Off the Wires

Oops, they did it again — stocks flirt with lofty levels not seen in 15 years

October 12th, 2016  |  Source:

The recent selloff notwithstanding, stocks are pricey.

Indeed, the last time the average S&P 500 stock was this expensive, Britney Spears was the hottest name in pop music and the market was on its doomed path toward the meltdown that came to be known as the bust.

Valuation—a measure of how much stocks are worth using many different metrics including earnings—is near levels seen during the tech-bubble era, according to Savita Subramanian, an equity and quantitative strategist at Bank of America Merrill Lynch.

 “The S&P 500 median P/E [price-to-earnings ratio] is currently at its highest levels since 2001 and suggests that the average stock trades a full multiple point higher than the oft-quoted aggregate P/E. This puts it in the 91st percentile of its own history and just 14% from its tech-bubble peak,” Subramanian said in a report.

Some analysts believe that the median P/E ratio, the number representing the midpoint of the range, is a more reliable measure of valuation than the standard P/E ratio that is most commonly referenced.

On aggregate basis, the forward P/E ratio hit 16.7 times multiple in September, which is 10% above its historical average. By Subramanian’s reckoning, the market is stretched on most metrics, save for two exceptions: normalized P/E and a ratio based on price to free cash flow.

The one key difference, however, between this market and its younger, vulnerable self from 15 years ago is that valuations of the so-called mega caps—the companies with the largest value like Apple Inc.—is nowhere near the 2001 apex.

“The group keeping the S&P 500 aggregate forward P/E 30% below its tech-bubble levels is the mega caps, which are trading well below their valuations at that time,” said the strategist.

The 20 largest stocks in 2001 were trading at a median P/E of 25 times compared with 17 times now. Apple AAPL, +1.18% the largest company by market cap in 2016, is trading at 13 times versus over 25 times for General Electric Co. GE, -0.02% which was the largest company by market cap in 2001, she said.

Ultimately, even with elevated valuations, stocks are more attractive than bonds for now, given that dividend yields are near 60-year high versus the 10-year Treasury yield. The 10-year Treasury note TMUBMUSD10Y, +1.15%  was under pressure Wednesday, with yields climbing to a four-month high.

Coincidentally, Spears has been making a comeback.

G7 sets common cyber-security guidelines for financial sector

October 11th, 2016  |  Source: Reuters

The Group of Seven industrial powers on Tuesday said they had agreed on guidelines for protecting the global financial sector from cyber attacks following a series of cross-border bank thefts by hackers.

Policymakers have grown more worried about financial cybersecurity in the wake of numerous hacks of SWIFT, the global financial messaging system, including an $81 million theft in February from the Bangladeshi central bank's account at the New York Federal Reserve.

"Cyber risks are growing more dangerous and diverse, threatening to disrupt our interconnected global financial systems," according to the guidelines agreed by G7 finance ministers and central bankers.

The guidelines, which officials described as non-binding principles, were in a three-page document posted on the Web pages of G7 government agencies. The G7 comprises Britain, Canada, France, Germany, Italy, Japan and the United States.

U.S. Deputy Treasury Secretary Sarah Bloom Raskin told reporters in a telephone briefing that G7 officials had surveyed their existing cybersecurity practices and identified potential shortfalls.

A Treasury official later described the shortfalls as a failure to look at cybersecurity from a risk-management perspective.

Cyber thieves have targeted large financial institutions around the world, including America's largest bank JPMorgan, as well as smaller players like Ecuador's Banco del Austro and Vietnam's Tien Phong Bank. The U.S. Federal Reserve's internal security staff detected more than 50 cyber breaches between 2011 and 2015, with several incidents described as "espionage."

The guidelines released on Tuesday instruct governments to make sure financial regulators are policing the cyber-security readiness of companies and themselves, and that public and private institutions are continually updating their defenses.

The goal of the guidelines was also to get firms and regulators across the world to approach risks the same way, according to the Treasuryofficial.

Deutsche Bank races against time to reach U.S. settlement

October 3rd, 2016  |  Source: Reuters

Deutsche Bank (DBKGn.DE) is throwing its energies into reaching a settlement before next month's presidential election with U.S. authorities demanding a fine of up to $14 billion for mis-selling mortgage-backed securities.

The threat of such a large fine has pushed Deutsche shares to record lows, and a cut-price settlement is urgently needed to reverse the trend and help to restore confidence in Germany's largest lender.

Its shares won't trade in Germany on Monday because of a public holiday, but they will resume trading on the U.S. market later on Monday.

A media report late on Friday that Deutsche and the U.S. Department of Justice were close to agreeing on a settlement of $5.4 billion lifted the stock 6 percent higher, but that report has not been confirmed.

The Wall Street Journal reported on Sunday that the bank's talks with the DOJ were continuing. Details are in flux, with no deal yet presented to senior decision makers for approval on either side, the paper said, citing people familiar with the matter.

"Clearly, so long as a fine of this order of magnitude ($14 billion) is an even remote possibility, markets worry," UniCredit Chief Economist Erik F. Nielsen wrote in a note on Sunday.

Ratings agency Moody's said it would be positive for bondholders if the lender could settle for around $3.1 billion, while a fine as high as $5.7 billion would dent 2016 profitability but not significantly impair the bank's capital position.


Deutsche is much smaller than Wall Street rivals such as JPMorgan (JPM.N) and Citigroup (C.N).

But it has significant trading relationships with all of the world's largest finance houses and the International Monetary Fund this year identified it as a bigger potential risk to the wider financial system than any other global bank.

Deutsche Chief Executive John Cryan will be in Washington this week for the annual meeting of the IMF, and the Frankfurter Allgemeine Zeitung reported that other executives would join him to try to negotiate a settlement with the U.S. authorities.

Like fellow large European banks also under investigation for mis-selling mortgage-backed securities -- Credit Suisse (CSGN.S) and Barclays (BARC.L) -- Deutsche will want to get a deal done with the current administration still in power.

A new administration to be installed after the Nov. 8 election will bring unknown risks and likely delays.

Domestically, Deutsche Bank is fighting a rearguard action, seeking to shore up confidence among the public, politicians and regulators who say the bank brought many of its problems upon itself by overreaching itself and then reacting too slowly to the 2008 financial crisis.

It suffered a further blow to its image this weekend with a third IT outage in the space of a few months on Saturday, denying some customers access to their money for a short time.


German business leaders from companies including BASF (BASFn.DE), Daimler (DAIGn.DE), E.ON (EONGn.DE), RWE (RWEG.DE) and Siemens (SIEGn.DE) lined up to defend the bank in a front-page article in the Frankfurter Allgemeine Sonntagszeitung.

"German industry needs a Deutsche Bank to accompany us out into the world," BASF Chairman Juergen Hambrecht said.

Aleppo, the scared and hungry

September 26th, 2016  |  Source: AFP

In five years, it experienced misfortune after misfortune prison regime and that of the EI, the death of his parents in a raid, the seat of his native Aleppo, hunger and hell bombing.

Despite this terrible journey, our correspondent Karam Al-Masri, photographer and videographer in the rebel part of Syria's second city tells us day to day, with a courage that does not waver, the history of this metropolis consumed by war merciless.

Here is his testimony, follow the story of his collaboration with AFP told by the journalist Rana Moussaoui.
Slideshow here:

As Obama's term wanes, so does focus on Israeli-Palestinian issue

September 21st, 2016  |  Source: Reuters

In his first major United Nations speech eight years ago, President Barack Obama said he would not give up on Israeli-Palestinian peace.

In likely his last U.N. speech, on Tuesday, he spoke little about the conflict beyond voicing the unsurprising sentiment that matters would improve if Israel let go of Palestinian land and if the Palestinians rejected incitement and embraced Israel's legitimacy.

While U.S. officials have said Obama could lay out the rough outlines of a deal - "parameters" in diplomatic parlance - after the Nov. 8 presidential election and before he departs on Jan. 20, many Middle East analysts doubt this will have much effect.

The result, they say, is likely to be a legacy of failure on an issue Obama made a priority when he came into office in 2009 and declared in his first U.N. General Assembly address: "I will not waver in my pursuit of peace."

Obama has little to show for his two efforts - one spearheaded by George Mitchell in his first term and another by U.S. Secretary of State John Kerry in his second.

"He has not made an impact on this issue, at all, and he wants to," said Elliott Abrams, a Middle East adviser to former President George W. Bush, a Republican. "So I think the question that he is asking is really a legacy question, rather than asking a pragmatic question of what will really help the parties."

Obama will raise concerns about Israeli settlements when he meets Israeli Prime Minister Benjamin Netanyahu in New York on Wednesday, the White House deputy national security adviser Ben Rhodes said.

Rhodes said Obama had no plans to pursue a new Israeli-Palestinian peace initiative before leaving office, though he could take unspecified steps.


A U.S. official who tracks the issue said he does not expect the White House to decide whether Obama might make a speech on the issue or seek to pass a new U.N. Security Council resolution, until after Americans elect his successor.

"They are waiting to see what they can get the boss to do after the election pressure is over," said the official, who spoke on condition of anonymity. "They have been toying with the idea for months."

The U.S. presidential election pits Democrat Hillary Clinton, Obama's former secretary of state and his choice for the top job, against Republican businessman Donald Trump. Several analysts believe Obama will consult Clinton if she wins.

The acid political climate between Israelis and Palestinians makes progress unlikely. Netanyahu and Palestinian President Mahmoud Abbas have no plans to meet this week at the annual U.N. gathering of world leaders.

"We don’t expect much from Abu Mazen," Israeli Ambassador to the United Nations Danny Danon told reporters on Monday, referring to the Palestinian leader by his nickname.

Palestinians say Israeli settlement expansion in occupied territory is dimming any prospect for the viable state they seek, with a capital in Arab East Jerusalem.

Israel has demanded tighter security measures from the Palestinians and a crackdown on militants responsible for a string of stabbings and shootings against Israelis in recent months. It also says Jerusalem is Israel’s indivisible capital.

With U.S. efforts to broker a deal on a Palestinian state on Israel-occupied land in deep freeze for two years, France has tried to revive interest in the issue, with one senior French diplomat arguing that letting matters drift even during a U.S. election year is like "waiting for a powder keg to explode."

Verizon Facing FCC Questions on Data Metering After $9,100 Phone Bill

September 19th, 2016  |  Source: Fortune

Mysterious data charges hit customers, including some without smartphones—and some who are dead.

The Federal Communications Commission confirmed this week that it is examining complaints about data billing from Verizon Wireless customers. The move comes after a series of stories in the Cleveland Plain Dealer detailing unexplained— and in some cases, inexplicable—upticks in customers’ mobile data usage.

The Plain Dealer’s stories were mostly authored by Teresa Dixon Murray, whose reporting on similar billing issues led to a huge fine against Verizon in 2010. Murray first wrote about mysterious increases in her own family’s data usage, caused in part by data apparently being used while the family slept.

ne Verizon customer told Murray that she was being charged for wireless data—despite using a flip phone with no wireless data connection, on an account that blocks data. Another customer, Joyce Shinn, had been using her recently-deceased husband’s phone to answer phone calls to settle his affairs. About a year after his death, the phone suddenly started showing data usage, triggering overages on Shinn’s account.

Many more accounts came in from customers detailing incremental rises in data usage over the course of several months, despite no changes in their usage habits.

The capper came from a Tampa mother, Valarie Gerbus, whose data usage suddenly surged from less than 4GB one month to 569GB the next, resulting in$8,535 in data charges. Verizon charged her an extra $600 when she decided to cancel her plan.

Verizon did ultimately agree to waive much of that bill, and in a statement said they had resolved Gerbus’ situation “to her satisfaction.” But the company provided no details about the nature of the initial problem.

U.S. sees stronger median household income, less poverty

September 13th, 2016  |  Source: Reuters

The median U.S. household income rose last year, its first significant annual increase since 2007, and helped push down the number of people living in poverty to 53.1 million, federal government data released on Tuesday showed.

About 29 million people did not have health insurance in 2015, down from 33 million in the previous year, the Census Bureau said in its annual Income, Poverty and Health Insurance Coverage and Supplemental Poverty Measure report.

The poverty rate fell to 13.5 percent from 14.8 percent in 2014, the report said.

Median income rose 5.2 percent to $56,500 from $53,700 in 2014, in large part due to increases in employment, Census officials told reporters on a conference call.

The poverty rate has continued to edge down in the wake of the 2007-2009 recession amid a tepid recovery. The latest drop is the largest annual percentage point decline since 1999, Census officials said.

Analysts, however, caution against using the poverty rate to assess the long-term trend because it does not account for non-cash benefits, including food stamps and refundable tax credits.



Apple drags down Wall Stree

September 8th, 2016  |  Source: Reuters

Apple weighed on the three major U.S. stock indexes on Thursday morning, a day after the tech giant unveiled the new iPhone 7 that failed to impress Wall Street.

Shares of Apple (AAPL.O) fell 2.1 percent, their steepest decline since June 24 when the markets witnessed a broad selloff after the result of the Brexit vote.

The S&P 500 information technology index .SPLRCT fell 0.51 percent and was the biggest loser among the benchmark's 10 major sectors.

Investor reaction to an unexpected drop in weekly jobless claims and the European Central Bank's decision was largely muted.

U.S. stocks have been trading in a tight range in recent months, even as they hover near record levels, due to growing uncertainty over interest rates.

The S&P 500 index has not moved more than 1 percent in either direction on a daily basis since July 8.

At 9:33 a.m. ET the Dow Jones industrial average .DJI was down 54.17 points, or 0.29 percent, at 18,471.97.

The S&P 500 .SPX was down 4.85 points, or 0.22 percent, at 2,181.31.

Iran-Saudi war of words heats up ahead of hajj

September 7th, 2016  |  Source: AFP

A bitter war of words between Iran and Saudi Arabia intensified Wednesday ahead of the annual hajj pilgrimage from which Iranians have been excluded for the first time in decades.

Iran's supreme leader Ayatollah Ali Khamenei blasted the "incompetence" of the Saudi royal family as he met with the families of victims of a deadly stampede during last year's hajj.

"This incident proves once again that this cursed, evil family does not deserve to be in charge and manage the holy sites," Khamenei said.

Relations between Iran and Saudi Arabia were already at rock bottom before the regional rivals started trading caustic remarks ahead of the annual pilgrimage to Islam's holiest places in Saudi Arabia, which is due to start on Saturday.

Iranians have been blocked from the event after talks on safety and logistics fell apart in May.

"If the existing problems with the Saudi government were merely the issue of the hajj... maybe it would have been possible to find a way to resolve it," Iranian President Hassan Rouhani said at a cabinet meeting.

"Unfortunately, this government by committing crimes in the region and supporting terrorism in fact shed the blood of Muslims in Iraq, Syria and Yemen," Rouhani said.

- 'Inappropriate and offensive' -

The week began with a furious rebuke from Khamenei, published on his website, in which he accused the Saudi royals of "murder" over the deaths of nearly 2,300 pilgrims, including hundreds of Iranians, in last year's stampede.

Saudi Arabia claims the death toll was only 769 -- despite data from more than 30 countries suggesting it was far higher -- and has refused to release the details of its investigation into the disaster.

But the head of the six-nation Gulf Cooperation Council hit back on Wednesday, calling Khamenei's remarks "inappropriate and offensive... and a desperate attempt to politicise" the hajj.

AFP/File /Iran was fiercely critical of the Saudi response to a deadly stampede during the 2015 hajj, which killed some 2,300 foreign pilgrims, including an estimated 464 Iranians

Saudi Arabia's most senior cleric, Grand Mufti Abdulaziz al-Sheikh, also waded into the dispute, telling the Makkah daily on Tuesday: "We must understand these are not Muslims, they are children of Magi and their hostility towards Muslims is an old one."

"Magi" is a reference to the Zoroastrian religion that was prevalent in Iran before Islam, and is sometimes used as an insult against Iranians.

Jane Kinninmont, deputy head of the Middle East and North Africa programme at the Chatham House think tank in London, said the world needed to pay more attention to the "cold conflict" between Iran and Saudi Arabia.

This week's verbal attacks "are an indication that the tensions that really ratcheted up earlier this year are still unresolved," she told AFP.

"Particularly when it comes to the pilgrimage and religious discourse, then it has quite damaging effects on sectarian relations around the world."

- A history of violence -

Iranian Presidency/AFP /Iranian President Hassan Rouhani called on the Muslim world to unite and "punish" the Saudi government for its actions in the region

The two dominant Middle Eastern powers follow different branches of Islam -- Shiite and Sunni -- and vie for regional dominance.

Iran boycotted the hajj for three years between 1988 and 1990 after clashes between Iranian pilgrims and Saudi police in 1987 left around 400 people dead.

Diplomatic ties were restored in 1991, but relations have deteriorated in recent years, particularly over the countries' support for opposing sides in the Syrian and Yemeni civil wars.

In January, relations were severed again after Iranian demonstrators torched the Saudi embassy and a consulate following the kingdom's execution of a prominent Shiite cleric.

Around 60,000 Iranians took part in last year's hajj, but the two sides could not reach an agreement on this year's pilgrimage.

A former senior US foreign policy official, John Hannah, last month cited Gulf sources in an article for Foreign Policy magazine, saying that "the Saudis did in fact go out of their way to make Iranian attendance difficult."

"(The) Saudis were insisting that the Iranians be kept in a closed camp, effectively barred from co-mingling and socialising with participants from other countries, often considered an essential element of the hajj experience," Hannah wrote.

His claims could not be independently verified. Saudi Arabia says Tehran made "unacceptable" demands, including the right to organise demonstrations "that would cause chaos".

Crown Prince Mohammed bin Nayef reiterated those concerns on Monday, saying Iran wanted to "politicise hajj and convert it into an occasion to violate the teachings of Islam, through shouting slogans and disturbing the security of pilgrims."

Philippines scrambles to soothe tensions after Obama slur

September 6th, 2016  |  Source: Reuters

Philippines President Rodrigo Duterte sought to defuse a row with the United States on Tuesday, voicing regret for calling President Barack Obama a "son of a bitch", a comment that prompted Washington to call off a bilateral meeting.

The tiff between the two allies overshadowed the opening of a summit of East and Southeast Asian nations in Vientiane, Laos.

It also soured Obama's last swing as president through a region he has tried to make a focus of U.S. foreign policy, a strategy widely seen as a response to China's economic and military muscle-flexing.

Diplomats say strains with longtime ally the Philippines could compound Washington's difficulties in forging a united front with Southeast Asian partners on the geostrategic jostle with Beijing over the South China Sea.

Duterte has bristled repeatedly at criticism over his "war on drugs", which has killed about 2,400 people since he took office two months ago, and on Monday said it would be "rude" for Obama to raise the question of human rights when they met.

Such a conversation, Duterte told reporters, would prompt him to curse at Obama, using a Filipino phrase "putang ina" which can mean "son of a bitch" or "son of a whore".

He has previously used the epithet against Pope Francis, although he later apologized, and the U.S. ambassador to the Philippines.

After Washington called off Tuesday's bilateral meeting between Obama and Duterte in response to his latest comment, the Philippines issued two statements expressing regret and also briefed reporters.

"President Duterte explained that the press reports that President Obama would 'lecture' him on extrajudicial killings led to his strong comments, which in turn elicited concern," the Philippines government said in a statement.

"He regrets that his remarks to the press have caused much controversy," it added. "He expressed his deep regard and affinity for President Obama and for the enduring partnership between our nations."

Obama's deputy national security adviser, Ben Rhodes, said the focus on Duterte's comments leading into the summit had not created a constructive environment for a bilateral meeting.

"All of the attention frankly was on those comments, and therefore not on the very substantive agenda that we have with the Philippines," he told reporters.

Officials from both countries said there would be no formal meeting rescheduled in Laos but a short conversation between the two presidents was possible.

Instead of the Duterte meeting, Obama held talks with South Korean President Park Geun-hye, a day after North Korea fired three medium-range missiles into the sea. He urged a full implementation of sanctions against North Korea, adding that the missile test demonstrated the threat that Pyongyang posed

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