Американский инвестбанк Goldman Sachs после Brexit сосредоточит европейские операции сразу в двух центрах - во Франкфурте и в Париже, заявил главный исполнительный директор Goldman Ллойд Бланкфейн.
Lloyd Blankfein says cities would be main hubs for handling business no longer possible in London, with American staff ‘probably preferring Paris’Goldman Sachs has stepped back from identifying a single European city as its post-Brexit EU home and has instead chosen to split its business between Frankfurt and Paris. Lloyd Blankfein, Goldman’s chief executive, said the German and French cities would be the main centres from which the US investment bank would handle business that can no longer be conducted in London after March 2019. Continue reading...
To much fanfare, mostly out of president Trump, on Thursday the House passed their version of the tax bill 227-205 along party lines, with 13 Republicans opposing. The passage of the House bill was met with muted market reaction. The Senate version of the tax reform is currently going through the Senate Finance Committee for additional amendments and should be ready for a full floor debate in a few weeks. While some, like Goldman, give corporate tax cuts (if not broad tax reform), an 80% chance of eventually becoming law in the first quarter of 2018, others like UBS and various prominent skeptics, do not see the House and Senate plans coherently merging into a survivable proposal. Indeed, while momentum seemingly is building for the tax plan, some prominent analysts believe there are several issues down the road that could trip up or even stall a comprehensive tax plan from passing the Congress, the chief of which is how to combine the House and Senate plans into one viable bill. How are the two plans different? Below we present a side by side comparison of the two plans from Bank of America, which notes that the House and the Senate are likely to pass different tax plans with areas of disagreement (see table below). This means that the two chambers will need to form a conference committee to hash out the differences. There are three major friction points: the repeal of the state and local tax deductions (SALT), capping mortgage interest deductions and the delay in the corporate tax cut. The House seems strongly opposed to fully repealing SALT and delaying the corporate tax cuts and the Senate could push back on changing the mortgage interest deductions. Finding compromise on these issues without disturbing other parts of the plan while keeping the price tag under the $1.5tn over 10 years could be challenging. Here are the key sticking points per BofA: Skinny ACA repeal: The repeal of the individual mandate is back on the table. It would free up approximately $300bn in revenue to pay for the tax plan. But this likely means no Democratic Senator will support the bill. This could prove costly as the Republicans can only afford to lose 2 votes and several Republican Senators are already on the fence on the tax plan. Byrd Rule means tax plan might not hatch: Reconciliation directives allow the tax plan to add $1.5tn to the deficit in the first 10 years (See appendix for breakdown of the cost of each plan). However, rules in the Senate state that any bill passed under reconciliation has to be revenue neutral beyond the 10 year budget window. Given that the Republicans are hoping to make the corporate tax cuts permanent, it would mean that they would need to find additional revenue in the out years while sunsetting all other tax cut provisions (e.g. personal tax cuts). This will mean the personal tax code at best will revert back to current law or at worst roll back the cuts and preserve the repeal of the deduction which would amount to a tax increase on households after ten years. Currently, the Senate plan would let reduction in the personal tax rates, expansions of the standard deduction and child tax credit and other provisions expire after 2025. The court of public opinion could threaten the tax plan. And while it remains to be seen if tax reform will pass the Senate, or like Obamacare repeal, it will get shot down by the like of McCain (and perhaps Corker), another key question, is whether the US even needs tax reform at this point - the Fed certainly could do without the added inflationary pressure - and whereas former Goldman COO and Trump's econ advisor, Gary Cohn certainly thinks so, his former boss, Lloyd Blankfein disagrees. So does Bank of America, which maintains that at this stage of the business cycle, tax cuts are not needed to sustain the current expansion. Nevertheless, BofA concedes the passage of a comprehensive tax plan would likely lead to a short term boost to growth which would translate to further declines in the unemployment rate and higher inflation. Then, as the economy begins to heat up, the Fed will likely lean against the economy by implementing a faster hiking cycle than currently projected, which will ultimately spark the next market crash, recession and financial crisis. Ironically, the seed of Trump's own destruction would be planted by his biggest political victory yet (assuming tax reform passes, of course). * * * As a bonus, here is a simulation BofA ran using the Fed's FRB/US model to calculate the potential costs of the tax plans. BofA ran its simulations assuming model consistent expectations for all sectors of the economy and using the inertial Taylor rule to set the path of the federal funds rate: "o simulate the impact of the fiscal stimulus brought on by the tax cuts, we make the fiscal setting exogenous during the first 10 year period and adjust the path for corporate and personal income taxes to take into account the government revenue effects from the tax plan." Costs aside, to get a sense of the economic impact from the two tax plans, BofA similarly models the two plans' outcomes using the FRB/US macroeconomic model. The simulation results suggest under the House plan, the US would see a boost to aggregate demand as growth would be approximately 0.4pp higher relative to baseline in 2018 and 0.3pp higher in 2019. Better aggregate demand would reduce the unemployment rate by 0.3pp by 2019 and put upward pressure on inflation. These growth and price dynamics would lead the FOMC to raise rates an additional 1 to 2 hikes over the next two years. The economic impact from the Senate plan would be slightly more modest but in the same ballpark as the House plan. Under the Senate plan, the model predicts growth to be approximately 0.3pp higher in both 2018 and 2019 and similar dynamics for the unemployment rate and inflation as seen in the House plan, leading the FOMC to tighten quicker than the current baseline path. There is also an "alternative" scenario where we a watered down version of the tax plan passes (i.e. modest tax cuts for middle-income households and a corporate tax cut near 25-28% that is deficit increasing by $600bn-$800bn on a static basis). Under the "alternative" scenario, we would see approximately half the economic impact that is seen under the House plan. Given that such a plan would likely only generate modest inflationary pressures, the Fed's response likely would be relatively muted and it would likely stay on its baseline path.
Senate Panel Approves Tax Plan as GOP Leaders Gird for Fight (BBG) U.S. towns, cities fear taxpayer revolt if Republicans kill deduction (Reuters) After House Victory, Tax-Overhaul Fight Now Goes to Senate (WSJ) Analysts flee Wall Street with gallows humor as research changes loom (Reuters) Tesla Unveils ‘World’s Fastest Production Car’ and Electric Big Rig (BBG) Bitcoin Emerges as Crisis Currency in Hotspots (BBG) Ivanka Trump and the fugitive from Panama (Reuters) Murdoch Empire in Play as Suitors Line Up for 21st Century Fox Assets (WSJ) Franken Case Puts Both Parties in Bind on Misconduct Response (BBG) Crime Wave Engulfs Sweden as Fraud, Sexual Offenses Reach Record (BBG) Google Has Picked an Answer for You—Too Bad It’s Often Wrong (WSJ) Saudi Arabia swapping assets for freedom of some held in graft purge: sources (Reuters) Metal recyclers prepare for electric car revolution (Reuters) Despite Big Push From Beijing, Electric Cars Struggle in China (WSJ) Harvard’s Days as the World’s Richest School May Be Numbered (Reuters) Sears Dials Up Discounts to Record Levels as It Copes With Slump (BBG) Zimbabwe's Mugabe Makes First Public Appearance Since Military Takeover (WSJ) Hassett Bets on 3% U.S. Growth That Summers Sees in Fairyland (BBG) Two Weeks of Frenzied Negotiations Led to Bank-Relief Deal (WSJ) Overnight Media Digest WSJ - The House of Representatives passed a bill that would usher in the most far-reaching overhaul of the U.S. tax system in 31 years, a plan that would reduce the corporate tax rate to its lowest point since 1939 and cut individual taxes for most households in 2018. on.wsj.com/2j1JjUr - New suitors are circling Twenty-First Century Fox Inc , affirming that the media empire built by Rupert Murdoch is now in play. Comcast Corp has approached the media company. Verizon Communications Inc and Sony Corp are also kicking the tires. on.wsj.com/2j0i38O - A federal judge declared a mistrial in the corruption trial of U.S. Sen. Bob Menendez, giving the Democrat a political lifeline and preserving his party's control of the seat for the near future. on.wsj.com/2j1LebB - Meredith Corp has made a takeover bid for storied magazine publisher Time Inc in the range of $17 to $20 a share, according to people familiar with the situation. on.wsj.com/2j0Ht6p - An activist investor in Barnes & Noble Inc has proposed a transaction that would take the bookseller private with the help of current shareholders and a hefty dose of borrowings, an effort that could face formidable obstacles. on.wsj.com/2j0EvP6 - Emerson Electric Co boosted its takeover offer for Rockwell Automation Inc, ratcheting up an effort to bring its reluctant rival to the negotiating table and forge a new giant in industrial automation. on.wsj.com/2j21qd2 NYT - With 227 Republican votes, the House passed the most sweeping tax overhaul in three decades on Thursday as U.S. lawmakers seek to enact $1.5 trillion in tax cuts for businesses and individuals and deliver the first major legislative achievement of President Donald Trump's tenure. nyti.ms/2hDqQRs - The cable company Comcast Corp is in preliminary talks to buy entertainment assets owned by Twenty-First Century Fox Inc, including a vast overseas television distribution business. nyti.ms/2hxkbof - Tesla Inc has aimed to reinvent the automobile and the way electricity is generated for homes. In a presentation by its chief executive, Elon Musk, Tesla unveiled a prototype for a battery-powered, nearly self-driving semi truck that the company said would prove more efficient and less costly to operate than the diesel trucks that now haul goods across the country. nyti.ms/2zJPgzU - The senior American diplomat at the United Nations climate talks in Germany told world leaders on Thursday that the United States would remain engaged in global climate change negotiations even as it planned to exit the Paris agreement "at the earliest opportunity." nyti.ms/2ySE1Bd - The Federal Communications Commission voted on Thursday to allow a single company to own a newspaper and television and radio stations in the same town, reversing a decades-old rule aimed at preventing any individual or company from having too much power over local coverage. nyti.ms/2zN7YpA Britain The Times * Prudential Plc is scaling up its ambitions in Asia with plans to open a fund management venture in China and to double in size in the region every few years. bit.ly/2jxRjAk * WPP said it was prepared to increase its stake in Asatsu-DK, one of the largest marketing services companies in Japan, to about a third after requests from other shareholders. bit.ly/2jwULvg The Guardian * The business secretary, Greg Clark, has been urged by the GMB union to block the proposed merger of German energy group Innogy's British unit, npower with SSE's British retail supply business .bit.ly/2jxZCMG * The chief executive designate of GKN, Kevin Cummings, has been ousted from the FTSE 100 company weeks before he was due to take up the top job at the aerospace and engineering firm. bit.ly/2jz3GvX The Telegraph * Jaguar Land Rover has quietly started testing driverless cars on British roads that are simultaneously being used by the general public, in a clear indication that Britain's biggest manufacturer is determined the country will play a leading role in the race to develop autonomous vehicles. bit.ly/2jyNx9Z * The Serious Fraud Office has made its first charges against Unaoil employees in relation to a corruption scandal that has engulfed the oil and gas industry. bit.ly/2jy7he2 Sky News * The boss of U.S. investment bank Goldman Sachs, Lloyd Blankfein, has used his latest Twitter post on Brexit to suggest a second referendum is held. bit.ly/2jyVwnr * The GMB union's Scotland secretary, Gary Smith, has told Sky News a dispute threatening 1,400 jobs is a battle for the future of skilled manufacturing in Scotland. bit.ly/2jy60U4 The Independent * Rail passengers on the UK's leading long-distance network face disruption and cancellations after Virgin Trains staff belonging to the RMT union voted to strike by a majority of 10 to one. ind.pn/2jvIwil * Retail sales continued to grow in October according to the latest official data, easing some of the fears of a plunge in consumer spending. A survey of retailers by the CBI had suggested the fastest rate of decline in sales in October since the UK's last recession in 2009. ind.pn/2jyWfFb
For debt collectors Cabot Credit Management its near-£1bn IPO valuation was money deemed not worth chasingThe stock market, we are invited to believe, has been in a state of utter turmoil for the past few weeks. Fund managers have been hiding in bunkers, apparently, afraid to consider new investments. It’s rubbish, of course, but that doesn’t prevent every company that pulls its flotation, or IPO, from blaming the market.The latest is debt-collector Cabot Credit Management, a firm that buys portfolios of defaulting loans from banks, energy suppliers and retailers at a discount and then tries to collect the debts. Ken Stannard, chief executive, reports a “high level of engagement and interest” from “a wide array of investors” but, oh dear, “the timing has been unfortunate with respect to IPO market conditions”. Continue reading...
Принесение извинений клиентам, сотрудникам и акционерам — это целое искусство. В современном мире, где репутационные кризисы обходятся дорого, руководство корпораций обязано им владеть. Впрочем, далеко не всегда процесс проходит гладко.
Goldman Sachs CEO Lloyd Blankfein isn't done tweeting about Brexit.
Goldman Sachs CEO Lloyd Blankfein isn't done tweeting about Brexit.
Lloyd Blankfein tweets that many want a "confirming vote" on a "monumental and irreversible" decision.
Rolling coverage of the day’s political developments as they happen 3.43pm GMT At the end of the debate Eleanor Laing, the deputy speaker, put the motion to a vote. With no one shouting no, it was approved by acclamation.That means the Commons has voted to cut the amount of time people have to wait for their first universal credit payment from six weeks to a month. 3.39pm GMT In the Commons Damian Hinds, the work and pensions minister, is replying to the debate on universal credit.He says only 3% of workers are paid fortnightly. Some 70% of people are paid monthly or every four weeks, he says. Continue reading...
Could anyone possible deserve a salary of £217m a year?Denise Coates is probably the most successful entrepreneur you have never heard of. She started a business, Bet365, in a Portakabin in a Stoke car park 17 years ago which is now the second largest bookmaker in Britain and one of the largest online operations in the world. She and her family, who still live in Stoke, are now worth between them perhaps half as much as the annual economic output of everyone else in the town. But is she – is anyone – really worth the £217m salary she paid herself this year? That made her Britain’s highest-paid executive by an astonishing margin: the previous record salary had been held by the advertising man Martin Sorrell, who was paid a comparatively pathetic £48.1m last year. For comparison, the chairman of Goldman Sachs, Lloyd Blankfein, made only $22.3m – and by far the greatest part of that was in stock options. Cristiano Ronaldo, the best-paid sportsman in the world, is arguably overpaid for what he does, with an estimated annual income four times as much as the banker – but that isn’t even half Ms Coates’s.By all accounts she is a modest and decent person. She built the business from nothing, through hard work and a willingness to make bets rather more sensible than those of her customers. She does not represent the most rapacious and damaging forms of the industry, the fixed-odds betting terminals. Unlike her rivals, she has not moved operations abroad to dodge tax. But to take nearly half the year’s profits as salary for herself is a cause for bogglement. It outrages any egalitarian instinct. There comes a point where the sheer quantity of money defeats the imagination. How much work would be needed to spend all that, and, to spend it all again next year? Her success makes a serious point about inequality. If anyone deserves to be so rich, she does. Yet instinct tells us no one does, and instinct here is right. Continue reading...
Стоимость биткойна в пятницу снизилась более чем на $1000 после того, как в среду ее курс достиг исторического максимума в $7888.
During his trip to London this week, US Commerce Secretary, Wilbur Ross, wasn’t only defending revelations in the Paradise Papers that he’d invested in a shipping company with ties to the Putin family. He also attended a “closed-door meeting” with executives from JPMorgan, Goldman, HSBC and other banks. The meeting took place over lunch in the exclusive St James’s District (hedge fund land these days) at Wiltons restaurant. Wiltons, if you’re not familiar with it, started as an oyster stand in 1742 before developing a clientele of English aristocrats and foreign dignitaries and latterly, bankers. Ian Fleming, creator of the James Bond novels and bon vivant, listed it as one of his top 10 restaurants in the 1950s. During lunch, the banks warned Ross that time is running out for the UK government. The failure to provide clarity on Brexit means that they will be forced to start moving jobs out of London. According to the FT: A group of large financial institutions with big London operations, led by Wall Street’s pre-eminent banks, have told the US commerce secretary that Britain’s unstable government and slow progress in Brexit planning may force them to start moving thousands of jobs out of City in the near future. The warnings came on Friday during a closed-door meeting between executives from the banks, which included JPMorgan Chase, Goldman Sachs and HSBC, and Wilbur Ross during the US commerce secretary’s visit to London, according to people briefed on the discussions. Those briefed on the talks, which were held over lunch at Wiltons restaurant in London’s exclusive St James’s district, said the banks were particularly concerned by the failure of Britain to provide clarity over whether it will secure a transition deal to smooth the changing regulatory regime after the UK leaves the EU. They warned they had even less clarity over what a final Brexit deal will look like. Absent clarity from the government about post-Brexit plans, the executives said jobs would move back to the US or to other European capitals as banks begin to enact their worst-case contingency plans, the sources said. ”There was broad discussion around the lack of progress in the Brexit talks and some discussion around various political scenarios,” one person briefed on the talks said. Not surprisingly the banks declined to comment when contacted by the FT, which also discovered that Morgan Stanley failed to show up to the gathering. Shame on it. The FT’s anonymous sources emphasized that bank executives communicated a greater level of anxiety regarding Brexit negotiations than in the past. Decisions on job relocations are imminent, as FT explains: US banks have been among the loudest critics of Britain’s decision to leave the EU since last year’s referendum, with Goldman boss Lloyd Blankfein recently tweeting he anticipated “spending a lot more time” in Frankfurt post-Brexit. But the recent warnings in private meetings with Mr Ross — as well as similar soundings taken by the City of London Corporation, the capital’s local government, on a fact-finding mission to Wall Street and Washington — included a level of urgency not seen in previous criticisms, those present said. The banks warned Mr Ross that a “point of no return” is fast approaching, when they must start moving jobs, capital and infrastructure in order to meet the March 2019 Brexit deadline if no transitional deal is secured. In London’s City A.M. financial newspaper yesterday, the City of London’s policy head, Catherine McGuinness, highlighted rising nervousness in the US financial sector about Brexit. City of London Corporation's policy chief Catherine McGuinness was told the sector had moved beyond its initial "surprise" and "curiosity" at the events unfolding on this side of the Atlantic, with fear creeping in that no real movement had been made since last summer's referendum. “The message was that this is taking too long and it may have implications beyond your borders," McGuinness said. "[They] are becoming nervous," she said. "It wasn’t just curiosity, it was concern at the lack of progress that we have been making, and nervousness that it had implications beyond Europe’s borders in terms of causing disruption to markets.” While New York expects to benefit from some of the disruption, the overriding sense was that Brexit could cause global ripples if progress failed to materialise, she added. Fears that the UK would simply "crash out" were also growing. She was speaking after a three-day fact-finding mission, where she met US Treasury officials, as well as Commodity Futures Trading Commission (CFTC) chairman Chris Giancarlo, and representatives from the International Swaps and Derivatives Association (ISDA). McGuinness noted that the recent IRSG report, which set out a blueprint for how financial services might continue to do business after Brexit, had been welcomed in the States. But she acknowledged that progress on the matter back home was painfully slow, saying she had "very little sense" of when - or if - a financial services position paper could be expected from the government. Back to the lunch between Ross and the bankers, the one positive note which emerged for the UK government is that the prospect of a Labour government headed by Jeremy Corbyn fills them with dread. That’s scant consolation, however, as the banks are believed to have drawn up contingency plans to shift 10,000 jobs out of London in the short-term. This number was confirmed by the Bank of England last week. However, the FT notes a much larger exodus is possible if the government fails to set up a transitional deal as part of Brexit. Sam Woods, deputy governor (of the Bank of England), said that a longer-term 75,000 job-loss figure cited in a previous report by Oliver Wyman, the consultancy, was “plausible”. Mr Woods also said that a transitional deal was an asset whose value diminished through time, as banks scrambled to get in place for March 2019. Still, we wonder how sympathetic to London’s Brexit challenges Ross was during the lunch. After all, this is the man who said last December that Brexit was a “God-given opportunity” for other countries to take business away from the UK. Finally, it also crossed our minds as to who picked up the bill? We doubt that it was Ross, or Deutsche Bank, if it was invited. Our guess is Goldman, but what was the catch?
The ink wasn't even dry yet on the just published Republican Tax Cut And Jobs Act, and within the hour UBS was already confident that it has virtually no chance of passing: As UBS chief economist Seth Carpenter wrote shortly after the publication, "to our read, the release confirms our view that tax reform is far from being a done deal. The bill contains several specifics that we believe will prove sticking points, which increase the difficulty of finding the votes to support the plan in both the House and the Senate." Fast forwarding to Carpenter's conclusion: "We maintain our view that tax reform is unlikely this year or next." To be sure, banks have a right to be skeptical: after all with the economy already growing above 3%, the last thing financial institutions want is for another burst of output courtesy of fiscal stimulus. Last week, Lloyd Blankfein said as much when the Goldman CEO warned "now’s not the best time for tax cuts", a view diametrically opposite that of his former "right hand man", Gary Cohn, currently Trump's chief economic advisor, who said this is precisely the right time for more tax cuts. “I can’t say this is the moment where you want the most fiscal stimulus in the market, when we’re mostly at full employment, when GDP last registered at 3 percent,” Blankfein said Thursday in a Bloomberg Television interview. “I don’t know that this is the moment that you provide the biggest stimulus.” Goldman CEO's skepticism was obvious in a report released this afternoon by economic Alec Phillips, who looked at the tax plan released on Friday, and said that while Goldman still assigns a two-thirds chance of tax reform passing, it conceded that "now comes the hard part." First, here are the big picture details: Tax Reform: Now Comes the Hard Part The recent release of the House tax reform bill marks the start of the second, harder, stage of tax reform. The plan cuts the corporate tax rate to 20% and reduces taxes on individual and “personal business” income while staying within the $1.5 trillion (over 10 years) cost limit recently agreed to in the House and Senate. Achieving all three goals had appeared quite difficult in our view but the proposal does it, according to the official estimates. The House proposal includes substantial reforms. However, this greater-than-expected base broadening has already generated some political opposition, which is likely to lead to changes to the House bill as it moves forward. The Senate is likely to release its own version with even greater differences within the next week or so, in our view. The proposed tax cut is more front-loaded than we have expected; official estimates suggest a tax cut of 0.75% of GDP in 2018. However, we expect the final version to have a smaller near-term effect as competing priorities lead tax-writers to phase in some cuts—particularly corporate rate cuts—over time. Senate Republican centrists have already expressed concerns about the cost and might balk at tax cuts that expire after five years, since the true ten- year fiscal cost would rise if they were extended. The net tax cut appears to be weighted more heavily toward individual and “pass-through” income than to the corporate sector. This is surprising considering the proposed immediate and permanent 20% corporate tax rate, but appears to be the result of substantial base-broadening, new restrictions on cross-border corporate activity, and the fact that several existing tax incentives are set to expire, which offsets a portion of the net tax cut under the legislation. We continue to believe that tax legislation has around a two-thirds chance of becoming law by early 2018. The release of the House legislation is a positive step in that it moves the process forward. It also demonstrates that meaningful base-broadening might be more achievable than we have believed. However, it does not alter our outlook for the odds of enactment, since the Senate is likely to release its own bill shortly and the vote in that chamber represents the greater obstacle to passing tax reform. Hatzius lays out the key underlying details for his current outlook: There are good reasons to believe that tax legislation will become law in the next few months and we believe there is a 65% chance of enactment by Q1 2018. First, tax reform—and a net tax cut—is an area where the President and most congressional Republicans generally agree. This is notable, since there are substantial differences within the Republican Party on a number of other issues, including immigration, infrastructure, international trade and health reform. Second, congressional Republicans face a difficult midterm election in 2018 and many lawmakers believe Republican prospects would be improved by a major legislative achievement before voters head to the polls. As Exhibit 1 shows, Republicans tend to be more supportive of most of the general aspects of tax reform than Democratic voters, though some tax changes are more popular than others; middle-class tax cuts and small-business relief enjoys broad support, while corporate tax cuts do not. Third, tax legislation can pass in the Senate with only 51 votes, instead of the customary 60 votes, through the budget reconciliation process. Now that a majority of the House and Senate have passed a budget resolution calling for a tax cut of up to $1.5 trillion over ten years, the odds would seem low that they would fail to follow through in passing the tax legislation itself. Nevertheless, there are still a number of ways that the effort could run off the rails. First, tax reform is much harder than tax cuts. The recently introduced House proposal is a case in point. While the proposal achieves meaningful reductions in individual and corporate tax rates, it also targets a number of specific tax benefits and several important constituencies have come out against the bill. This is the main risk to passing tax reform with only Republican votes, in light of the slim Republican majorities in both chambers. Second, although House and Senate majorities voted in favor of a budget resolution including an instruction to cut taxes by up to $1.5 trillion over ten years, a few of these lawmakers have expressed some hesitation regarding the tax legislation itself. Senator McCain (R-AZ), for example, has called for the legislation to be considered under “regular order” and might not support a tax bill passed via the reconciliation process. Senator Corker (R-TN) supported the budget resolution but has left open the possibility that he would oppose the tax bill itself if he feels it would add to the deficit beyond the estimated revenue gain from economic growth effects and the cost of extending expiring provisions. Third, while few argue against the concept of revenue neutral reform that lowers statutory tax rates and broadens the tax base, there are good arguments against a large net tax cut at the moment, including a high debt-to-GDP ratio, growing fiscal imbalances projected over the coming decade, and an economy with little remaining slack. This stands in contrast to the 1981 and 2001 tax cuts, when the federal budget was projected to run surpluses, the debt-to-GDP ratio stood at less than half of its current level, and the economy was in recession. That said, the tax cut is not that large; nearly $500 billion in expiring tax provisions were likely to be extended regardless of tax reform, so the net revenue loss over ten years compared to our and most other realistic projections is only around $1 trillion (0.4% of GDP). The increase in GDP that would result from a tax cut would reduce the net cost slightly further. Next, Phillips breaks down the key components of the Tax Cut And Jobs Act, whose core principles are summarized as follows: On November 2, the House Ways and Means Committee released its Tax Cuts and Jobs Act (TCJA). The proposal makes more substantial changes than are implied by its estimated cost. The House plan achieves a 20% corporate tax rate and tax relief for individuals and “personal business income” while staying within the $1.5 trillion (over 10 years) limitation on cost recently agreed to in the House and Senate. Achieving all three goals had appeared quite difficult but the proposal managed to do this, according to estimates from the Joint Committee on Taxation (JCT); the most recent estimate puts the total revenue loss at just over $1.4 trillion over ten years. Here, instead of repeating Goldman's take on all the core aspects of the TCJA, we summarize the progression of tax reform courtesy of the following summary chart: Which the brings us to Goldman's critical discussion on "the way forward", or what happens next. Exhibit 8 below summarizes Goldman's expectations regarding the timeline for consideration of tax reform over the next few months. The House Ways and Means Committee is scheduled to begin its “mark up” of the TCJA on Monday, November 6. This is likely to take several days, and will involve the consideration of dozens (potentially over 100) amendments to the proposal, followed by a vote on the package as amended. House Republican leaders hope to pass the bill on the House floor the week of November 13, but might have to postpone the vote until after the Thanksgiving recess (the week of November 20) if there is insufficient support and further changes become necessary. In our view, there is little risk that the committee will fail to pass the bill, but a good chance that objections from some Republicans could delay passage by the full House until after Thanksgiving. That said, we believe there is a high probability of House passage by December. How about the Senate? The Senate Finance Committee might release its own proposal late in the week of November 6, though it is also quite possible this could be delayed. Although Senate Republican leaders have expressed hope that the Senate might be able to pass tax reform legislation by the end of November, this seems unlikely to us. Passage in December is certainly possible, however, in our view. We assume that a conference committee between the House and Senate will be necessary to resolve differences between the two bodies, which would probably delay final enactment until early 2018. That said, it is conceivable that the House could instead simply pass the Senate’s version of tax reform, which might allow for enactment before year-end. We continue to see enactment in early 2018 as the base case, though we note that market perceptions could shift substantially before then. For example, a successful Senate vote in December could lead market participants to place a high probability on eventual enactment, since the Senate vote is widely seen as the greatest risk to passage. In summary, Goldman continues to believe there is a 65% chance that Congress will approve a tax bill by Q1 that results in a net tax cut of about $1 trillion (0.4% of GDP) over ten years (an amount similar to the tax cut under the TCJA, adjusting for scheduled expiration of tax incentives under current law) by Q1 2018. By comparison, prices in the online prediction market PredictIt imply a 60% probability that a corporate tax cut will be enacted by the end of Q1 2018, and around a 30% chance it would be enacted prior to year-end, down from over 80% early in the year. What about the market? The relative performance of our equity strategists’ basket of high tax stocks vs. the S&P 500 suggests that expectations have come down further. Even after adjusting for dollar depreciation—low tax stocks tend to have more foreign exposure so the relative performance might also be driven by the value of the dollar— the basket suggests that market expectations for tax reform that benefits high tax companies more than low-tax companies are not much greater now than they were prior to the election. What may be taking place, according to Phillips, is that In light of the House proposal’s 20% rate combined with substantial base broadening and base-erosion protections, the market might soon assign a higher probability that the high tax rates faced by some companies— particularly those with a largely domestic focus— might converge with the low effective tax rates that some US-based multinationals pay. As a reminder, while the statutory US tax rate is 39%, the effective US tax rate of 27% has never been lower. In this light, the Trump tax cuts, contrary to Steven Mnuchin's observations, will soon be seen as a non-event, especially if Goldman is correct, and the agreed upon corporate tax rate end up being 25%...
While Bitcoin bulls will probably never have it so good as they have in 2017, we wonder whether many of them have stopped to think about the environmental downside of this roaring bull market. After all, back in the dot.com boom, people had ideas about potential internet businesses, issued pieces of paper representing ownership and watched their prices go parabolic parabolic. All it took was a Powerpoint presentation, some computer programming expertise and a “research” report, courtesy of Mary Meeker, Henry Blodgett et al. The environmental downside we’re referring to in Bitcoin is, of course, is energy. We alluded to this in a constructive way here when we noted that a new Bitcoin mining hub is developing in Iceland, where the natural temperature dramatically reduces the cost of cooling computing hardware. The primary energy requirement, however, goes into the computing power to “mine” the Bitcoins. The Bitcoin mining industry can consume 24 terawatt hours of electricity and still be profitable – the Motherboard website provides some context... Bitcoin's incredible price run to break over $7,000 this year has sent its overall electricity consumption soaring, as people worldwide bring more energy-hungry computers online to mine the digital currency. An index from cryptocurrency analyst Alex de Vries, aka Digiconomist, estimates that with prices the way they are now, it would be profitable for Bitcoin miners to burn through over 24 terawatt-hours of electricity annually as they compete to solve increasingly difficult cryptographic puzzles to "mine" more Bitcoins. That's about as much as Nigeria, a country of 186 million people, uses in a year… De Vries also estimates that the worldwide Bitcoin mining industry is now using enough electricity to power 2.26 million American homes. A rapid “Google” later and we discovered that there are 125.8 million American households, so almost 2%. Another way of looking at Bitcoin’s energy consumption is divide the electricity use in Bitcoin mining each day by the number of daily Bitcoin transactions. As the Motherboard notes, each Bitcoin transaction now requires the same amount of electricity needed to power the average American household for one week. Expressing Bitcoin's energy use on a per-transaction basis is a useful abstraction. Bitcoin uses x energy in total, and this energy verifies/secures roughly 300k transactions per day. So this measure shows the value we get for all that electricity, since the verified transaction (and our confidence in it) is ultimately the end product…This averages out to a shocking 215 kilowatt-hours (KWh) of juice used by miners for each Bitcoin transaction (there are currently about 300,000 transactions per day). Since the average American household consumes 901 KWh per month, each Bitcoin transfer represents enough energy to run a comfortable house, and everything in it, for nearly a week. Since 2015, Bitcoin's electricity consumption has been very high compared to conventional digital payment methods. This is because the dollar price of Bitcoin is directly proportional to the amount of electricity that can profitably be used to mine it. Unfortunately for the environmentalists, the Bitcoin price – as every bull knows – entered the parabolic phase in 2017. This Bloomberg chart calculates the number of days for each $1,000 rise in price. While Motherboard states that De Vries model isn’t perfect and “makes assumptions about the economic incentives available to miners at a given price level”, the website makes the point that there is clearly a “problem”. According to Motherboard... That problem is carbon emissions. De Vries has come up with some estimates by diving into data made available on a coal-powered Bitcoin mine in Mongolia. He concluded that this single mine is responsible for 8,000 to 13,000 kg CO2 emissions per Bitcoin it mines, and 24,000 - 40,000 kg of CO2 per hour. As Twitter user Matthias Bartosik noted in some similar estimates, the average European car emits 0.1181 kg of CO2 per kilometer driven. So for every hour the Mongolian Bitcoin mine operates, it's responsible for (at least) the CO2 equivalent of over 203,000 car kilometers travelled. However, you’ve probably been thinking what we’ve been thinking. While the price is going parabolic now, Bitcoin usage might go parabolic in the future, problem solved. While it might help, De Vries pointed out the structural flaw... As goes the Bitcoin price, so goes its electricity consumption, and therefore its overall carbon emissions. I asked de Vries whether it was possible for Bitcoin to scale its way out of this problem. "Blockchain is inefficient tech by design, as we create trust by building a system based on distrust. If you only trust yourself and a set of rules (the software), then you have to validate everything that happens against these rules yourself. That is the life of a blockchain node," he said via direct message. Motherboard reflects on the cost of Bitcoin’s environmental footprint versus the benefits of a decentralized payment system which avoids the “Too Big To Fails” and their smaller brethren. This gets to the heart of Bitcoin's core innovation, and also its core compromise. In order to achieve a functional, trustworthy decentralized payment system, Bitcoin imposes some very costly inefficiencies on participants, for example voracious electricity consumption and low transaction capacity. Proposed improvements, like SegWit2x, do promise to increase the number of transactions Bitcoin can handle by at least double, and decrease network congestion. But since Bitcoin is thousands of times less efficient per transaction than a credit card network, it will need to get thousands of times better. In the context of climate change, raging wildfires, and record-breaking hurricanes, it's worth asking ourselves hard questions about Bitcoin's environmental footprint, and what we want to use it for. Do most transactions actually need to bypass trusted third parties like banks and credit card companies, which can operate much more efficiently than Bitcoin's decentralized network? Imperfect as these financial institutions are, for most of us, the answer is very likely no. It’s certainly food for thought, even for die-hard libertarians, like ourselves. Then again, perhaps less so for libertarians who’ve been loaded up with Bitcoins in the past few weeks. They would likely be more interested in the bull, bear and neutral cases for Bitcoin in the Bloomberg article linked above. Here is the summary. With the rhetoric for and against heating up this week amid bitcoin’s barrelling gains, here’s a look at where some big names in finance stand -- from those who see it as the natural evolution of money, to the naysayers waiting for the asset to crash and burn. Bitcoin’s Backers The digital currency’s evangelists are led by Roger Ver, known in the industry as “Bitcoin Jesus.” Ver remains optimistic about bitcoin’s sustainability amid attempts from governments like China to curb some of the more speculative elements of trading. “The only way to stop (bitcoin) is to turn off the entire Internet in the entire world and keep it turned off,” he said in a September interview with Bloomberg News. Some countries are jumping on the bitcoin bandwagon, with Argentina’s most important futures market considering offering services to investors in digital currencies, while Turkish Central Bank Governor Murat Cetinkaya said digital currencies may contribute to financial stability if designed well. Ronnie Moas, who for the past 13 years has made more than 900 stock recommendations via his one-man show at Standpoint Research, upped his 2018 price forecast to $11,000 from $7,500 on Friday. He maintained his $50,000 target for 2027, though he said it was conservative. Bitcoin’s Detractors Severin Cabannes, deputy chief executive officer at Societe Generale SA, was the latest big bank official to weigh in, saying that “Bitcoin today is in my view very clearly in a bubble,” in a Bloomberg Television interview Friday. Speculation around bitcoin is the “very definition of a bubble,” Credit Suisse Group AG CEO Tidjane Thiam told reporters in Zurich on Thursday. “The only reason today to buy or sell bitcoin is to make money,” and such speculation “has rarely led to a happy end,” Thiam said. Themis Trading LLC raised a red flag this week after CME Group Inc. announced plans to introduce bitcoin futures, saying the world’s largest exchange owner appeared to have “caved in” to pressure from clients. “A bitcoin future would be placing a seal of approval around a very risky, unregulated instrument that has a history of fraud and manipulation,” the firm said in a blog post. JPMorgan Chase & Co. CEO Jamie Dimon remains one of Wall Street’s most strident bitcoin opponents, saying in October that people who buy the currency are “stupid” and that governments will eventually crush it. On the Fence While CME’s decision to offer bitcoin futures by the end of the year appears to be an endorsement of the currency’s viability, CEO Terry Duffy demurred when asked whether he’s concerned about a potential bubble. “I’ve seen a lot of different bubbles over the last 37 years,” he said on Bloomberg TV. “It’s not up to me to predict if it’s a bubble or not -- what I’m here to do is to help people manage risk.” Goldman Sachs Group Inc. CEO Lloyd Blankfein isn’t sure what to make of bitcoin and is unwilling to reject the digital currency just yet. “I know that once upon a time, a coin was worth $5 if it had $5 worth of gold in it,” Blankfein said in another Bloomberg TV interview. “Now we have paper that is just backed by fiat ... maybe in the new world, something gets backed by consensus.” While Thomas J. Lee of Fundstrat Global Advisors has turned cautious on bitcoin in the short term because of its big gains, he remains a long-term bull on the digital currency -- maintaining a 2022 price target of $25,000. Unfortunately for the environmentalists, we suspect the Bitcoin horse has bolted and only the dreaded hand of government can rein it back.
Authored by MN Gordon via EconomicPrism.com, One of the fringe benefits of living in a country that’s in dire need of a political, financial, and cultural reset, is the twisted amusement that comes with bearing witness to its unraveling. Day by day we’re greeted with escalating madness. Indeed, the great fiasco must be taken lightly, so as not to be demoralized by its enormity. Of particular note is the present cast of characters. Could Bill Shakespeare himself have come up with a more flawless flock of scoundrels to take the plotless narrative from comedy to tragedy? There’s President Trump, Hillary Clinton, Paul Ryan, Mitch McConnell, Maxine Waters, Chuck Schumer, Nancy Pelosi, Robert Mueller, the Podesta Brothers, all of Congress; the list of political actors goes on and on. Moreover, it wouldn’t be complete if we didn’t also mention former A-lister’s Barney Frank and O-Bama. The political class’ efforts to climb and crawl over each other to reach the top of the dust heap and stay there are without restraint. Promises, lies, coercions, and deceits are all part of Washington’s standard operating procedures. They’ll steal from your kids and lie to grandma to get what they want. Financial actors like Jamie Dimon, Lloyd Blankfein, John Stumpf, Steven Mnuchin, Janet Yellen, various Fed Presidents, and soon to enter stage right, Jerome Powell, have their parts to play too. Namely, to extract as much savings and future earnings from the general population as possible without triggering a revolt. Tricks with No Treats Then there’s the cultural cast, perhaps the worst of all. This company includes dirt bags like Harvey Weinstein, Kevin Spacey, Bill Cosby, the Kardashians, half of the NFL, cultural appropriation police, and an endless assortment of freaks, dweebs, geeks, and weirdos. Have you heard of Caitlyn Jenner? Until very recently, the cultural actors’ primarily served to distract the public from the crimes of their cohorts in the elitist class. But now the stage spotlight shines directly on them. Their exposed skeletons are a disgrace. Still, their skeletons, along with nearly all storylines circulating, are enormous distractions. In fact, there are so many distractions it’s hard to tell what’s real. Certainly, Halloween week has provided a multitude of tricks – yet, no treats – to chew on. There was special counsel Robert Mueller’s indictment of several of President Trump’s campaign advisors. Somehow this has something to do with Russian meddling in the 2016 election. More accurately, it provides grounds for the Washington establishment to escalate their efforts to impeach Trump. Nonetheless, could there be a more one-sided witch hunt? What about Hillary Clinton and Tony Podesta? What we mean is, what is the objective of Mueller’s fiddle faddle? Is it an investigation or a cover up? This week also brought forth another trick – the House Republicans’ tax reform bill. From what we gather, the bill would result in a moderate reduction in taxes for most households. But it doesn’t really simplify things. What’s more, the tax cuts will require greater amounts of government debt to pay for them. And the problem of too much debt, after all, is already bearing down on all of us. How to Survive the Winter Many Americans have borrowed far more money than they will ever be able to pay back. At the time of their borrowing, it may have seemed like the sensible thing to do. Some borrowed money to invest in their education. Others took on massive levels of mortgage debt to buy a house in a nice neighborhood. These are both sensible things to do when the economy is in the midst of a long-term growth trend. From World War II until the turn of the new millennium these debt burdens generally worked out for people. Well-paying jobs were commonly available to bail out college graduates. Similarly, rising incomes softened the mortgage borrower’s debt burden over time. But that has all changed, especially after the Great Recession. Individual debt levels have increased. However, the means to pay off the debt have decreased. This is a gigantic problem that won’t magically go away. Who knows? Maybe prayers will be answered. Real gross domestic product (GDP) has grown at an estimated annual rate of 3 percent or more for two quarters in a row. Perhaps increasing GDP will grow the economy, and individuals, out of debt. Unfortunately, we suspect the GDP growth was fueled by record consumer debt. Thus, rather than diminishing overall debt burdens, it increases them. The point is, the Potemkin village of inflated stock and real estate prices cannot continue indefinitely. When asset prices crack, and pension funds are exposed to be in terminal arrears, exacting clarity will prevail. Federal, state, and local governments are flat broke. So, too, are corporations and consumers. Thus you should enjoy the harvest season while it lasts. You may want to pickle a few eggs to survive the winter.
Bitcoin soared past $7,450 Friday morning to a new record high. It seems everyone on Wall Street has an opinion on the cryptocurrency, from analyst Tom Lee to Goldman Sachs CEO Lloyd Blankfein. Yahoo Finance's Alexis Christoforous and Jared Blikre discuss whether or not this a sign bitcoin is going mainstream? And what it means for the value of the cyrptocurrency.
Генеральный директор Goldman Sachs Ллойд Бланкфейн сказал, что ему не нравится Биткоин, однако он открыт для криптовалют. Об этом пишет CoinDesk. Во время интервью Bloomberg на форуме, проходящем в Нью-Йорке, Бланкфейн, высказывая свое мнение о добавлении фьючерсов на Биткоин на площадку CME Group, признался, что он испытывает дискомфорт по отношению к Биткоину, поскольку он представляет собой новую технологию. Отметив развитие новых технологий, таких как мобильные телефоны, Бланкфейн сказал: «Я много лет наблюдал за эволюцией новых технологий, и многие вещи, которые изначально мне не нравились, сейчас работают довольно хорошо». «Возможно, в новом мире что-то обеспечено консенсусом… Если бы мы оказались в будущем, и Биткоин достиг бы успеха, я бы назвал это естественной эволюцией денег». В заключение Бланкфейн отметил, что он никогда не инвестировал в криптовалюты. Напомним, в прошлом месяце Бланкфейн заявил, что он «до сих пор думает о Биткоине» и что он не «одобряет и не отклоняет» криптовалюты.