Off the Wires

Former SEC Director Rips the Red Tape Off His Mouth

March 10th, 2015  |  Source: Bloomberg

For more than a decade, John Ramsay had red tape over his mouth. Now that he’s left government bureaucracy, he says he’s been “uncorked.”

Ramsay, 55, formerly the U.S. Securities and Exchange Commission’s director of trading and markets, joined the stock-trading venue founded by Brad Katsuyama, IEX Group Inc., in June and soon began slamming the industry he’d overseen for the SEC. He called out the “convoluted” and “illogical” pricing rules of major stock exchanges and compared the $25 trillion U.S. stock market’s structure to the Death Star of “Star Wars.”

Ramsay’s denunciations come during a period of unprecedented scrutiny of equities trading. A chorus of criticism, sparked by the claim in Michael Lewis’s book about Katsuyama and IEX, “Flash Boys,” that the market is rigged against retail investors, has questioned the tactics involved in using algorithms to buy and sell shares in fractions of a second. Ramsay’s opinions, blunt and impassioned, have extra heft because of his experience as a regulator.

“I’ve been able to find my voice on these issues in a way I couldn’t have done when I was in the government, because you’re always limited by internal politics and not wanting to get too far out in front of the agency,” he said. “I feel like I’ve been a little bit uncorked.”

The Power of Water – Robert F. Kennedy, Jr

March 9th, 2015  |  Source:

Water has emerged as the target of choice for the robber barons of globalization. As freshwater supplies dwindle, global investors are scrambling to own what’s left. The World Bank already values water privatization at $1 trillion and predicts that many of the wars of the 21st century will be fought over water.

And the wars have already begun as citizens in South and Central America have fought back against water moguls whom they regard as bullies trampling democracy and basic human rights. When Bechtel, in 2000, privatized the Bolivian city of Cochabamba’s water and then raised rates high enough to threaten the lives of poor residents, the city erupted in deadly violence.

The “Bolivian Water War” ejected Bechtel and toppled the city government. Control of Syrian waters by corporate agriculture during a prolonged drought helped trigger the current rebellion there. Today, Chile is effectively a neo-colonial vassal after the Pinochet dictatorship sold her rivers (along with her forests, minerals, and even roads, railroads and airports) to foreign syndicates. Chile’s leading human-rights lawyer recently told me, “Today, Chile has only the trappings of democracy, since we have no sovereignty over the resources of our nation.”

Could this happen in the United States? It already is. Chinese and European sovereign wealth funds and global private-equity firms are taking control of America’s waterways by purchasing the assets of industrial companies which once held hydropower licenses granted by the Federal Energy Regulatory Commission (FERC), which, ironically, was established to keep the nation’s waterways in public ownership and to assure that the waters are used for public not private benefit.

These machinations are reminiscent of the Gilded Age, when aluminum and steel companies dammed America’s rivers to power their smelters, routinely corrupting state legislatures and federal officials to win exclusive licenses to privatize public waterways. Teddy Roosevelt warned in 1915, “Keep your eye on the aluminum company that is trying to get control of your water powers. I have no objection to big business making money but I do not want it to make it at the expense of the public interest.”

Like most Americans of his era, Teddy Roosevelt regarded the control of our nation’s waterways as a central concern of democratic governance. Commonwealth assets like rivers and streams, he believed, should not be held by private interests for private gain.

In 1920, Congress heeded his warning and passed the Federal Water Power Act. Renamed the Federal Powers Act in 1935, this statute created the Federal Energy Regulatory Commission (FERC) to protect the public interest. The law recognized that a permit is a giving away of public treasure, and provided that rivers could only be dammed and water diverted to private users when it served a compelling public benefit.

In return for permits to build privately owned dams and divert waterways from traditional recreational, agricultural and drinking-water purposes, FERC required proof that these plants would bring jobs and prosperity to watershed communities. But, since 1935, FERC has never refused to renew or transfer any hydropower license. And, as the old permits expire, the enfeebled agency is allowing industrial companies to close their factories and effectively sell our rivers to foreign investors without any meaningful demonstration of a public benefit.

Here is an example of how it works: In the 1950s, FERC issued the Aluminum Company of America (Alcoa) a 50-year license to operate five hydroelectric dams on the Little Tennessee and Cheoah Rivers. The project’s primary purpose was to support Alcoa’s aluminum smelter and rolling-mill operations in Alcoa, Tennessee, which were the region’s principal sources of employment.

To win the FERC license, Alcoa had to prove that its hydroelectric facilities would drive economic activity and bring prosperity. The license gave the company ample time to recover its capital investment. The license also limited free access to river water for citizens, towns and other users at a particular level, and required them to pay Alcoa to divert river water above that level for drinking, agriculture or industrial needs. FERC permittees effectively owned the river.

Alcoa applied to renew its license in February 2003, and on January 25, 2005, FERC awarded the company a new license without requiring any written guarantee that the company would maintain its manufacturing jobs, which were worth $400 million to the local economy. Subsequently, Alcoa shuttered the bulk of its facility and laid off 450 workers.

In 2010 Alcoa refurbished one of the dams with $12 million in federal subsidies. Then, in March 2012, the company suddenly shuttered the remainder of its Tennessee smelter plant and sold its newly minted license and its hydroelectric facilities for $600 million to Brookfield Asset Management. Brookfield now owns 25 percent of the Alcoa facilities. The remaining 75 percent is owned by global institutions and foreign governments, including China, whose investments Brookfield manages.

The new owners have no obligation to benefit the region’s economic interests. Private control of public water resources will inhibit economic growth, and the project will no longer drive industrial activity in Tennessee and North Carolina. As water becomes more scarce and electric rates rise, the new owner will charge local governments, farmers and water consumers higher rates.

With no control over the bulk of river flow, localities will lose the flexibility to deal with extended water-shortages. The dams will simply enrich Brookfield and its global investors by producing wholesale power for sale to the highest bidder. The profits will leave the United States.

With $200 billion in assets, and more than 10 percent of FERC licenses in its portfolio, the company has acquired over 130 hydropower generating-stations and 30 river systems in the United States – more than any other FERC license holder. And Brookfield is only one of a spate of foreign-owned private equity firms racing to privatize America’s waterways for profit.

Alcoa appears to be re-deploying the same strategy it used on the Little Tennessee and Cheoah Rivers on North Carolina’s Yadkin River. In 2007, Alcoa closed its Yadkin smelter, fired its workers, and began selling electricity from the Yadkin’s four dams outside North Carolina, generating $30 million for the company last year alone. Despite fierce local opposition, Alcoa is applying to renew its Yadkin power license.

FERC will almost certainly give Alcoa kneejerk support to relicense its dams and then sell the river to the highest bidder. Since the passage of the 1935 Federal Power Act, FERC has never refused to renew or transfer any hydropower license.

FERC ’s practice, in contrast, has been to grant exclusive use of our water resources to private companies and foreign governments and corporations to generate hydroelectricity and seize de facto control of public waters for 30 to 50 years, without regard for the mandates for public benefit the Federal Power Act stipulates.

Robert F. Kennedy, Jr., Founder and President of Waterkeeper Alliance. The Waterkeeper Alliance ( ) and its members fight every day around the globe for their local waterways and landscapes and embody the 1935 Federal Power Act’s original intention to “promote the development of safe, reliable and efficient energy infrastructure that serves the public interest.”

Apple Will Join the Dow Jones Industrial Average

March 6th, 2015  |  Source: Bloomberg

Apple Inc. was added to the Dow Jones Industrial Average, ending a banishment that kept the world’s largest company out for years before a stock split made its shares palatable to the price-weighted measure.

The changes will push the number of technology-related companies in the 30-member gauge to six and boost their influence even more as Apple joins Microsoft Corp., Intel Corp., International Business Machines Corp., Cisco Systems Inc. and Visa Inc. AT&T is being kicked out after falling 4.5 percent in 2014. The changes will take effect after the close of trading on March 18.

“The Dow is supposed to be the dominant companies in each different sector of the economy and I don’t think anybody can argue that Apple isn’t by far the dominator in the phone sector,” Michael Chadwick, who manages $150 million as chief executive officer of Chadwick Financial Advisors in Unionville, Connecticut, said in a phone interview. “The digital age is taking over. It’s going to be a function of those who can adapt and change.”

The Dow average’s weighting methodology, which links a stock’s influence to its share price, had long barred Apple from joining the gauge. The timing of Apple’s addition hinged on not just its own 7-for-1 split last June but also Visa’s 4-1 split scheduled for March 19 of this year, according to David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.

‘Clear Choice’

Stocks in the index are selected by a committee of Wall Street Journal and S&P Dow Jones Indices representatives based not on quantitative rules but on the companies’ reputation, relevance to investors and growth record.

“As the largest corporation in the world and a leader in technology, Apple is the clear choice for the Dow Jones Industrial Average,” Blitzer said in a statement.

Apple’s split brought the stock price closer to the median price in the Dow and the Visa split will reduce the technology weight and make room for Apple, Blitzer said.

“The DJIA is price weighted so extremely high stock prices tend to distort the index while very low stock prices have little impact,” Blitzer said.

The original American Telephone & Telegraph entered the Dow in October 1916 and was taken out in April 2004. The company removed today was created in the merger of SBC Communications and AT&T in November 2005. The removal announced today will leave Verizon Communications Inc. as the only telephone stock in the Dow.

‘Some Surprise’

“There’ll be some surprise that AT&T is the name that’s being removed and Verizon is being kept,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a telephone interview. “From the historical standpoint, AT&T represents an American institution. To see that leaving the Dow is somewhat of a psychological blow. In terms of impact on the stock itself I don’t think it’s going to be overly significant.”

Charles H. Dow, the co-founder of Wall Street Journal publisher Dow Jones & Co., devised the Dow average in 1896 to provide a clear view of the stock market and “barometer of the times,” according to the S&P Dow Jones Indices website. It originally included American Tobacco, General Electric Co. and 10 other companies before expanding to 20 companies in 1916 and 30 in 1928.

Google Missing

Apple’s Dow entrance makes it only the second among the three largest U.S. companies by market capitalization to be included in the gauge. Class A shares of Google Inc., the third largest U.S. company, closed at $581.44 yesterday, effectively making them too expensive for inclusion in the Dow average even after what amounted to a 2-for-1 stock in April of 2014.

The last Dow reshuffling took place in September 2013 when Goldman Sachs Group Inc., Visa Inc. and Nike Inc. replaced Bank of America Corp., Hewlett-Packard Co. and Alcoa Inc. The changes boosted the influence of financial-related companies to five.

At $126.41, Apple’s shares will get the sixth-biggest weighting in the gauge, with a 4.3 percent share, according to data compiled by Bloomberg. AT&T was the fourth-smallest stock, priced at $34 with a weighting of 1.2 percent. Goldman Sachs will have the highest weighting following Visa’s split and Apple’s addition, based on current share prices.

There is more than $7 trillion benchmarked to the S&P 500, with index assets comprising approximately $1.9 trillion of the total, according to S&P Dow Jones’ web site. Only about $32.8 billion was directly indexed to the Dow at the end of 2013, according to Dave Guardino at S&P.

“It’s not going to change anything,” Andy Hargreaves, an analyst covering Apple at Pacific Crest Securities LLC in Portland, Oregon, said in a phone interview. “I couldn’t tell you the last time I thought about the Dow Jones Industrial Average and what it means for its constituent stocks. It has a kind of social significance, meaning the companies in it are old, and that’s the whole idea.”

Ukraine Raises Key Rate to World’s Highest to Stem Currency Rout

March 3rd, 2015  |  Source: Bloomberg

Ukraine’s central bank raised its benchmark interest rate to the world’s highest, the fifth emergency move since the beginning of last week to arrest a plunge in the hryvnia as the nation moves closer to obtaining a bailout.

The National Bank of Ukraine raised its refinancing rate to 30 percent from 19.5 percent, effective Wednesday, to “stabilize the situation on the money and lending markets,” Governor Valeriya Gontareva told reporters in Kiev. That’s the highest benchmark among all countries tracked by Bloomberg.

Policy makers are staggering from the turmoil wrecking the economy as the hryvnia, the world’s worst performer in the past year, spurs panic buying among shoppers and destabilizes banks. Before opting to push the key rate to the highest since 2000, the central bank in Kiev used tighter capital controls and a one-day freeze on currency trading to steady the hryvnia.

“The picture is being blurred: every day a different measure is taken,’” Simon Quijano-Evans, head of emerging-market research at Commerzbank AG in London, said by e-mail. “What the local population in particular needs is a clear policy picture from the central bank.”

The hryvnia, which has lost 60 percent against the dollar in the past year, strengthened or weakened more than 15 percent on a single day on five occasions in 2015, data compiled by Bloomberg show. The Ukrainian currency jumped 8.5 percent to 24.25 against the dollar as of 6:38 p.m. in Kiev.

This bill would halt Congress’s pay if Homeland Security shuts down

March 2nd, 2015  |  Source: Washington Post

A potential Department of Homeland Security shutdown would directly affect lawmakers’ pocketbooks under a bill introduced in the House this week.

The Democratic measure, sponsored by Reps. Brad Ashford (Neb.), Gwen Graham (Fla.), Scott Peters (Calif.) and Ami Bera (Calif.), would halt pay for members of Congress if they don’t agree to a new round of funding for the agency by Friday, in which case DHS would partially close.

The legislation is similar to several bills that would have halted lawmakers’ salaries during the government-wide shutdown of 2013. Those measures never made it out of committee that year.

Federal statute only allows lawmakers to change the salaries of future members of Congress, so the new House bill would put their wages in an escrow account until the potential Homeland Security shutdown ends.

“All across the country, folks live by the idea that if you don’t do your job, you shouldn’t get paid,” Ashford said in a joint statement with the bill’s other sponsors. “The same should hold true for members of Congress.”

No Homeland Security employees would be paid in the event of a shutdown, but 85 percent of the department’s roughly 240,000 employees would remain on the job because their roles are vital to national security or funded from sources outside of Congress.

Debt Swap to Finance Marine Conservation in the Seychelles

February 26th, 2015  |  Source: NatureVest

First of its kind impact investment deal between The Nature Conservancy, the Seychelles Government and the Paris Club.

 The Nature Conservancy through its NatureVest division will be supporting a first of its kind debt-swap deal between the Government of Seychelles and its Paris Club creditors in exchange for the Government of Seychelles’ commitment to enhance marine conservation and climate adaptation. The Nature Conservancy will invest $23 million in impact capital while raising an additional $8 million in grant funding for the first time to finance the deal.

The Seychelles, a nation of 115 islands in the Western Indian Ocean, with its low-lying geography, makes its people and economy particularly vulnerable to the threats of climate change.

The debt to be bought back by Seychelles from the Paris Club and South Africa at a discount-to-face-value under the terms of an unprecedented agreement reached on 25 February 2015 in Paris will be converted into new Government of Seychelles debt to be issued to the soon-to-be-created Seychelles Conservation and Climate Adaptation Trust (SeyCCAT). Over a 20 year period, the proceeds of this debt will be used to:

·       Finance marine conservation and climate adaptation in the Seychelles

·       Capitalize an endowment to finance work in the future

·       Repay Impact Investors

The landmark agreement reached between Seychelles and its Paris Club creditors will trigger a US$31million funding package that will benefit critical marine conversation work in Seychelles, and follows three years of close interaction between the TNC, the Government of Seychelles, and its financial advisor, White Oak Advisory.

Seychelles’s debt buyback agreement with the Paris Club and South Africa is notable for a number of reasons, marking not only the first time the Paris Club has supported a debt operation designed to benefit the environment, but also the first time a southern creditor (South Africa) has participated in a buyback operation covering the debts of another southern country. Creditor participation in the agreement is also the highest ever achieved in a buyback deal reached through the Paris Club’s market-based window. 

“This deal demonstrates the tremendous potential for impact investing to protect nature,” said Mark Tercek, President and Chief Executive Officer at The Nature Conservancy. “Through NatureVest, we are excited to bring together the Paris Club creditors and the Seychelles government to unlock a significant source of capital for marine conservation efforts that will help address climate change.”

The Nature Conservancy designed the debt-swap deal to allow the Seychelles to redirect a portion of their current debt payments from external creditors to fund conservation activities including the creation and management of over 400,000 square kilometers of new marine protected areas (the second largest in the Indian Ocean). The deal helps address the marine conservation and climate adaption goals announced as part of the “Blue Economy” theme at Rio +20 meeting held in 2012.

President James Michel of Seychelles thanked all of Seychelles’ partners and creditors who made the agreement possible, and who showed their confidence in the country. He further noted, “Although we are small, we can make a real difference. A difference that brings the best outcomes for Seychelles. And a difference that offers examples in terms of sustainable development, in terms of innovation, and in terms of options for all small island states.”

Through NatureVest, The Nature Conservancy aims to replicate this model to help other small island nations invest in marine conservation efforts that will limit the risks and costs posed by climate change.

Support for the Conservancy’s NatureVest team comes from the Robertson Foundation, the Jeremy & Hannelore Grantham Environmental Trust and JPMorgan Chase & Co.

The Euro Was a Bad Idea From the Start

February 25th, 2015  |  Source: Foreign Policy

Can Europe finally admit it?

After frantic eleventh-hour negotiations and continent-wide hand-wringing, eurozone authorities and Greece’s new left-wing government have reached a deal. If you’re surprised, you shouldn’t be. A deal was in the cards from the beginning for one simple reason: Ultimately, neither the Greek government nor Germany and other euro member states could risk triggering a financial crisis by cutting off Greek banks.

Financial stability in the 19-country currency area has been preserved — at least for now. But patching up the situation has not removed the key question of where to go from here. There is a lot of “austerity fatigue” in Europe right now. That’s understandable, but it shouldn’t be allowed to distort the debate and allow Europe to dodge the much-needed thorough assessment of the entire euro project: Does it still make sense, given its constraints and limits? What should be the way forward? And was it even a good idea to begin with?

Europe’s monetary union has been based on bad economics from the start. As German economist Rudiger Dornbusch wrote in Foreign Affairs in 1996, “If there was ever a bad idea, EMU is it.” The eurozone does not have the features of what economists call an “optimal currency area.” According to the standard definition, an optimal currency area is characterized by perfect labor mobility, perfect wage flexibility, and a risk-sharing system, such as fiscal transfers when a region — or a member country — is affected by an economic or financial shock.

Read on here:

Apple to Spend $1.9 Billion Building Two Europe Data Centers

February 23rd, 2015  |  Source: Bloomberg

Apple Inc. plans to spend 1.7 billion euros ($1.9 billion) building data centers in Ireland and Denmark in its biggest European investment, with the facilities set to run services such as iTunes and maps for users of its devices.

The centers, located in Athenry, Ireland, and Viborg, Denmark, will be powered by renewable energy, Cupertino, California-based Apple said on Monday. The facilities are scheduled to begin operations in 2017 in the two countries known for their use of wind power.

The project lets Apple address European requests for data to be stored closer to local users and authorities, while also allowing it to benefit from a chilly climate that helps save on equipment-cooling costs. Google Inc. opened a data center in Finland in 2011 and in September unveiled plans for one in the Netherlands. Facebook Inc. started one in Sweden in 2013.

Spying threats, in the aftermath of leaks about the U.S. National Security Agency’s data-collection programs, have prompted governments including France and private companies in Europe to adopt stricter data-protection requirements.

Those tighter rules have meant asking providers to host more customer information, such as health records, locally. To tend to this demand, U.S. providers including Inc. have bulked up their data-center presence in Europe.

World’s Largest

The Europe investment marks a push by Apple in a continent where sales rose 66 percent last quarter from the preceding period, outpacing the 55 percent growth in the Americas. Sales in Europe were $17.2 billion, accounting for 23 percent of the total.

The new facilities will have the lowest environmental impact yet for an Apple data center, and the company said it will work with local partners to develop additional renewable-energy projects from wind or other sources.

Earlier this month, Apple made an $848 million commitment to obtain electricity from a solar farm that’s big enough to power its offices in California, along with 52 retail stores and a data center.

The Irish and Danish centers, each measuring 166,000 square meters (1.8 million square feet), will be among the largest in the world, Denmark’s Ministry of Foreign Affairs said in a statement. Apple said the projects are set to create hundreds of local jobs.

“This is an important strategic investment with significant local economic benefits,” Martin Shanahan, head of the Irish foreign investment agency IDA, said in a statement. “Ireland has for several years successfully attracted data center investments from major corporates.”

Record-breaking cold in U.S. Midwest heads to frigid East Coast

February 19th, 2015  |  Source: Reuters

Bone-chilling cold in the U.S. Midwest shattered records in Chicago on Thursday, closing schools and starting its trudge eastward to an already frozen Boston and New York.

Arctic air was expected to keep its grip on the nation's midsection on Friday morning, a day after the minus 8 degrees Fahrenheit (minus 22 Celsius) measured in Chicago broke the low temperature record of minus 7 degrees for the day set in 1936, said National Weather Service meteorologist Bob Oravec.

The wind chill made temperatures in Chicago feel like minus 25, he said.

Chicago public schools, serving 396,000 students in the third largest U.S. school district, canceled classes on Thursday and many commuters there were bundled so heavily that only their eyes could be seen.

But not everyone hates the weather. Teejay Riedl, 54, was filming the steam rising from the Chicago River before work.

"I love it. It's crisp, it's clean, there are no bugs," he said.

Farther north, Sarah Applin, who works for Travel Market Vacations in the Milwaukee area, has seen a surge in business.

"We have been very, very busy. It's cold here so everyone wants to leave," she said.

Bitter cold was headed east, meaning a frosty Friday morning commute was in store for East Coast residents from Boston down to Richmond, Virginia, Oravec said. More records are expected to fall.

With temperatures in Washington, D.C. forecast to reach 3 F (-19 C) overnight, schools and local governments across the region were closed or opening with delays on Thursday.

It has been cold enough in New York this week to bring the roaring Niagara Falls to a halt, as parts of the waterfall trio on the Canadian border froze over, leaving long spears of ice cascading down from the falls' edges and glacier-like mounds rising up from their plunge pools.

Cabin fever appears to have taken hold in Boston, which broke its own record this week for the snowiest February in the city's history. Residents in Boston, which has had more than 8 feet (2.4 meters) of snow this winter, are using the social media hashtag #BostonBlizzardChallenge to share videos of themselves - wearing only swimsuits - diving into snow banks.

Norway’s pension fund to divest from unsustainable assets

February 10th, 2015  |  Source:

Norway’s Government Pension Fund Global, the world’s wealthiest sovereign wealth fund, will divest from a range of sectors including coal mining companies according to an announcement.

The pension fund is worth US$850 billion and has come under growing pressure to use its influence to promote more sustainable and responsible investments.

Environmental groups and some Norwegian politicians have called for the fund to move away from fossil fuels and in 2014 the fund removed 40 companies working in the coal-mining sector from its portfolio.

The fund noted that companies with a high level of greenhouse gas (GHG) emissions could be exposed to risk from regulatory changes with the move towards binding global climate targets leading to falling demand and increased risk to investment.

The fund divested from a total of 49 companies in 2014 based on environmental, social and governance (ESG) factors.

Yngve Slyngstad, CEO of Norges Bank Investment Management, said: “We have gradually increased the scope of risk-based divestments, both geographically and thematically. In total, we have divested from 114 companies in the past three years.”

The fund published its first report looking at its work on responsible investment last week and covers standard setting, active ownership and risk management.

Last year the fund held 2,641 meetings with companies to increase knowledge and understanding of their business and to present expectations and views on ownership

Slyngstad added: “Our aim with this report is to provide a full overview of the many different areas we are working on and so increase transparency on the management of the fund. We recognise that there is still much to be done, and that we will encounter a number of challenges in the years ahead. Our role is to think long-term and protect value for future generations.”

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