brexit – at least in the short-term. It is hard to see what can now justify Morgan Stanley’s decision to raise its risk probability of global recession over the next year to 40pc after the referendum.

GfK’s latest confidence barometer showed households were more pessimistic about their personal finances and the general economic outlook compared with June, with all five measures of its survey falling sharply this month.  Its headline reading fell to -12 in July, from -1 in June. This represents the biggest monthly drop since March 1990 and is steeper than the decline to -9 recorded by an initial estimate in the first week of July.  Joe Staton, head of market dynamics at GfK, said: “We’ve seen a very significant drop in confidence, as is clear from the fall in each of our key measures.” Mr Staton said the index was still at a “relatively elevated level by historic standards”, and the survey suggested Britons were not yet preparing to stash away more cash into their savings accounts in anticipation of a downturn.  “The future trajectory depends on whether we enter a new period of damaging economic uncertainty or restore confidence by embracing a positive stance on negotiating a new deal for the UK,” said Mr Staton.  GfK’s survey of 2,000 people was conducted in the first two weeks of July, with the poll ending just before Theresa May became prime minister on July 13.

UK = A report from the Home Affairs Committee said: "Past experience has shown that previous attempts to tighten immigration rules have led to a spike in immigration prior to the rules coming into force.  "Much will depend on the negotiations between the UK and the EU and the details of any deal to retain or constrain the free in the European Union."  It suggested three “cut off” dates for when EU citizens can apply for permanent UK residence: the June 23 referendum, the date Article 50 is triggered to begin Brexit talks or the day Britain actually leaves the bloc.  Mr Vaz said: "There is a clear lack of certainty in the Government's approach to the position of EU migrants resident in the UK and British citizens living in the EU...One in three lorries arriving in Britain do not have the security measures needed to keep out stowaways, border officials have also found as it emerged almost half of all people smuggling fines are never paid. Around 750,000 vehicles a year come to the UK without the necessary locks on doors and other measures needed to make sure illegal migrants cannot ride across the border undetected, according to the Border Force. Millions of pounds of penalties for people smuggling have also gone unpaid in recent years after thousands of foreign drivers were caught but failed to pay up.

The new British prime minister, Theresa May, took office on Wednesday (13 July) amid indications she might not be an easy partner for the EU in talks to organise the UK's exit from the bloc.

In phone talks with German chancellor Angela Merkel, French president Francois Hollande and Irish prime minister Enda Kenny, she said the UK would "need some time to prepare" for Brexit negotiations. She added she hoped the talks "could be conducted in a constructive and positive spirit", according to her office. But EU leaders have started to put pressure on her to trigger Article 50, the procedure to exit the EU. Hollande "repeated his desire that negotiations for Britain's exit from the European Union should be launched as quickly as possible", a statement from his office said.  In his congratulation letter to May, European Commission Jean-Claude Juncker said that the UK and the EU had to "address soon" the "new situation" created by the Brexit vote on 23 June.

He added he looked forward to learning about May's "intentions in this regard."

On Sunday, Merkel had told Germany's ZDF channel that "the decision has been taken … and the next step is to invoke Article 50." In an interview with the Polish weekly Politiyka, European Council president Donald Tusk said on Wednesday that "no-one should be seething with desire to punish, humiliate [the UK] for what they have done to us", but he added that "we cannot let them profit from Brexit, as that would be lethal for the EU"  In her first statement as prime minister, Theresa May focused on domestic issues and did not develop her views on Brexit. "We are living through an important moment in our country’s history. Following the referendum, we face a time of great national change," she said.

As far as Brussels is concerned, Britain has left.  At home on Friday morning, Britons were dumbstruck, agog at the result, or chuffed at having taught Brussels a lesson.  We now see street protests to overturn the result, internet petitions, suggestions that the UK or Scottish Parliament could revoke it or somehow make it go away. Westminster is occupied by Labour coups and Tory successions. Few seem to believe we are going.   In Brussels, they have been ready to say goodbye for a long time. Britain had been half-way out the door for forty years. David Cameron had announced this referendum in January 2013. He had won an election on the back of it, and many expected him to lose it. He, and they, repeated many times that it was final and binding. Patience is exhausted.  On Friday there was grave sadness, but no panic. The timetable for the talks was announced days before the vote. Martin Schulz, the president of the Parliament, spoke at dawn; Donald Tusk, the president of the Council, delivered a statement at 07.40 GMT. The founding members' foreign ministers met on Saturday; sherpas for the 27 remaining states will meet today to sketch out the months ahead.  Leaders have demanded Article 50 is activated immediately, to create certainty. Realistically, Mr Cameron has until Christmas.

Here is a longer extract from Nigel Farage's controversial 'victory' speech:  "If the predications now are right this will be a victory for real people, a victory for ordinary people, a victory for decent people. We have fought against the multinationals, against the big merchant banks, against big politics, against lies against lies, corruption and deceit and today honesty and decency and belief in nation I think now is going to win.  We will have done it without having to fight, without a single bullet having been fired.  I hope this victory brings down this failed projects and brings us to a Europe of sovereign nation states trading together.  Let June the 23rd go down in our history as our independence day."

Germany’s finance minister, Wolfgang Schäuble, has slammed the door on Britain retaining access to the single market if it votes to the leave the European Union.

In an interview in a Brexit-themed issue of German weekly Der Spiegel, the influential veteran politician ruled out the possibility of the UK following a Swiss or Norwegian model that would allow it to enjoy the benefits of the single market without being an EU member.

“That won’t work,” Schäuble told Der Spiegel. “It would require the country to abide by the rules of a club from which it currently wants to withdraw. If the majority in Britain opts for Brexit, that would be a decision against the single market. In is in. Out is out. One has to respect the sovereignty of the British people.”...Supporters of the British leave campaign argue that it is in Germany’s economic interest to maintain barrier-free trade relations with the United Kingdom. Britain is the third-largest export market for German car manufacturers and the destination of around 7% of total German exports. In a debate on the BBC, Nigel Farage, the Ukip leader, went even further than the official leave campaign and suggested getting rid of tariffs on goods traded with all countries.

The ASI survey of more than 1,750 adults, carried out by YouGov on June 8, showed that 54pc of Britons would  support Britain pursuing such a deal for five to 10 years immediately following Brexit were the UK to leave. Just 25pc said that they would oppose such an arrangement. Norway, as one member of the four-strong European Free Trade Association (EFTA), is also a part of the European Economic Area (EEA), commonly referred to as the European single market. Sam Bowman, executive director of the ASI, said that a deal that kept the UK in the EEA would “take the risk out of leaving the EU, providing the time it would take to come up with a unique British solution” for trade with the economic bloc.  Experts at the Treasury, the National Institute of Economic and Social Research (Niesr), and the London School of Economics have all found that remaining a part of the EEA would pose the least severe economic risk to  the UK after a decision to split from the EU.  The potential hit to gross domestic product (GDP) from such a move compares favourably with other post-EU options, including a bespoke deal along the lines of that enjoyed by Switzerland, or deciding not to forge a trade agreement at all, and instead relying on the minimum tariff rates secured by the UK’s membership of the World Trade Organization. Other polls show that a large proportion of support for withdrawal is motivated by opposition to EU migration. As such, political experts have suggested that joining up to EFTA, which requires members to allow EU citizens to come and live and work in the UK, could be politically unpalatable.

Sharapova announced in March she had tested positive for meldonium, insisting she had been prescribed the drug since 2006 for "several health issues", including irregular heart test results and a family history of diabetes.  The 29-year-old also claimed she was unaware meldonium, which boosts blood-flow and can improve endurance, had been added to the World Anti-Doping Agency's banned list from January 1 th Sharapova described the two-year suspension as "unfairly harsh" and says she will lodge an appeal to the Court of Arbitration for Sport.  "While the tribunal concluded correctly that I did not intentionally violate the anti-doping rules, I cannot accept an unfairly harsh two-year suspension," Sharapova wrote on Facebook.  "The tribunal, whose members were selected by the ITF, agreed that I did not do anything intentionally wrong, yet they seek to keep me from playing tennis for two years. "I will immediately appeal the suspension portion of this ruling to CAS, the Court of Arbitration for Sport."

Meldonium was on Wada's watch list last year and in September the agency announced it would be banned from the start of 2016, citing "evidence of its use by athletes with the intention of enhancing performance".  Sharapova's results at the Australian Open, where she lost to Serena Williams in the quarter-finals, as well as her prize money and ranking points earned at the event have also been disqualified.  The Independent Tribunal's report concluded: "The contravention of the anti-doping rules was not intentional as Ms Sharapova did not appreciate that Mildronate contained a substance prohibited from 1 January 2016.  "However she does bear sole responsibility for the contravention, and very significant fault, in failing to take any steps to check whether the continued use of this medicine was permissible. "If she had not concealed her use of Mildronate from the anti-doping authorities, members of her own support team and the doctors whom she consulted, but had sought advice, then the contravention would have been avoided. She is the sole author of her own misfortune."

China must act to sort out its private debt which anyone who has spent any significant time there knows is out of control and is a huge threat. This isn't something that could just cause some issues or even a recession, this can implode the entire nation.  Nobody knows just how bad it is, but some anecdotal evidence is shocking. I lived and worked there in the mid 2000's. None of the people I worked with had ever had access before to debt / credit. It just didn't exist. Then, all of a sudden, they had lots of it available. But no understanding of how to manage it. As a result, most of the people I knew had credit card debts with black banks many times their annual salary and when payments were due, would just get another card to make the payments with. They were not at all worried by this. Many now had 20+ credit cards.  It is the same with housing. Have a look at the average costs for buying an apartment in Beijing and you see, that by any other world standard, they should be totally out of reach to all but the very rich. But, there not. People instead are taking mortgages which they have zero hope of paying back. Now, slot in a slowing economy and people losing jobs. Not a good mix...Interesting points. However, from my experience in Beijing most people save obsessively, and put down hefty deposits on apartments, something like 30%. I believe you can't get anywhere near a 90% mortgage in China.  My old landlord (not rich) and his wife used to save scrupulously as private tour guides, they bought their two vehicles (needed for work) cash, and paid down a big deposit on an apartment on the outskirts of the city (cheaper) somewhere in the region of about £1-200,000. Not convenient as so far out, in the city centre it would be much more expensive. I think it tends to be the young and trendy with the credit cards, and their parents might help bail them out.

The core assumption of the anti-Brexit economists is that leaving would erect damaging barriers to trade; the pro-Brexit side must take on and demolish these arguments. The good news is that it’s quite easy to do so. The Leave campaign’s long-term aim is to break away completely from the EU. But there is no doubt that, were we to vote Leave on June 23, the UK would seek to adopt, as an interim solution, a Norwegian-style relationship with the EU which ensures that we remain in the single market, giving us plenty of time to work out new arrangements with the rest of the world. 

That is both the only realistic way we would quit the EU – the only model, that, plausibly, MPs would support as a cross-party compromise deal – and the best possible way for us to do it. The Norwegians would welcome us with open arms, as their own influence would be enhanced, and other EU nations would seek to join us. Such a deal would eliminate most of the costs of leaving, while delivering a hefty dose of benefits as a down payment. As part of the European Free Trade Association, we would remain in the single market, complete with its Four Freedoms, while withdrawing from agricultural and fisheries policies, justice and home affairs and the customs union. The City wouldn’t lose access and virtually all of the anti-Brexit scare stories would be neutralised, which is presumably why that option was mysteriously absent from the Treasury’s ludicrous analysis of the short-term impact of Brexit. We would save money: Norway’s net contribution per person is lower than Britain’s. We would have to follow fewer rules: Norway has adopted 1,369 out of 1,965 EU directives, and just 1,349 out of 7,720 EU regulations. So Norway has been forced to swallow just 28 per cent of the total “acquis communautaire”, against all of it for the UK. 

 Billionaire George Soros has cut his investments by almost 40% in shares of US-listed companies, in the first quarter of 2016, and has instead bought a USD 264 million stake in the world's biggest gold maker, "Barrick Gold" Corp., according to Bloomberg. The agency notes that the worth of the holdings of Soros' fund, Soros Fund Management, has decreased 37% between January and March 2016, to 3.5 billion dollars.   Soros has acquired 1.7% of "Barrick", a company headquartered in Toronto, whose shares have more than doubled this year, amid cost cutting and debt reduction measures. Just since March 31st, "Barrick" shares have risen 39%.  Soros also revealed he holds "call" options on 1.05 million shares in the SPDR Gold Trust, an ETF which tracks the price of gold. The American billionaire, who has built a fortune of 24 billion dollars through market investments, is turning to gold as the global economy is faced with risks. Soros recently warned about the risks China's economy could cause, saying that he was reminded of the crisis which affected the US in 2007-2008, generating a global recession.  In this context, investing in gold is seeing increased demand. June delivery gold futures prices rose 0.4% yesterday, at 10:17, on Comex New York, to 1,279.80 dollars an ounce. In early May, the price of gold passed 1,300 dollars an ounce, amid speculations that the US central bank would slow down the tightening of monetary measures, which have caused the dollar to weaken. According to "BNP Paribas" SA analysts, the price of gold will rise to 1,400 dollars/ounce this year, and "ABN Amro Group" NV predicts a price of 1,370 dollars/ounce.  Soros has sold a stakein"Level 3 Communications" Inc., which was worth 173 million dollars on December 31st, 2015, and a stake in "Dow Chemical" Co., which was worth 161 million dollars. The investor has also sold his stakes in "Endo International" Plc and "Delta Air Lines" Inc.
The price of spot gold has risen 16% in the first three months of 2016, the biggest quarterly rise since 1986, according to Bloomberg. The Bloomberg index which tracks the evolution of 14 major gold producers has doubled this year, after a decline of 76% in the 2011-2015 period.