#_yfinance:segment=the_final_round

[its-jen-rogers-blog]

Apptio CEO: Now the right time for IPO

It’s been a slow year for initial public offerings. In fact, it has been the weakest on record since the financial crisis of 2008. But the sickly IPO market is finally showing signs of life. This week looks to be the busiest week for new issues all year, with September on track to be the most active month for all of 2016, according to Dealogic.

Among the new issues investors seemed eager to snap up in the last few days: Apptio. The tech company, which makes cloud software to help manage IT, surged more than 40% on its first day of trading. The Bellevue, Washington–based company sold 6 million shares for $16 a piece, above the marketed range of $13 to $15. Overall, the company raised $96 million.

Co-founder and CEO, Sunny Gupta, says that despite the trend of staying private longer, now was the right time for his company to go public. That said, he isn’t sure how many other tech companies will follow. He noted from Apptio’s roadshow that he learned the “bar is high” for IPOs right now. Apptio has not posted a profit yet, but its revenues climbed over 20% last year. The stock is listed on the Nasdaq, and its ticker is APTI.

[j-underhill-blog]

Why shredding $100 bills could be good for the economy: Rogoff

While more than half of all transactions in the US are electronic—think debit cards, Apple Pay and Venmo—there’s still a record $1.4 trillion in physical currency, from $1 to $100 bills, circulating in the global economy.

That’s almost double the amount from a decade ago, and about 80% of that cash is in $100 bills.

These large bills could be making us poorer and less safe, says Kenneth Rogoff, Harvard economist and author of the new book “The Curse of Cash.” For Rogoff, the benefits of phasing out both $50 and $100 bills are two-fold: It would hamper criminal activity and aid monetary policy.

“I argue [large bills] are more facilitating activity in the underground economy—crime, tax evasion, you name it—than they are in legal activity,” Rogoff told Yahoo Finance.

But cash can also be used as a form of civil disobedience for what is perceived to be an unjust law or an onerous regulation. Where exactly do we draw the line between a government’s right to enforce laws and the public’s right to privacy?

He admits that phasing out cash is a highly politicized and emotional topic, adding that the economy will still need cash—at least the smaller bills— for reasons of natural disasters, privacy, and unbanked neighborhoods.

“It’s 22 pounds for $1 million in hundreds, but it’s 220 pounds to carry around $1 million in tens,” said Rogoff. “So I’m looking for… how can people still do $500, $1,000, sort of retail transactions, but not be able to run these criminal enterprises.”

A less-cash society and central banking

In addition to hampering the underground economy, phasing out larger bills could give central banks additional tools to fight recessions and deflation, says Rogoff.

After the 2008 financial crisis, the Federal Reserve dropped its benchmark interest rate to near zero, with the expectation that low rates would stimulate the economy. The Bank of Japan and the European Central Bank took their policies a step farther, lowering rates into negative territory. In Germany, for example, an investor pays for the right to loan the government money for 10 years.

But central banks’ ability to venture into negative territory is limited, as people have the ability to convert their investments into cash and get 0% interest. If a central bank decides to lower rates to -5%, at some point investors are just going to take cash, rather than get a negative return in a checking account. This scenario would be counterproductive to a central bank’s efforts to fight a recession and deflationary pressures.

“When we wake up and see that there are only $10 bills, it’s way easier to have serious negative interest rates,” said Rogoff. “The idea is not that you’d have negative 6% rates for 10 years, but it would last a relatively brief period because you’re powering the economy out of the recession.”

In principle, Rogoff notes, there is no reason that currency holders should prefer a world with 2% inflation and a 0% interest rate on currency to a world with 0% inflation and and a -2% interest rate on currency. In both cases, the real rate of return on currency is -2%.

But should we give the government the right to tax our currency?

“Well, let’s face it. They can do whatever they want now,” Rogoff said. “There’s inflation. That works really well. It’s been used time and again. You are trusting the central bank apparatus to be trying to stabilize output, trying to stabilize inflation. Yeah, they can set a negative tax rate—a negative rate on currency. But if the market’s not calling for that, the currency is just going to empty out.”

[jared-blikre-blog]

One more bull leg, but short-term pain first: analyst

“Low volume,” “low volatility,” “no volume,” … “boring.” Such was August—at least in the words of the analysts covering the market who couldn’t seem to get the month off. Yet, congratulations are in order.

The summer is nearly over, and for the first year since the financial panic, we’ve (so far) avoided a full-blown market panic selloff. Greece took a little wind out of markets in May, and the Brexit in June looked like a sure-fire risk-killer but quickly fizzled from investors’ minds within days.

Amazingly, fundamentals are starting to matter again. (Gains in the first six years of this bull market were largely derived from three rounds of quantitative easing liquidity.)

According to FactSet, revenues are set to turn positive in Q3 and companies should start reporting profits again in Q4. In other words, the “earnings recession” should be over soon. True: Growth is anemic and has come painfully slow. But by many metrics, we’re as close to full employment as we were before the financial panic.

S&P 500 technical picture

Currently, UBS is calling for a short-term decline in September. Support levels for the S&P 500 (^GSPC) include 2050, the old all-time high in of 2134, 2100, and (worst case) 2070, which is about 95 handles, or 5%, below the current price of 2165.

Longer-term, UBS is looking for the completion of a secular Elliot Wave 5 bull leg into the first half of 2018. But they do warn that the bull market will be difficult to trade and will favor stock pickers over passive investors.

S&P 500 – UBS technical picture

“From a cyclical/tactical standpoint, we see the risk of a more significant corrective process from later September into initially later October/early November (wave a) and finally into late Q1 (wave c) before resuming the underlying bull cycle. So the whole wave 5 bull cycle will very likely be highly selective (regionally and thematically) and also highly trading oriented, where from a trend perspective our focus remains on cyclical outperformance,” says UBS.

Elliot Wave technical analysis is by its nature very discretionary and open to interpretation. Nevertheless, there are other reasons to be bullish long term. Financials (XLF), the prior laggard of 2016, have been leading the broader market since the Brexit sell-off, as banks anticipate at least one Federal Reserve rate hike this year.

Short term, it’s important to watch the VIX (^VIX), according to Keith Bliss of Cuttone & Co. “The VIX from the beginning of July until just a week ago was below that 13 handle…and now it climbed above it and is trading at about 14,” says Bliss.

“After it’s traded below 13 for so long, once it gets to back above that bottom channel, it tends to zip up to 20. And then if it can break out of 20, it’ll have a substantial move—an outsized move. And of course, that’s going to be negative for equities. So that’s the one thing you really need to keep an eye on going forward.”

[julialaroche-blog1]

Investors yanked $25.2 billion from hedge funds in July alone

Broadly speaking, it’s been a brutal summer for hedge funds.

Hedge funds have continued to suffer from sizable redemptions, with investors yanking another $25.2 billion in the month of July alone, bringing year-to-date outflows to $55.9 billion, according to a new eVestment Hedge Fund Asset Flows report.

In June, investors pulled $23.5 billion from hedge funds, the report noted.

If this keeps up, the hedge fund industry could be track for its first year of net outflows since the financial crisis.

“In terms of cumulative magnitude, the redemption pressures facing the hedge fund industry in the last two months are reminiscent of the second half of 2011, when in a four month span investors redeemed an estimated $42.0 billion. Unless these pressures recede, 2016 will be the third year on record with net annual outflows, and first since the outflows in 2008 and 2009, a result of the global financial crisis,” eVestment’s Peter Laurelli wrote in the report.

Credit and multi-strategy hedge funds funds saw “crisis-like” level redemption pressures. Event-driven funds also saw money depart.

The funds with the biggest redemption have returned an average of -4.1% year-to-date, the report noted.

“There should be caution when classifying the industry as a whole, as it is more a sum of very unique parts,” Laurelli wrote.

The hedge fund industry, which has just shy of $3 trillion in assets, is made up of more than 10,000 different funds with different strategies ranging from long/short equity, macro, event, multi-strategy, activist, managed futures, direct-lending, etc. Some strategies and individual funds have done well in 2016.

“Many funds have received new allocations in 2016, including both June and July. The ten largest allocations in the last two months have gone to funds which have produced an average return of nearly 7% this year, and produced positive returns on average in 2015. That we are forced to illuminate positive sentiment in the proverbial ashes, only illustrates the difficulty faced by many,” the report said.

Commodities funds have continued to be a bright spot, attracting new allocations in June and July. In July, investors added $2.7 billion in new allocations. In the last fourteen months, commodity funds have seen approximately $10.3 billion added, the report said.

Generally speaking, hedge funds have struggled to beat the market, with the average fund tracked by the Barclay Index up 2.73% this year, while the S&P 500 has gained around 7%.

Julia La Roche is a finance reporter at Yahoo Finance.

Read more:

Tiger Global ditches its billion-dollar Netflix stake, cuts Apple

Here’s what hedge fund titans have been buying and selling

Hedge fund billionaire Dan Loeb bought a bunch of Facebook

Warren Buffett ramps up his huge bet on Apple, cuts back Walmart

Legends of finance have big bets on the stock market going down

[pras-s]

Ferrari's newest car was inspired by these two classics

When the church bells ring in Maranello, Italy, on Sunday – it’s not always to remind the faithful for prayer. Since 1928, in the land of Ferrari the church bells ring for victory on the Formula 1 track, too.

But times have been changing, and the most famous team in Formula 1 has seen muted success as of late. Nevertheless, the company has been winning where it counts in another area – the bottom line. The Prancing Horse brand continues selling thousands of high-priced machines.

Ferrari is public now, spun off from parent Fiat Chrysler, and Ferrari must meet the demands for its passionate customers and the investing public. That’s why the setting of Pebble Beach, during Monterey Car Week from August 15-21, was the perfect time for Ferrari to make both parties happy by showing off a new car.

Home away from home

“This is one of the most important automotive events in the world this is for car enthusiasts. It’s all about beauty, it’s all about performance, it’s all about classic cars, and Ferrari is everything about cars,” says Enrico Galliera, SVP of Sales and Marketing at Ferrari. “Here we have some of our best customers, our best collectors, and we’re here to support them at this fantastic event.”

At Casa Ferrari, Ferrari’s home away from home in Carmel, California, fans of Ferrari can meet for an espresso, display their treasured Ferrari automobiles, or just buy a t-shirt. It was at Casa Ferrari that the automaker debuted the GTC4Lusso in North America for the first time. The GTC4Lusso is an update to the groundbreaking FF, a hatchback, or shooting brake as they call it.

The ‘4’ in its name signifies all-wheel drive and all-wheel steering, which is represents the highest technology Ferrari has to offer. “This is a GT car, and the DNA of Ferrari is performance,” Galliera proclaims about the GTC4Lusso, adding that it also “takes inspiration from some cars from [Ferrari’s history].”

And just behind us paying homage to the GT cars of the past, Ferrari had on display a vintage 330 GTC. This was Monterey Car Week after all, a celebration of both the past and present of the automotive world’s most celebrated carmakers.

“The 330 GTC represents the heart and soul of the company, which is not only creating high performance sports cars, but high performance cars you can use everyday,” Galliera says. It was also one of Enzo Ferrari’s favorites.

[yahoofinancestaff-blog]

Stocks on edge as Fed stokes rate-hike debate

Stocks (^DJI, ^GSPC, ^IXIC) on edge as the Fed stokes the rate-hike debate. Will uncertainty be the bane of markets? Catch The Final Round at 4 p.m. with Justine Underhill, Yahoo Finance editor-in-chief Andy Serwer, Yahoo Finance’s Jared Blikre and columnist Rick Newman.

Winners and losers

Stocks ending the week in the red include Estée Lauder Cosmetics after posting disappointing guidance, drilling service firm Ensco after receiving a notice of early termination for a drilling contract, and DaVita Healthcare. Shares of the dialysis provider are lower after the government launched a probe into whether firms are steering Medicare-eligible patients into marketplace plans, as a way of obtaining higher payments.

Stocks ending the week in the green include home goods store Restoration Hardware on an upgrade to buy from Goldman Sachs, retailer Foot Locker on an earnings and revenue beat, and Applied Materials. The semiconductor equipment maker is up on better-than-expected guidance, after orders reached a record high last quarter.

Looking ahead

On Tuesday we’ll get a read on the housing market with new home sales for July. Analysts are expecting a slight build on June’s 592,000 homes sold.

And on Thursday, the Jackson Hole economic symposium kicks off. Central bankers, finance ministers, and academics will gather in Jackson Hole, Wyoming to discuss monetary policy, with a highly anticipated speech by Fed Chair Janet Yellen on Friday.

Finally, we’ll get another look at GDP on Friday, with revised data for Q2. The preliminary read showed GDP increasing at 1.2%, which was below analyst expectations.

[minyoungparkyahoo-blog]

Morgan Stanley: Self-driving cars and apps like Uber could boost booze industry

In 2014, alcohol played a role a third of motor-vehicle deaths in the US. However, ride-hailing services like Uber and so-called self-driving cars could reduce the number of DUI accidents, fatalities and arrests, according to new research from Morgan Stanley.

And ride-sharing services and autonomous vehicles could also potentially be a boon for the alcohol industry — including bars and restaurants that serve alcohol, according to the research led by Morgan Stanley’s Adam Jonas.

The alcoholic beverage industry is already huge; the global drinking population right now is 2.1 billion while the total drinks consumed per year is 1.1 trillion. Value per drink is $1.33, which all totals a whopping $1.5 trillion worth of drinks consumed per year. But according to the new report, the industry might have the potential to grow even more with shared and autonomous vehicles.

“Shared and autonomous vehicle technology help address the mutual exclusivity of drinking and driving in a way that can significantly enhance the growth rate of the alcohol market and on-trade sales at restaurants,” the Morgan Stanley study notes.

While the average person has 542 drinks per year, autonomous cars and ride-hailing apps could bring that number up to an additional 52 drinks, according to the Morgan Stanley report. With each drink valued at $2.32, that could create $98 billion in revenue. (Morgan Stanley placed a higher value on drinks resulting from autonomous or shared vehicles, as those drinks would be consumed in bars or restaurants rather than at home.)

The restaurants that stand to benefit include those whose alcohol sales account for 10% to 20% of revenue, including BJ’s Restaurants, (BJRI), Buffalo Wild Wings (BWLD), and Brinker International (EAT), which owns Chili’s among other big chains.

Morgan Stanley is not the first to suggest ride-hailing apps like Uber or Lyft could spur alcohol sales. In 2015, the Los Angeles Times wrote that “Uber lets you drink more.” That story quoted Francois Renaud, managing partner at restaurant called Terrine, who called ride-hailing apps “a game-changer.”

“The difference is in the second bottle of wine ordered,” he told the LA Times.

Of course, the notion that autonomous vehicles, aka self-driving cars, could spur more drinking is more controversial. While so-called self-driving cars are still in their infancy, it’s generally assumed that drivers must be responsible for their vehicles even if they’re on “autopilot” mode.

Tesla itself — which is a pioneer in this area — has noted that drivers who use its autopilot feature “need to maintain control and responsibility for your vehicle.” It’s hard to do that while drunk.

“I think the automotive dealers where they are like Tesla and some of the others, I don’t think they are at the point right now where they are suggesting that [the vehicle] could be unmanned,” Michael J. Whitekus Ph.D., a toxicologist, says. “They are suggesting that you will still have to be engaged with the driving process and an intoxicated person certainly cannot be engaged with the process.”

Whitekus instead sees Uber as a safer option for intoxicated people: “I see Uber as a better comparison [to autonomous vehicles] to be honest. Uber right now you can get in and someone else drives you. As long as you can trust them to get you home and they are not going to mug you or take advantage of you because you are intoxicated, which is a whole set of other issues, then you’re going to be in pretty good shape. But these semi-autonomous and autonomous vehicles, they are not there yet.”

Minyoung Park is a writer for Yahoo Finance.

Facebook may be the key to marketing to an important demographic: moms

How the Supreme Court is hurting the economy by killing immigration reform

America’s brick-and-mortar banks are vanishing

A mysterious US industry has been growing since the recession — psychic services

[its-jen-rogers-blog]

Why Kaepernick’s brand may be stronger than ever

We are all talking about him. His jersey is number one on the NFL sales chart. And he kept a spot on the 49ers roster.

Three weeks ago, that wasn’t necessarily the case. When San Francisco 49ers quarterback Colin Kaepernick decided to sit for the national anthem back in August as a protest over what he sees as the country’s oppression of people of color, the conventional wisdom was that “Kap” had committed a cardinal sin in the world of sports. To make the most of their relatively short careers, model professional athletes in the era of big-business sports need to be more committed to capitalism than controversy.

For former NFL Pro Bowler and The NFL Today commentator Bart Scott that’s what makes Kaepernick impressive. “He’s not the starting quarterback anymore. He’s a backup… When you’re the backup, you want to be seen and not heard, so to speak. So he’s fighting for what he believes in, and that’s what makes him more impressive to me, that at this vulnerable state of his career he’s willing to stand up and fight for something.”

As Scott notes, that can sometimes be detrimental. “You can become blackballed, because you can become bad for business. So it can hurt your ability to earn.” As the saying goes, Republicans buy shoes too.

For Kaepernick, though, his stand has had the opposite effect on his brand. His jersey sales have shot up. He is donating proceeds from the boost in sales to charities focused on racial and social inequality. He has also committed $1 million from his salary to those causes. The 49ers organization has also pledged $1 million in donations, and other athletes are following his lead by kneeling during the anthem.

Scott compares Kaepernick to Muhammad Ali, who refused to fight in the Vietnam War. “It’s never a convenient time to stand up for what you believe is right. And he also put his money where his mouth is. Him donating $1 million out of his salary, or out of his bank account, speaks volumes, meaning that he’s serious, that he’s not just standing up with pompoms and cheering, but he’s actually actively trying to do something,” he said.

Of course, Kap’s ability to make a difference off the field is still strengthened by his play on it. The 49ers face the Rams on Monday.

[its-jen-rogers-blog]

If Trump and Clinton lose, this man could be your next vice president

If running for president is a popularity contest, our two leading candidates are struggling to break into the cool crowd. Democrat Hillary Clinton and Republican Donald Trump are two of the most unpopular major party candidates in history.

With their unfavorable ratings polling high, many voters are looking for alternatives to staying home on November 8. The leading option in the polls is the Libertarian ticket with former New Mexico governor Gary Johnson averaging around 9% nationally. His running mate is the former Republican Governor of the mostly Democratic Massachusetts, Bill Weld.

Together, Johnson and Weld are crisscrossing the US aiming to get their poll numbers to 15% so they can join the televised debates this fall.

Johnson has said the debates are make-or-break for the Libertarian ticket. Weld thinks the two have momentum heading into the post-Labor Day push and predicts “national outrage if we are very, very close and don’t get in because people want to hear alternatives.”

Weld stopped by Yahoo’s offices in New York City between fundraising calls and a nationally televised town hall. He and Johnson have been friendly since they were both governors in the 1990s and as Weld put it “were members of a mutual admiration society.” Now Weld calls his running mate “painfully honest” — kind words from the competitive Weld, considering Johnson had just beaten him in a game of chess.

The only presidential candidates to support the Trans-Pacific Partnership, Johnson and Weld see free trade as a key to new high wage jobs. “We’re always going to be net winners in free trade,” Weld says. They want more competition in the health care marketplace as well, but aren’t for an immediate repeal of Obamacare.

Weld describes the Libertarian ticket as “fiscally responsible” and “socially tolerant.” As for his old party — the GOP — Weld says “nobody would confuse them with being socially welcoming … they made a point of making their platform meaner in Cleveland than it was before.”

In case you had any doubt, Weld says he’s not going back to being a Republican: “I made my bed and I’m going to lie on it.”

[its-jen-rogers-blog]

Why you are giving business gifts all wrong

A bottle of wine. A box of chocolates. A gift card.

If those gifts are on your corporate gift giving list, you are missing out on one of the secret skills of successful entrepreneurs and leaders, according to John Ruhlin, the author of “Giftology.” He believes radical and strategic generosity is an investment that pays off while climbing  the corporate ladder.

Ruhlin, the founder of gift logistics company The Ruhlin Group, has designed gift giving strategies for everyone from Fortune 500 companies to celebrities to Silicon Valley startups. One big mistake he sees companies make is confusing gifts with promotional items. Think logo polo shirts or magnets or pens. That’s not a gift, says Ruhlin. That’s an ad.

A sauna. A Brooks Brothers’ wardrobe. An ice cream scooper and bowls. Those are gifts Ruhlin’s used to make a sale, secure a meeting or just say thank you.

Sending the right business gift means breaking old habits. Ruhlin says gift cards are a no-no: “It’s like giving cash. But it’s like you can’t spend money anywhere else other than here. It’s an unthoughtful gift. No creativity. And it doesn’t make people feel warm and fuzzy, especially the higher up the food chain you go.”

If you are trying to get to the top of the food chain, one of Ruhlin’s strategies is to give gifts to the “inner circle” rather than the executive. “When I take care of an assistant or a spouse, they become my sales advocate. They are the ones that are like, have you called John back? Have you reached out to him? Have you done any business with him?” Ruhlin says.

Of course, gift giving can get expensive. Ruhlin recommends spending whatever you would spend on a round of golf, nice dinner out or ball game tickets. As he points out, “You should be willing to invest in something that’s tangible and lasting. I call it an artifact.”

Ruhlin loves buying gifts people will actually use on a regular basis. Knives for the kitchen. A fancy golf accessory. He steers clear of electronics, like an iPad, because most executives already have one. Most importantly, he never gives over the holidays when people are already inundated with gifts.

Most gifts Ruhlin gives range between $100 and $500. If that is out of your budget, Ruhlin says a simple hand-written note can also do the trick.

[j-underhill-blog]

Stiglitz: The days of the euro are numbered

Nearly a decade after the financial crisis, the eurozone’s jobless rate still hovers around 10%, almost double that of the US.

But aggregates of the eurozone don’t tell the whole story. Austria’s unemployment sits below 6% while Spain’s has topped 20%. Between 2008-2014, Greek household disposable income fell by 24% while German households gained 15%, according to EU data.

The main culprit for the dichotomy is the shared currency, says Joseph Stiglitz, Nobel Prize-winning economist and author of the new book, The Euro: How a Common Currency Threatens the Future of Europe.

Yet, for Stiglitz, the problems were evident from the beginning. “[T]hose in Europe deliberating about adopting the euro should consider whether they should tie their fortunes to an institutional arrangement whose flaws are apparent,” wrote Stiglitz in 2003, as a handful of countries, including Cyprus, Slovenia and Estonia, sought to adopt the currency.

Now, a decade later, Europe’s great monetary endeavor has led to economic stagnation and severe inequality, he says.

“The euro is a man-made construction” writes Stiglitz. “Europe’s monetary arrangements can be reconfigured; the euro can be abandoned if necessary.”

While the reforms he proposes, including common deposit insurance, eurobonds and a move away from austerity policies, are relatively straightforward, the political climate needed to institute the change is not. The longer it takes to make reforms, the more fractured countries will become– a cycle which could eventually diminish political will to save the eurozone.

We sat down with Joseph Stiglitz to discuss critical missteps in the formation of the euro, currency reforms, and the EU’s path forward. Below is an edited section of our interview; the video interview is above.

———————–

YAHOO: It seems the crux of the issue is that monetary unity came before political unity. So why wasn’t that part of the equation when they first set out? 

JOSEPH STIGLITZ: Well, the creation of the single currency was a political project. It was driven by the desire to be the next step in bringing the countries of Europe together.

But the politics wasn’t strong enough, you might say, to finish the project. To make a successful single currency, you had to realize that you were taking away, too, the most important instruments for adjusting when you had an economic shock, like the recession of 2008. So you took away the interest rate. You took away the currency adjustment mechanism, but they didn’t put anything in the place.

And instead, they made things even worse. Because they tied the hands of the countries of Europe by saying you have to limit the deficits and the debt. And then they said to the central bank, focus just on inflation. Don’t pay any attention to employment, jobs, financial stability. They believed, somehow, that all this would work out, that politically it would work out, that eventually, they would create the necessary institutions.

Economically, they thought markets would make sure things would work out, because if you maintain deficits and debt low and low inflation, automatically you’d be brought to full employment and rapid growth. Well, it hasn’t worked out. And theory said it wouldn’t work out.

YAHOO: As economic stagnation continues, there’s a lot more anti-EU rhetoric and populism. Do you see there being a tipping point at which the euro or the EU can’t be saved? JOSEPH STIGLITZ: Very much so. And in fact, you almost see a beginning of that with Brexit. Now, remember, the UK was not in the eurozone. But when they looked across the English Channel at what was going on inside the eurozone, one of the things they saw was rigid bureaucrats. They saw a system that was not able to adapt to the differences in circumstances. It was imposing the same rules everywhere, rules that might make sense in Germany, but didn’t make sense in other countries. They saw a dysfunctional eurozone. And their trading partners in Europe were not doing very well. And so they said, do we want to be a member of that club?

Now, what’s going to happen, I think– and what is happening already– is that the parties in the center– the center-left, the center-right– that have been supporting the concept of the euro are losing support. You see that in poll after poll. And people are moving to the extreme parties. And that’s a danger.

Because eventually, unless they make the reforms that I describe in the book– unless they make the institutions that will make the euro actually work for most of the citizens– unless they do that, the discontent will grow. And eventually, there will be vote of a country within the euro that says– a party will get elected, one of the extreme parties, a coalition, that will say we’ve had it. And they will call for a referendum like the Brexit. And there’s a good chance– and I think it’s almost inevitable, eventually, unless the reforms occur– that there will be an exit. Whether it’s Italy or Spain or Greece, it’s hard to tell. But it’s hard to see it not happening.

YAHOO: Now, some of the reforms that you suggest include deposit insurance, euro bonds, and a move away from austerity policies. Do you see that possible now in this political climate in Europe? Is it almost like they’re in a catch-22, where they need to implement reforms but they can’t? 

JOSEPH STIGLITZ: These reforms are not big in an economic sense. But you’re absolutely right– it’s the politics. And while they’re not big in an economic sense, they’re too big for the politics of Europe as it’s constructed today.

You don’t know what will happen when, as you say, push comes to shove. They see the light. They see Brexit. They see this discontent. And they say, look, we have to actually do what we’re supposed to.

Unfortunately, some of the response to Brexit was suggesting that rather than doing that, they were going to move in the other direction, a hard line attitude. Juncker, who’s the head of the European Commission, said we are not going to give UK a good deal. We’re going to treat it harshly, because we want to make sure that other countries won’t leave.

When you think about that for a minute, what he was saying– this is the head of the European Commission– was saying the benefits to the citizens of Europe were so low that the only way to keep them supporting the euro was to threaten them with disaster if they leave. Now, that’s not the way to create a partnership.  YAHOO: You’ve suggested the idea of a northern and a southern euro. How exactly would that work?

JOSEPH STIGLITZ: Well, the first thing to realize is that the regional work on the design of currency area by my colleague at Columbia, Bob Mundell, emphasized that currency areas were better when there’s enough homogeneity. And there’s a closer similarity– not perfect, but closer similarity– among the countries of the south, not only in economics, but in political philosophy, and so too for the countries of north. So the prospects of two or three currency areas working are far greater than the prospect of a single currency working for the whole world.

If you ask the question could America join with a currency area of Latin America and the United States, we would say, oh no. When we talked about NAFTA, nobody said we need to have a single currency, because they knew it would not work. We could have a free trade area, but making a single currency work with countries as different as Mexico, Canada and the United States was not going to work.

In fact, even Canada and the United States have different currencies. We get along well. We have lots of economic relationship. It’s beneficial to both of us. But there’s not a single currency. So that’s the key idea.

Now, once you recognize that, there’s not a flood of money to the United States or to Canada. The money allocates itself on the basis of where the returns are highest. And the exchange rates are just to equilibrate the returns. So that’s the whole point.

If you have flexible exchange rates, you don’t get the rush of money going from one place to another, because you get the exchange rate to make the adjustment. So everybody says the returns are reasonably the same in the different parts.

YAHOO: But initially, once you institute that change suddenly, say tomorrow, we’re going to have a southern euro currency and a northern euro currency. Wouldn’t there be some sort of issue in implementing that overnight? 

JOSEPH STIGLITZ: Well, I try to address that in the book. And this is one of the more novel proposals in the book, where I try to take advantage of the advances of technology that have occurred. Those advances mean that that paper money that we all use has become a thing of the past. In fact, people don’t use paper very much. Most of the transactions are done electronically. 99.9% are done electronically in value terms.

So once you realize that, that means we could go to a fully digital currency. A lot of people have been saying we ought to do it. It has a lot of advantages in terms of record keeping, tax avoidance, monitoring people to make sure that there isn’t tax evasion– a lot of advantages. And if you did that, you would have the mechanism to circumscribe the kind of flight that you would worry about.

And so initially, you might have to put in those kinds of controls. Fairly quickly, things would equilibriate after that moment of panic. And this electronic currency has a further advantage– you don’t have to print all that money. You don’t need the printing presses. A lot of people in Greece were thinking about leaving. They say, who’s going to print the money, and how are you going to keep it secret?

Well, the point is, you can create this electronic platform. In fact, it’s almost there.

[yahoofinancestaff-blog]

Stocks stall as the Fed signals a 2016 rate hike is still in play

Stocks (^DJI, ^GSPC, ^IXIC) stall and Treasurys rally as the Fed signals it’s still open to a rate hike in 2016. Catch The Final Round at 4 p.m. with Jen Rogers and Yahoo Finance editor-in-chief Andy Serwer.

Utilities power higher

The ultra low-rate environment is fueling a hunt for yield, which has led many investors to utilities. But with utilities up more than 15% this year and P/E’s over 15% higher than their historic norm, is it possible utility stocks are topping out?

Winners and losers

Stocks on the move lower today include Staples after posting revenue below expectations, as sales dropped for the 14th straight quarter, Lowe’s after the home improvement chain missed on both its top and bottom lines, and Barnes and Noble. Shares of the bookseller are down after the board ousted CEO Ronald Boire, saying that he was “not a good fit for the organization.”

On the flip side, stocks ending the day in the green include retailer Urban Outfitters after a big earnings beat on stronger sales, Valeant Pharmaceuticals after Morgan Stanley upgraded it to overweight, and Lumber Liquidators. Shares of the beleaguered flooring company are up after announcing a California court ruled in its favor against claims it didn’t warn consumers about formaldehyde in some of its products.

Can giving gifts actually give you a leg up in business?

If corporate gift giving makes you think of logo polo shirts and magnets, you’re doing it all wrong. Our guest, John Ruhlin, author of the book “Giftology,” has worked with Fortune 500 companies and just-launched startups to help them cut through the noise and grow their businesses with gifts.

Looking ahead

At 8:30 a.m. Eastern the Labor Department will release jobless claims for the week. The street’s expecting around 265,000 new claims.

And Fed watch continues, with speeches from New York Fed President William Dudley, San Francisco Fed President John Williams, and Dallas Fed President Robert Kaplan.

Finally, earnings season getting towards the end with big reports from Walmart, Gap, and Hormel Foods.

[yahoofinancestaff-blog]

Former Facebook insider on why it felt like a religious cult

Despite the popular appearances, the tech industry isn’t as transparent, innovative or revolutionary as some might extol.

Rather, a more apt description would reference the money cowboys, opportunists and sociopaths that fill Silicon Valley, says Antonio García Martínez, author of “Chaos Monkeys”.

Martínez left his job at Goldman Sachs, modeling prices of credit derivatives, to pursue a startup, which later led to a job at Facebook (“My job was literally taking your data and turning it into money”).

The worlds of Wall Street and Silicon Valley aren’t so different, Martínez says in the video above. Back room dealings and back stabbings are common place in both cultures.

“There’s really as much greed and hustling and politics as you’d find in almost any industry. It’s no worse than any other industry,” he said. “But it’s certainly no better.”

He likens the major players on Wall Street and Silicon Valley to quasi-monopolists, noting, “they maintain a certain information asymmetry that they find very profitable. And so often, although Facebook paints itself as an innovation company, it often opts for non-innovation to preserve certain incumbency that it has in the market.”

Facebook has also built a culture that felt almost a religious cult at times, adds Martínez. “And I was as much sucked into it as everybody: A more open and connected world. Done is better than perfect. Get in over your head. Move fast and break things. These were the mantras that were constantly drilled into our heads,” he said.

However, he notes that Facebook’s culture has been very effective for producing results, with the stock up about four times since he left.

“But on the other hand, as a foot soldier inside, you can get burned by that culture, or you can see where that culture veers into hypocrisy, which I think as the company gets bigger, it tends to do.”

[j-underhill-blog]

Experts can't agree on what the Fed said in its July statement

The Federal Reserve’s July policy statement has been parsed, sliced and diced by analysts looking for any clues about the next rate hike, and one particular line buried in the second paragraph of the release caught Wall Street’s attention:

“Near-term risks to the economic outlook have diminished.”

For the first time this year the Fed acknowledged subsiding economic risks, a 180-degree pivot from the March statement when it warned of risks abroad.

The new language brings the Fed one step closer to reintroducing its balance of risks statement, a sentence the Fed included in nearly all of its 2015 press releases, which read “[the] Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced.”

When the Fed finally voted to raise rates in December — for the first time in over a decade — the statement described risks as “balanced.” Many Fed watchers agree that including balanced risks language will be a prerequisite for another rate increase.

However, it seems analysts agree on little else in the July statement. Some believe the statement opens the Fed to a September rate hike, while others expect a rate increase in December. Still others think the Fed will hold off until next year.

One thing is for sure: The Fed managed to leave its options open.

Here are some excerpts from analyst and economist notes:

Chris Rupkey, The Bank of Tokyo Mitsubishi: “Rate hikes are coming. Bet on it.”

“The July meeting is the setup for a potential rate hike in September, if the data continue to come in in a way that suggests the Fed is getting closer to achieving its goals …

If they go in September for the first time since last December you can’t be anymore gradual and cautious than that. Get on with it is our view. We think Yellen will raise the curtain on a September move at Jackson Hole in August. The economy is better than Fed officials think. Rate hikes are coming. Bet on it.”

BofA Merrill Lynch Global Research: “We expect the Fed to hike in December”

“The FOMC sounded more upbeat about the health of the labor market, noting that payrolls and other labor market indicators point to some increase in labor utilization …

We think the FOMC is preparing for another hike, but it is not imminent … We continue to believe that a September hike is unlikely, but expect conditions to be met by December to justify a rate hike, assuming no additional negative shocks.”

Omair Sharif, Societe Generale Group: Fed will wait “until next year to hike”

“Admittedly, this was a more confident statement than we expected from Fed officials …

In our view, the Fed is likely to reintroduce the balance of risks statement prior to the rate hike. So, one can envision a scenario where the Fed brings back that statement in the September communiqué in advance of a rate hike in December. A move to a ‘balanced’ assessment may be foreshadowed at Yellen’s Jackson Hole speech on August 26. While that scenario is plausible, we continue to expect the Fed to punt on a rate hike until 2017.”

Goldman Sachs Economic Research: “A roughly 70% probability of at least one rate increase this year”

“We think the statement keeps open the committee’s options for a rate increase later this year, possibly as soon as September. Accordingly, we modestly raised our subjective odds of a rate hike at the September FOMC meeting to 30% from 25% previously.

We see this phrase as a half step toward the ‘nearly balanced’ language the committee used to describe the outlook late last year, and an effective way to keep its options open for action as early as the September meeting. As a result, we have raised our subjective odds of a hike at the September meeting to 30% from 25% previously; we continue to see a 40% chance that the next hike will come in December—implying a roughly 70% probability of at least one rate increase this year.”

Peter Tchir, Brean Capital: Fed may “break with tradition and hike in the heat of the election cycle”

“[The] report seems to set the stage for a series of Fed Speakers to push on the need to hike rates…the next meeting will have the press conference and the election is already so convoluted that they might well break with tradition and hike in the heat of the election cycle …

For the past year a hawkish Fed has generally been bad for stocks and with the chase for yield dragging in dividend stocks of all sorts — the equity market is far more susceptible than usual to any back-up in treasury yields.

I think this further encourages you to ‘sit on your helmet’ during this alleged ‘helicopter’ ride.”

Capital Economics: “[W]e still expect the Fed to raise rates … probably twice this year”

“[T]he assessment that near-term risks have diminished, as well as Esther George’s decision to resume voting at this meeting for an immediate rate hike, make it clear that the odds of a September rate hike are far higher than the minor probability that was priced into futures markets.

Overall, we still expect the Fed to raise rates at least once and probably twice this year, taking the fed funds target range to between 0.75% and 1.00% by year-end.”

[j-underhill-blog]

This is the most positive Fed statement we've seen in a while

  The Federal Reserve once again left interest rates unchanged Wednesday, following its two-day policy meeting, citing an improving labor market and progress in economic growth.

The widely expected move comes amid mixed economic reports and after Fed officials agreed that it was “prudent to wait” for more data on the consequences of Britain’s June 23rd decision to leave the European Union. The Fed’s statement reiterated that it will “closely monitor” developments abroad.

For the first time this year, the Fed noted, “near-term risks to the economic outlook have diminished,” implying that officials are keeping their options open for a rate hike this year. The previous two Fed statements withheld mention of global economic risks, while the March statement warned that developments abroad “pose risks.”

“Today’s FOMC statement was more upbeat than the cheerless one released after the June meeting,” said Michael Feroli, JP Morgan chief US economist. “[T]he improved risk assessment could begin to lay the groundwork for a hike in a few meetings’ time, provided the data cooperate.”

The Fed’s cautious, yet generally positive, economic outlook notes “the labor market strengthened and that economic activity has been expanding at a moderate rate. Job gains were strong in June following weak growth in May. On balance, payrolls and other labor market indicators point to some increase in labor utilization in recent months.”

The statement follows mixed jobs reports in which the US economy added only 11,000 jobs in May, the lowest level in six years, but rebounded by 287,000 jobs in June, the strongest growth in 2016. Other employment data has been varied. The hiring rate has slowed, but jobless claims are near record lows. Fed officials have said that they are waiting for additional data before placing weight on recent employment numbers.

Meanwhile, inflation, which has run below the Fed’s 2% target for years, has shown signs of improvement in recent months, as oil prices stabilized. The personal consumption expenditures index, the Fed’s preferred measure of price inflation, increased 0.9% in May from the year before, as core inflation rose 1.6%. However, the Fed sees inflation remaining “low in the near term.”

With only three policy meetings remaining in 2016, expectations are low that the Fed will raise rates twice this year, as officials forecasted in June. Shortly after the Fed began lifting rates in December—for the first time in over a decade—turmoil in US markets and uncertainty abroad convinced many officials to delay further rate increases.

“At some point the Federal Reserve has to be willing to raise interest rates under a less-than-perfect set of conditions,” said Greg McBride, Bankrate’s chief financial analyst. “If they’re waiting for world peace and harmony before raising interest rates again, they’ll never do it.”

While the Fed decided hold its benchmark rate between 0.25%-0.50%, one member of the committee, Esther L. George, voted against the decision, preferring to raise the federal funds rate to 0.50% to 0.75% at this meeting.

“The July meeting is the setup for a potential rate hike in September,” wrote Chris Rupkey, chief financial economist at The Bank of Tokyo Mitsubishi. “The economy is better than Fed officials think. Rate hikes are coming. Bet on it.”

Redline version below.

Fed July statement redline