Wednesday, March 15, 2017

Futures Point To Higher Open On Wall Street; Fed Rate Hike Eyed

By Sam Meredith
CNBC
March 15, 2017

U.S. stock index futures pointed to a higher open on Wednesday morning as traders eyed a probable interest rate hike from the Federal Reserve.

The Federal Open Market Committee is poised to announce its second interest rate hike in three months and third in 10 years on Wednesday. The market consensus expects the Fed to lift rates by a quarter point on Wednesday and forecast an upbeat economic outlook for the U.S.

Wednesday will also see retail sales and consumer price index (CPI) for February as well as empire state manufacturing survey data for March released at 8.30 a.m ET. Business inventories for January and national association of home builders (NAHB) data for March are both scheduled to be released at 10 a.m ET.

On the earnings front Oracle, Guess and Jabil Circuit are all due to report after the market close.

In Europe, the pan-European Stoxx-600 index was around 0.34 percent higher on Wednesday morning. In Asia, the Shanghai Composite in China closed 0.08 percent higher, while the Nikkei in Japan closed 0.16 percent lower.

In oil markets, Brent crude traded at around $51.63 a barrel on Wednesday morning, up 1.39 percent, while U.S. crude was around $48.53 a barrel, up 1.7 percent.

Oil prices recovered from three-month lows in the previous session after data showed an unexpected drawdown in U.S. stockpiles.


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After Six Years, Assad Now Secure But His Country Carved Up As War Thunders On

By Samia Nakhoul
Reuters
March 15, 2017

Six years since the start of the uprising against President Bashar al-Assad, he is winning on the battlefield but Syria's civil war is far from over, with his once stable country broken into fiefdoms ruled by rebels and warlords.

While few non-partisan observers think the conflict will end soon, fewer still believe Assad can retake the whole country. But since all outside players now seem to have adjusted to his staying, no one expects a peace deal either.

Many foresee, at best, a ceasefire observed much of the time over much of a territory that will be effectively partitioned between competing forces.

During five years of stuttering negotiations between the government and the opposition, brokered by the United Nations, the United States and Russia, and more recently by Russia and Turkey, the sticking point has been whether Assad would go. Now, the starting point is that he will stay.

“We have to be realistic – he’s not leaving”, says Robert Ford, a former American ambassador to Damascus who resigned in frustration at President Barack Obama’s indecision on Syria and remains in contact with many of the conflict’s protagonists.

“After Aleppo, there is no chance" of dislodging Assad, Ford added. "That's the result of the military victory they won."

It started six years ago with protests across Syria, mainly among the country's majority Sunni Muslims, against Assad and his family's 40-year rule built around the minority Alawite community, an offshoot of Shi'ite Islam.

In March 2011, "Arab Spring" protests sweeping the region had already dislodged autocrats in Tunisia and Egypt, and would later claim the long-term rulers of Libya and Yemen, two other countries still embroiled in civil wars six years on.

Assad responded to Syria's protests with unconstrained violence, turning the uprising into a war to the death.

Western leaders including Obama predicted Assad would quickly fall. But he hung on, using the resources of the state and backing from Iran and Lebanon's Hezbollah Shi'ite militia to fight rebels funded by Arab states to a stalemate. A year and a half ago, Russia joined the war on his side, tipping the balance in his favor.

Today an estimated half a million people have been killed, half the population has been uprooted in the world's biggest refugee crisis, and the war has set new standards of savagery in its impact on civilians.

Most of the world's major powers and regional states have backed proxy forces in a complicated multi-sided conflict, while the Islamic State jihadist group, at war with everyone else, declared a caliphate straddling the border with Iraq.

Anti-Assad rebels, split between nationalists and Islamists, are splintered and abandoned by their half-hearted patrons. International actors - Russia, Iran, the United States and Turkey - crowd an ever more confusing battlefield.

And Assad is still there, proclaiming he will reconquer every inch of a devastated country shattered into ruins.

Resembling Lebanon And Iraq

Since Russia stormed into Syria 18 months ago, Assad has surged from the verge of a collapse among his depleted loyalist forces to a formidable position of military strength.

His recapture in December of the rebel enclave in Aleppo, their last urban stronghold, was a major turning point in the war and left the insurgents bottled up in rural Idlib province and battling each other.

Syria now faces a situation that could resemble neighboring Lebanon at several stages of its 1975-90 civil war, when it was carved into fiefdoms by competing militias, with long lulls in fighting punctuated by violent cataclysms.

It could also share some traits with Iraq after the first Gulf War, which left its former ruler Saddam Hussein in power for more than a decade as a global pariah, with his legitimacy in question and his economy strangled by sanctions.

Andrew Tabler, a Syria specialist at the Washington Institute for Near East Policy think-tank, does not see anyone, much less Assad's allies Russia or Iran, ordering the president out, although he can still imagine a violent end for Assad.

“I don’t see Russia or Iran asking him to step down, but we do have to prepare for an eventuality in this volatile environment that Assad may be targeted for assassination because of how much of a barrier he is to a settlement - him personally."

Assad himself, asked in an interview if he had thought about leaving Syria, said: “Never. After six years, the most difficult time has passed, which was in 2012-13. Those times we never thought about (leaving), how could I think about it now?"

For the former ambassador Ford, who once saw Assad's demise as inevitable, the flip side of him now seeming impregnable is that his opponents can never accept his continued rule.

Among the millions of Syrian refugees and internally displaced, many cannot return to homes in areas they see as subject to the tyranny of rule by Assad's secret police, which the opposition blames for hundreds of thousands of deaths.

Converging Interests


Nevertheless, an emerging international consensus in practice favors pro-Assad forces, illustrated by events around the northern town of Manbij this month, when Washington sent its first openly acknowledged regular ground troops.

The small U.S. force was sent to separate Kurdish fighters Washington has supported from rival Arab rebels backed by Turkey near the town. By blocking any advance of the rebels, the U.S. move was seen as a tacit endorsement of the presence of Assad's Russian-backed forces in the area.

“The Americans are cooperating with the Russians in a way that is going to help complete the regime’s victory in Syria," says Eugene Rogan, professor of modern Middle Eastern history at the University of Oxford, of the U.S. moves in Manbij.

Syria watchers say a patchy ceasefire in place now - brokered by Russia and Turkey - could be consolidated. But they believe Assad will eventually try to annihilate the rebel forces pushed into rural Idlib, one village at a time.

Yet Assad and his patrons will always face the constraint of limited manpower, which stretches his forces ever thinner the more territory he regains and makes his troops more exposed to attacks by opposition groups and jihadis of Islamic State.

Recent deadly attacks inside government-held cities, on a military intelligence headquarters in Homs and on Iraqi Shi’ite pilgrims in Damascus, underline the threat, which Assad's refusal to compromise could magnify.

“If you’re Iran and Russia and you know Assad's manpower limitations and political rigidity you have a problem," says Tabler. “You have to cut a deal so that Iran and Russia don’t have to surge troops into Syria, which is their dilemma."

Ford, after informal recent discussions with Russian experts familiar with Moscow's policy, says the Russians believe the Syrian army is exhausted and that it would be difficult for Assad to recapture all of the country.

Since Assad cannot hope to run Syria with the iron centralized control he once exercised, there needs to be decentralization, Ford said, noting that Moscow had proposed a less-centralized constitution but Assad had rejected it.

That leaves the likely outcome continued de facto partition of Syria, even if Assad continues to make incremental gains.

“The only way to avoid partition, without a peace agreement, is for the Syrian government to recapture the whole country and that could take years," says Ford.

Boundaries are fluid, but at present Assad and his allies will probably keep control of the main population centers, from Aleppo in the north to Deraa in the south, including the coast and the capital, Damascus. Many of the millions of people who fled those areas are unlikely to return soon.

Turkey and a rebel force that it backs hold a pocket in the far north, while other rebels retain their big enclave in Idlib and west of Aleppo. The Syrian Kurds control areas in the northeast and northwest.

The next year will probably see an attempt to push Islamic State from Raqqa, its citadel on the Euphrates river in northeast Syria. The United States seems intent on relying on Kurdish fighters for that assault, to the chagrin of Turkey which views the main Syrian Kurdish force as enemies.

Joshua Landis, director of the Center for Middle East Studies at the University of Oklahoma, said Assad's continued rule was increasingly - if tacitly - accepted by the forces that have called for his downfall.

But Landis and others conclude that even if the West and Syria’s neighbors accepted Assad’s partial reoccupation of the country, it would not mean the international community would embrace him, much less help pay for Syria’s reconstruction.

“The entire western world hates Assad and they’re going to squeeze him economically," Landis said. “He’s not going to be reintegrated, he’s going to be like Iraq used to be under Saddam Hussein."


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Republicans Weigh Health Bill Changes As Doubts Mount

By Susan Heavey and Susan Cornwell
Reuters
March 15, 2017

The White House and congressional leaders said on Tuesday they were weighing changes to their plan to dismantle the Obamacare health law as Republicans' questions mounted following an estimate that it would cause 14 million Americans to lose insurance next year.

Press Secretary Sean Spicer said White House officials and leaders in the Republican-controlled House of Representatives were considering whether to tweak their bill, which faces growing doubts within party ranks.

"Obviously we're going to make some modifications," House Speaker Paul Ryan told Fox News, although he said the bill would remain largely intact.

The nonpartisan U.S. Congressional Budget Office estimated on Monday that by 2026, the plan would boost the number of people without health insurance by 24 million.

Those findings prompted a few Republican defections and made it tougher for Republican President Donald Trump to sell his first major piece of legislation. Trump hopes to deliver on a longtime pledge by his political party to undo former Democratic President Barack Obama's signature domestic policy achievement.

Trump spoke by phone on Tuesday with Ryan and with Joseph Swedish, chief executive of managed care company Anthem Inc. He also has hosted Republicans at the White House.

"Part of the reason we are engaging with these individuals is to hear their ideas," Spicer said. "We are obviously in talks with House leadership about the contents."

The debate comes as voter interest in the issue rises. Healthcare was a top priority for Americans, according to a Reuters/Ipsos poll of 1,747 people in March. Sixteen percent picked healthcare as their No. 1 issue, compared with 14 percent for the economy and 11 percent who chose terrorism.

It was the first time healthcare topped the list since the poll started in 2012. The poll has a credibility interval, a measure of accuracy, of 3 percentage points.

Republicans' plan to replace the 2010 Affordable Care Act, popularly known as Obamacare, would repeal a penalty against Americans who do not buy health insurance and slash spending on the Medicaid program for the poor and disabled.

It would also revamp tax subsidies that help people buy insurance if they do not get it from work. The amounts would be based on age, not income.

Democrats say the Republican plan would hurt the elderly, the poor and working families but give tax cuts to the rich. Doctors, hospitals and advocates for patients and senior citizens also have panned it.

After the CBO report, some House Republicans pulled support. Representative Leonard Lance of New Jersey, who said the report "modified the dynamic," said the bill could not pass the Senate.

Representative Ileana Ros-Lehtinen, who is from south Florida, tweeted: "As written the plan leaves too many from my district uninsured."

Spicer said the CBO struggles to estimate insurance coverage. Before the 2010 law passed, the office projected more people would buy individual insurance plans through new online marketplaces than actually did.

The White House, however, has promoted the CBO's estimate of the plan's effect on federal deficits. The report said it would cause deficits to fall by $337 billion between 2017 and 2026.

Changes Possible


Trump's administration must heal divisions in his party. Moderates, particularly in the Senate, worry about causing people to lose coverage, while conservatives do not think the bill goes far enough in undoing Obamacare.

House leaders have resisted a conservative push to bring a quicker end to Obamacare's expansion of Medicaid. But they are considering changes to tax credits to help older, lower-income Americans.

The CBO said that group could see higher premiums because the Republican plan would let insurers charge older enrollees more than they can under Obamacare.

Representative Kevin Brady, who heads a tax-writing committee, said the House was exploring options, but gave no details. John Thune, the third-ranking Senate Republican, has proposed modifying the plan's insurance tax credit to help lower-income Americans.

Republican senators had lunch on Capitol Hill with Vice President Mike Pence and Health and Human Services Secretary Tom Price to discuss possible changes. Majority Leader Mitch McConnell said the bill could be amended in the Republican-controlled Senate.

Shares Fall


Shares of hospitals and health insurers slipped, partly on worries the plan would mean fewer insured patients.

Among insurer stocks, UnitedHealth Group Inc closed down 0.7 percent, and Aetna Inc and Humana Inc each dipped 0.5 percent.

“It looks like it's going to be the dismantling of the individual insurance market, which again means lower revenues,” said Vishnu Lekraj, an equity analyst at Morningstar.

Hospital shares were also lower. Tenet Healthcare Corp finished down 3.3 percent and HCA Holdings Inc ended down 1.5 percent.


Article Link To Reuters:

Fed Will Raise Rates Up To Four Times This Year

By Gemma Acton
CNBC
March 15, 2017

The U.S. Federal Reserve is set to raise interest rates between three and four times this year, the chairman of JPMorgan Chase International told CNBC on Wednesday.

Speaking from the IIF conference in Frankfurt, Jacob Frenkel explained that each one of the economic conditions that the Fed had set for itself in order to justify the commencement of rate rises had now been satisfied.

"Economic activity in the U.S. is now much more robust than it was, the unemployment rate is at a very, very low level, the composition of unemployment is also healthy, the duration of unemployment is lower. And also inflationary pressures are now coming more towards the 2 percent target of the Fed," Frenkel outlined.

Following a consensus-beating jobs report last Friday, financial markets have now fully priced in the probability of a Fed rate hike of 25 basis points when the rate-setting Federal Open Market Committee (FOMC) finishes its two days of deliberations later on Wednesday.

However, this month's anticipated rate rise should be interpreted as only the first of many such moves over the next 12 months, given that we are still so far away from a reasonable long-term configuration of interest rates, Frenkel said.

"We are still very close to zero while the normal configuration is around 3 percent or so…one needs to take the journey to go there," he affirmed.

"We should not think about it as a single step, we should think about it as a journey, as a strategy," Frenkel added.

Warning of the dangers of maintaining an irregular interest rate environment for too long, Frenkel said that by this time next year, U.S. interest rates should be at least one percentage point higher than their current range of between 0.25 percent and 0.50 percent.

"Late normalization is costly, it creates distortions, it affects the financial markets, it gives superficial, artificial boosts to financial investments instead of real investments. After all, we want to see economic growth, we want to see job creation and this is only going to be done if there are investments in plants and equipment," he said.

Considering the effect of a potential U.S. rate rise on other countries, Frenkel pointed to the exchange rate implications for Europe should the continent's central bankers maintain a much looser monetary policy as could continue to befit the situation in the view of regional policymakers.

He added that the anticipated depreciation of the euro versus the dollar in the wake of policy divergence could actually benefit the region.

"Europe needs to have higher productivity, higher profitability and therefore a weaker euro is serving Europe. So it is in this case, the U.S. raising rates is helping Europe and it will end up in a virtuous cycle."


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Trump May Have Leaked His Own Tax Return

By Christine Wang 
CNBC
March 15, 2017

President Donald Trump may have leaked his own 2005 tax return, according to the Pulitzer-prize winning investigative reporter David Cay Johnston.

Johnston said he obtained the document by mail. He subsequently shared those findings exclusively with MSNBC's Rachel Maddow on Tuesday.

"By the way, let me point out that it's entirely possible that Donald Trump sent this to me. Donald Trump has, over the years, leaked all sorts of things," said Johnston, founder of DCReport.org.

The second page of the documents obtained by Johnston are stamped "Client Copy," leading to speculation on Twitter that they may be Trump's own copy.

It has been reported that Trump posed as his own publicist under the names "John Miller" and "John Barron." The real estate mogul has denied this, despite recordings that reveal the two had remarkably similar voices.

The longtime reporter said that Trump has a "long history of leaking material about himself when he thinks it's in his interests."

The tax documents aired on MSNBC match figures given by the White House in a Tuesday statement, which said Trump had paid $38 million in taxes on income of more than $150 million for 2005.

The documents indicate that Trump paid an effective tax rate of about 24 or 25 percent. But Trump could have paid a lot less, if not for the alternative minimum tax, something he has said he'd eliminate.

Trump paid "no more tax than legally required," a spokesperson for the White House said in response to MSNBC's report. The full statement is below:

"Before being elected President, Mr. Trump was one of the most successful businessmen in the world with a responsibility to his company, his family and his employees to pay no more tax than legally required. That being said, Mr. Trump paid $38 million dollars even after taking into account large scale depreciation for construction, on an income of more than $150 million dollars, as well as paying tens of millions of dollars in other taxes such as sales and excise taxes and employment taxes and this illegally published return proves just that. Despite this substantial income figure and tax paid, it is totally illegal to steal and publish tax returns. The dishonest media can continue to make this part of their agenda, while the President will focus on his, which includes tax reform that will benefit all Americans."


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Hoping For An Inheritance? You May Not Get As Much As You Expect

Keeping inheritance expectations realistic can help avoid disappointment and conflict later.


By Suzanne Woolley
Bloomberg
March 15, 2017

Everyone should be grateful to receive an inheritance, and no parent wants to leave their offspring with nothing. But just 21 percent of those who plan to bequeath money to their children tell them how much money they'll get. When kids do find out the size of their inheritance after a loved one passes away, it's often less then expected. It can add an unwanted feeling—disappointment—into an already-volatile emotional stew.

More than half of 2,700 adults surveyed for Ameriprise Financial late last year expect to get an inheritance of more than $100,000. Among those who had already received an inheritance, about the same percentage (52 percent) got less than $100,000.

The survey focused on Americans between the ages of 25 and 70 with at least $25,000 in assets. Some 83 percent plan to leave money to loved ones. If those heirs have unrealistic expectations, it can lead to family tension later, said Marcy Keckler, vice president for financial advice strategy at Ameriprise.

Half of the boomers surveyed plan to leave at least $500,000 to their kids. Forty-seven percent of Gen Xers and 33 percent of millennials wanted to leave that much as well. While the survey found that the majority of those who had already inherited got less than $100,000, perhaps the portfolios of those benefactors hadn't lived through an eight-year bull market.



Family conflicts often arise when money mixes with grief. Almost a quarter of those surveyed expect family members will have disagreements after they learn the terms of the will. That proved true for 25 percent of those in the survey who were left money.

For parents, sometimes the issue is whether to leave amounts to children that are fair, or that are equal. That can become an issue if one child is wildly successful, while another struggles financially.

There's no way to eliminate these conflicts, but you can minimize them, said Eric Reich, a certified financial planner with Reich Asset Management in Marmora, N.J. His clients create what's called an "ethical will," which is a letter, document, or video that explains to kids why their parents divided assets the way they did.

Addressing potential conflicts while everyone is still alive is an even better strategy. Reich asks parents to get feedback from their children on what each one really wants from the estate. Usually "it's not money, but items of sentimental and/or intrinsic value," he said. "Most often the things that a particular child values most, the parents had no idea they even wanted to inherit."

Jewelry usually causes the most problems, Reich said, especially pieces that have been passed down generations. And siblings can hold grudges for a long time. "I've actually seen two very close siblings who have not spoken for the past 15 years over a piece of furniture, an antique breakfront cabinet valued at $10,000 in an estate valued at $3 million," he said.

It may be less anxiety-inducing if parents give children an estimation of what they hope to leave them. "I recommend parents give children some frame of reference," said Keckler. By setting proper expectations, the inheritance will be "less of a source of tension later," she said.

Beloved animals may also receive money if an owner dies. Some 5 percent of the people surveyed said they wanted to leave money behind for care of a pet.

Whatever the intent, few will match what is perhaps the largest inheritance left to a pet ever: $12 million, from New York hotel heiress Leona Helmsley to her maltese, Trouble. She left her two grandsons out of the will.


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Trump Paid $38 Million In Taxes In 2005

By Eric Beech and Emily Stephenson
Reuters
March 15, 2017

President Donald Trump paid $38 million in taxes on more than $150 million in income in 2005, the White House said on Tuesday, responding to an MSNBC report that the network had obtained two pages of the returns.

MSNBC host Rachel Maddow said she received the documents from journalist David Cay Johnston, who said on her show that he received them in the mail.

The returns, which MSNBC posted on its website, showed Trump paid an effective federal tax rate of 25 percent in 2005 after writing off $100 million in losses.

The White House said in a statement that Trump took into account "large scale depreciation for construction."

Trump has repeatedly refused to release his tax returns, drawing criticism throughout his campaign last year and speculation from his political rivals he was hiding something.

A New York Times report in October said Trump, a New York real estate developer, declared a $916 million loss on his 1995 income tax returns. The newspaper said the large tax deduction could have allowed him to avoid paying federal income taxes for up to 18 years.

But the returns posted by MSNBC on Tuesday showed that he did pay taxes in 2005. The returns do not indicate whether he paid taxes in other years or how much he might have paid. The Washington Post reported last year that Trump paid no federal income taxes for at least two years in the late 1970s.

The White House said in a statement on Tuesday that Trump, as head of the Trump Organization, had a responsibility "to pay no more tax than legally required."

Presidents and major candidates for the White House have routinely released their income tax returns.

Trump says he has not released his tax returns because they are under audit by the Internal Revenue Service. Experts say an IRS audit does not bar someone from releasing the documents.

During a September presidential debate, Democratic candidate Hillary Clinton criticized Trump, a Republican, for paying no federal income taxes.

"That makes me smart," he responded.

Trump has feuded with the media since his inauguration, often accusing it of promoting "fake news" intended to undermine his presidency.

"The dishonest media can continue to make this part of their agenda, while the President will focus on his, which includes tax reform that will benefit all Americans," the White House said on Tuesday.


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China Does Not Want To See Trade War With U.S.: Premier Li

Reuters
March 15, 2017

China's Premier Li Keqiang said on Wednesday that Beijing does not want to see a trade war with the United States and urged talks between both sides to achieve common ground.

"We do not want to see any trade war breaking out between the two countries. That would not make our trade fairer," Li said at his annual news conference at the end of the annual meeting of China's parliament.

"Our hope on the Chinese side is that no matter what bumps this relationship hits, we hope it will continue to move forward in a positive direction," he said.

"We may have different statistical methods, but I believe whatever differences we may have we can all sit down and talk to each other and work together to find solutions," Li said.

Issues that cannot immediately be solved should be "shelved" for the time being, he added.

U.S. media have reported that U.S. President Donald Trump and Chinese President Xi Jinping will meet in Florida next month.

Trump has attacked China on issues ranging from trade to the South China Sea and what he perceives as China's lack of interest in reining in nuclear-armed North Korea.

During the election campaign, Trump had threatened to label China a currency manipulator and impose huge tariffs on imports of Chinese goods.

He has not followed through on either move yet, but the U.S. Treasury will issue its semi-annual currency report in April.

China's trade surplus against the United States was $366 billion in 2015.

Last month, Trump held his first face-to-face talks with a member of the Chinese leadership, top diplomat Yang Jiechi, who outranks Foreign Minister Wang Yi. The White House said it was a chance to discuss shared security interests and a possible meeting with President Xi.

Li also reiterated in his remarks that China-U.S. relations are founded upon adherence to the "one China" policy, under which Washington acknowledges the Chinese position that there is only one China, of which Taiwan is a part.

The "one China" policy "has remained unshaken despite changing circumstances," he said, adding "this foundation cannot be undermined."

Trump incensed Beijing in December by talking to Taiwan President Tsai Ing-wen and saying the United States did not have to stick to the policy, vaguely suggesting that he may abandon the policy as part of negotiations for a better trade deal with China.

Trump later agreed in a phone call with Xi to honor the "one China" policy in a diplomatic boost for Beijing, which vehemently opposes criticism of its claim to self-ruled, proudly democratic Taiwan.

Li also said China did not seek a sustained trade surplus with the European Union, and that the imbalance "would clearly improve" if Europe exported more high-tech products to China.

The United States and the EU have long maintained export controls as security measures against China on a range of products with both military and civilian uses.

China wants access to high-tech components to move its manufacturing industries higher up the value chain, but the foreign business community has often voiced concern about weak protection of intellectual property rights and forced technology transfers in exchange for market access.


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Don't Just Roll Back Back Fuel Standards. End Them.

By Virginia Postrel
The Bloomberg View
March 15, 2017

To the outrage of environmentalists, the Trump administration plans to roll back its predecessor’s stringent gas-mileage regulations. Democratic senators are protesting and green groups are predicting lawsuits.

At issue is the Obama administration’s decree, enacted in its final days, that by 2025 automakers boost their fleets’ average fuel efficiency to more than 50 miles per gallon, up from about 35 mpg today. Car companies, who have President Donald Trump’s ear, call the targets unrealistic and warn that they’ll add at least $2,000 to the sticker price of new vehicles. Meeting the standards would likely require a huge expansion of hybrid and electric vehicles sales.

Although Congress originally established the Corporate Average Fuel Economy, or CAFE, standards to conserve gasoline in 1975, the Obama administration justified its sharp hike as a way to curb greenhouse gases under the Clean Air Act. A reversal will almost certainly trigger legal challenges.

Fighting over the right level for fuel-economy mandates obscures the fundamental problem, however. The CAFE standards are lousy environmental policy. Instead of targeting the real issue -- burning less gasoline -- the mandates meddle in corporate strategy, impose enormous hidden costs, and encourage drivers to hang on to their old gas guzzlers. Republicans should scrap the standards altogether while they control the White House and Congress. The CAFE rules are a terrible way to achieve either fuel savings or lower carbon emissions.

For starters, measuring miles per gallon is a misleading way to think about fuel efficiency. What we need is the reverse: gallons per mile. That more clearly shows how much fuel a given improvement might save. Going from 3.3 gallons per 100 miles (better known as 30 mpg) to 2 gallons per 100 miles (50 mpg) presents a much tougher design challenge than getting from 6.7 gallons per 100 miles (15 mpg) to 4 gallons per 100 miles (25 mpg). Yet the more modest improvement saves more than twice as much gasoline. And that’s without considering the relative popularity of gas guzzlers or how better gas mileage can encourage people to drive more.

And, of course, CAFE standards affect only new vehicles, a tiny percentage of the total. Higher mandates don’t get old ones off the road and, in fact, they may very likely keep gas guzzlers driving longer. Research by economists Mark Jacobsen of the University of California-San Diego and Arthur van Benthem at the Wharton School finds that among vehicles more than nine years old, the least fuel-efficient ones stay on the road the longest. By raising the prices of new vehicles, tighter fuel regulations encourage drivers to buy used ones or simply keep what they already have.

Nor does a fleet average make sense. Instead of governing a specific car’s efficiency, it directs and distorts corporate strategy. It forces American companies that are good at making and selling larger vehicles to make and sell little cars as well. It’s as though the Sub-Zero Freezer Co. had to balance its luxury models with mini fridges. That wouldn’t make a given kitchen any more efficient. It would just encourage wasteful production and corporate consolidations. (Perhaps Sub-Zero would merge with Danby or Haier, just as Porsche merged into Volkswagen.) Forcing General Motors to turn out more Chevy Cruzes may be good for rental-car fleets but it doesn’t do much for the environment.

Recognizing this flaw, last year the government began adjusting mileage and emissions requirements to the size (“footprint”) of each vehicle model. This policy, too, has perverse effects, forcing small cars to meet much stricter standards than larger ones. It especially punishes small but peppy cars. As Lucas Davis, an energy economist at Berkeley’s Haas School of Business, blogged:

"My Mini Cooper has a footprint of 39 square feet so in 2012 would have received an emissions target of 244 grams of carbon dioxide per mile. Actual emissions are 296 grams per mile, significantly above the emissions target. Even though my car is one of the smallest on the road weighing only 2,500 pounds and with a paltry 115 horsepower, it is less fuel-efficient than its footprint-based target. Thus if BMW wants to sell more Mini Coopers, it also needs to sell more of some other vehicle that is below its target and/or BMW needs to buy permits from some other manufacturer."


The more you examine how CAFE standards work, the more convoluted and absurd they appear. A rational approach would either raise the price of gasoline directly with additional gas taxes per gallon, offset by tax cuts elsewhere, or levy an emissions tax, payable with one’s car registration, based on the age and model of the car.

But the goal, it seems, isn’t to actually reduce how much gasoline Americans burn. It’s to signal concern, keep bureaucrats and lawyers employed, and boss auto designers around -- all the while allowing the rest of the population to keep their big cars, maintain their driving habits, and assume Washington is taking care of things.

Automakers won’t ask politicians to scrap the CAFE standards. They’re used to them. But Trump and his allies have promised to shake up Washington. If Trump and Congressional Republicans are going to pick a fight over fuel standards, they might as well go all the way.


Article Link To The Bloomberg View:

Oil Prices Jump After Surprise U.S. Stock Draw

By Aaron Sheldrick and Osamu Tsukimori 
Reuters
March 15, 2017

Oil prices rebounded from three-month lows on Wednesday after industry data showed a surprise drawdown in U.S. crude stockpiles and as Goldman Sachs put a positive spin on OPEC's compliance with output cuts.

U.S. West Texas Intermediate crude CLc1 was trading up 81 cents, or 1.7 percent, at $48.53 a barrel. That came after the contract fell for a seventh session on Tuesday in its longest losing streak since January 2016.

Brent futures were up 71 cents, or 1.4 percent, at $51.63, after settling down 43 cents at $50.92 on Tuesday, their lowest finish since November.

U.S. crude stocks fell by 531,000 barrels last week, industry group the American Petroleum Institute said on Tuesday after settlement. [API/S]

That compared with analyst expectations for an increase of 3.7 million barrels. If the draw is confirmed by government data on Wednesday, it would be the first drawdown after nine consecutive builds.

U.S. gasoline and distillate inventories drew more than expected, the data also showed.

Oil tumbled on Tuesday after OPEC reported a rise in global crude stocks and a surprise output jump from its biggest member, Saudi Arabia, further pressuring prices that have erased nearly all of their gains since OPEC announced output cuts in November.

Secondary sources had said Saudi output fell in February to 9.797 million barrels per day (bpd), but Riyadh told OPEC it rose to 10.011 million bpd.

In an effort to dispel market concerns, the Saudi energy ministry said the "difference between what the market observes as production, and the actual supply levels in any given month, is due to operational factors that are influenced by storage adjustments and other month-to-month variables."

Influential U.S. investment bank Goldman Sachs cast a positive light on the numbers, saying compliance with production cuts remains high. Market rebalancing is still progressing and the bank expects demand for oil to finally exceed supply next quarter.

"Our expectations that inventories will draw through 2017 therefore leads us to expect that Brent timespreads will continue to strengthen with the forward curve in backwardation by 3Q17," Goldman said in its research note.

OPEC's monthly report said oil stocks in industrialised nations rose in January to 278 million barrels above the five-year average, with U.S. shale and other non-OPEC supply gaining.


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Citi Tells Investors To Stop Worrying And Learn To Love Oil

OPEC output cuts are cleaning up the crude market, bank says; Saudi Arabia will try to defend oil prices through 2017: Citi.


By Serene Cheong
Bloomberg
March 15, 2017

Buy oil now, and count on Saudi Arabia for support, according to Citigroup Inc.

OPEC’s output cuts aimed at easing a global glut are “real” and is cleaning up the market, analysts including Seth Kleinman wrote in a report dated March 14. While prices have dropped recently amid rising U.S. inventories and drilling activity, investors should take advantage of the slide because the Saudis are likely to defend prices this year, according to the bank.

The bank’s comments are similar to Goldman Sachs Group Inc., which called for investors to be patient and said they should go, or stay, long on oil. Prices last week fell below $50 for the first time since December on concern rising U.S. output will offset curbs by the Organization of Petroleum Exporting Countries and other producers. While Saudi Arabia told OPEC it dialed back on some of its cuts last month, the extra supplies were moved into storage and the kingdom said it remains determined to stabilize the market.



“Citi views this sell-off as a buying opportunity for 2017,” the analysts wrote. “Running down the record level of inventories was always going to be a lumpy process, with tighter timespreads pushing oil out of tank and onto the physical market where it will weigh until it clears.”

While Saudi Arabia pumped more than 10 million barrels a day last month, the volume of crude supplied to markets nonetheless fell by 90,000 barrels a day to 9.9 million. The nation’s data show it’s cutting output more than required under the terms of OPEC’s Nov. 30 agreement. Nevertheless, Energy Minister Khalid Al-Falih warned last week that the kingdom won’t indefinitely “bear the burden of free riders.”

Balancing Act

“The perceived change in rhetoric from Al-Falih, saying there would be no ‘free-rides’ for U.S. shale producers, is at odds with the ongoing OPEC cuts and the headlines reflecting other OPEC producers are already starting to assume that the cuts do get extended, in line with Citi’s expectations,” the bank said in its report. “‘The Saudis must play a balancing act this year, needing to keep the oil price up through 2017.”

West Texas Intermediate traded up 1.7 percent at $48.53 a barrel on the New York Mercantile Exchange at 1:43 p.m. Singapore time, after sliding the past seven sessions. Brent crude, the benchmark for more than half the world’s oil, was up 1.5 percent at $51.69 a barrel on the London-based ICE Futures Europe exchange.

The OPEC agreement is for an average monthly cut over a six-month period, and crude production data for January and February indicate that Saudi output for the first two months of the year was 180,000 barrels a day below its target level so far, according to Citigroup.

“The oil markets are always noisy, but it looks like the Saudis are sending a clear signal that the kingdom will defend prices over market share for the remainder of this year,” the analysts wrote.


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Here’s How Much March Madness Really Pays

It takes a lot of professionals to keep the massive tournament humming. You may be surprised who gets the most.


By Julie Verhage
Bloomberg
March 15, 2017

The annual college basketball extravaganza known as March Madness has always been a welcome distraction for winter-weary American workers. This year the tournament may provide a respite from tense political chatter, too. Although the National Collegiate Athletic Association’s tournament lasts just a few weeks, its impact cannot be overstated, both in offices across the country and among the army of schools, players, and professionals who make it happen. Not only can future professional basketball stars emerge, but just one upset victory can trigger a huge boost in student applications for a Cinderella school, and coaches who make it all the way can cash in on some major bonuses.

For some, it’s the only time they gamble—filling in their brackets, paying attention to the sports pages, and comparing notes with co-workers. For others it’s an obsession that spans the whole season, or even the whole year. Beyond the players, it takes a lot of people to put on an event of this size, and new data from Monster Worldwide Inc. shine a light on the key actors off the court, how much money they make, and what the truly devoted might have to do if they want to be part of the big show.

If you’ve ever wondered about how you can get more involved (without being good at actually playing the game), here are some job suggestions from Monster.com and potential compensation to consider. You may be surprised who gets paid the most.

Referee

While their average pay is just $24,870 a year, referees can make upwards of $1,500 per game during the tournament. And there isn’t much need for years of education, since 96 percent have no college degree. Of course, the referees who are chosen for the tournament, especially the Final Four, have far more experience than the average referee and have been officiating games for years. In fact, many of them are chosen multiple times: Last year one of the Final Four refs was making his seventh appearance.

Coach

College basketball coaches generally earn an average of about $31,000 a year, but people like Mike Krzyzewski of Duke University make a lot more. Salaries for many of the coaches who reached the tournament this year are higher than $1 million. They, unsurprisingly, often have a lot more than the average experience level of three to seven years on the sidelines. Depending on the coach’s contract, there might also be a bonus for how far they get in the tournament.

Broadcaster


The average salary for an NCAA broadcaster is about $30,080 per year, but giving the play-by-play for big games like these will pay a much higher sum. Jim Nantz, Grant Hill, and Bill Raftery are set to be the main announcers this year and are all likely to make six or seven figures for their trouble.

Athletic Trainer


Outside of professional sports, college athletic programs will draw some of the best in the training fields to ensure players are well cared for. While the average trainer earns $44,670 a year, expect the crew for the tournament to have annual salaries higher than that. They’re also likely to have more than the average education and experience level, which is a bachelor’s degree and as many as two years on the job.

Dietitian

We’ve heard of the strict diet NFL quarterback Tom Brady follows, and though college athletes aren’t usually as intense, they certainly get guidance from professionals. While the average for all dietitians is $57,910 a year, expect those working the tournament to have higher annual salaries. They’re also likely to have a higher education level and several more years of experience than average.

Social Media Manager


In this day and age, promoting the games on social media is a big part of the marketing strategy. The average salary for someone with the title “social media manager” is $56,770 per year, so they’re far from the highest-paid on the list but certainly play an important role.

Statistician

Good with numbers and want to keep track of everything from fouls to who’s scoring? You could rake in north of $80,110 per year, which is the average salary for a statistician and more than what the rest of the supporting cast makes. Be ready to create reports for league officials and those highly paid coaches, though: They’re going to want to know how each player is performing to maximize how far their team goes in the tournament.


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U.K. Jobless Rate Falls To Lowest Since 1975 As Wages Slow

By Lucy Meakin
Bloomberg
March 15, 2015

The U.K. jobless rate is at its lowest in more than four decades but Britons are seeing their wages go nowhere.

Unemployment unexpectedly declined to 4.7 percent in the three months through January, the lowest rate since 1975, the Office for National Statistics said on Wednesday. The number of people in work rose by 92,000 to 31.9 million, the biggest increase since last summer.

The U.K. economy has defied predictions of doom since the Brexit vote, expanding at a robust 0.7 percent at the end of 2016, but the latest data show cost pressures in the labor market remain subdued.

Basic wage growth slowed to 2.3 percent. With the falling pound pushing up inflation, real incomes on some estimates are set for their worst year since 2013, putting a brake on the consumer spending that drives growth.

The figures may reinforce speculation that the first increase in interest rates since 2007 remains a long way off. Bank of England officials meeting this week are expected to keep the benchmark rate at a record-low 0.25 percent, with traders pricing in less than a 25 percent chance of a hike in 2017.

Policy makers now judge the economy can sustain unemployment as low as 4.5 percent without generating inflation. Adjusted for inflation, basic earnings grew just 0.8 percent in the latest three months, the least since 2014. In January alone, there was no growth at all.

Brexit is expected to take its toll on the labor market this year, as Prime Minister Theresa May prepares to trigger two years of divorce talks with the European Union this month.

The uncertainty will see the jobless rate rise to 5.1 percent by the end of the 2017, the Office for Budget Responsibility said last week. Employment is forecast to rise by just 100,000, not enough to absorb the demands of a growing workforce. In January, the jobless rate climbed to 4.8 percent.

The improvement in the latest period was driven by a 136,000-increase in the number of full-time workers.

The number of people who work for themselves climbed 49,000 to a record 4.8 million, underscoring the pressure on Chancellor of the Exchequer Philip Hammond to back down on a proposed 2 billion-pound tax increase on the self-employed.

The move, announced in the Budget last week, broke an election pledge and many Conservatives fear a backlash in Tory heartlands. Self-employed people now account for a record 15 percent of all workers compared with 13 percent before the 2008 financial crisis.


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Sell Trump Short If Stocks Take A Dive

Market downturn could hit new administration hard.


By Chris Edelson and Erran Carmel
MarketWatch
March 15, 2017

Seasoned investors will tell you that you can’t time the market. Even a self-promoting braggart like Donald Trump would be cautious about market-timing or predicting a perpetual rally.

Yet the president has no qualms about claiming bragging rights for the U.S. stock market’s recent “Trump rally,” which has lifted the S&P 500 SPX, -0.34% the Dow Jones Industrial Average DJIA, -0.21% and the Nasdaq Composite COMP, -0.32% The danger for Trump here is that by claiming credit for the market’s strong performance when things are going well, he and his administration will be held accountable for a sharp market downturn.

Consider what events could bring the current rally to a halt, and the resulting political consequences for Trump. Will the inevitable market downturn be caused by a global shock? Domestic turmoil? Trump himself?

One market risk comes from Trump’s own volatility. To be sure, the market so far has discounted the risk of Trump’s erratic behavior (and bizarre tweets) during the Trump stock market rally; with volatility at historic lows.

Nevertheless, we have to consider that Trump could trigger market tremors when (not if) he spirals into another unhinged episode or when one of the many questions involving Trump and members of his administration — insider trading, conflicts of interest, dealings with Russia — becomes impactful.

In fact, Trump himself — quite inappropriately — predicted some possible global jolts in a press conference in February, any of which could roil world markets.

On the domestic front, markets could be negatively affected if Trump’s legislative agenda stalls. Investors are optimistic that Trump will deliver on tax cuts and deregulation. But, even with Republicans controlling both houses of Congress, Trump so far has been slow to show that he can advance any significant legislation. The uncertain fate of the new TrumpCare legislation is a good example. This bill includes huge tax cuts for the wealthy and also benefits insurers — promises that are helping drive the current market rally. What if the legislation fails to move ahead? What if Trump runs into trouble when it comes to other tax measures? (There is evidence that Republicans are divided on key issues here as well.)

The Federal Reserve’s expected interest rate hike may also turn stock prices south — though a rate increase has been anticipated.

It doesn’t matter whether the market goes down due to an exogenous shock or to the deliberate, careful moves of the Fed. The end effect will be to weaken Trump’s position — particularly with two key groups: business leaders and Republicans in Congress.

Business leaders might become more emboldened to take on Trump after the market weakens. Some CEOs already have criticized the new president, but most have been careful about voicing misgivings — so far. Meanwhile, those Republicans in Congress who are already concerned about Trump might stand up to the president— especially members of the House and senators facing re-election in 2018.

Of course, expecting people to confront this bully president is hardly a given. But we have already seen signs that business leaders and Republican members of Congress can break with the president under certain circumstances.

Other factors will pressure the president. Older Americans (a key part of Trump’s base) could see their nest-eggs shrink just as they hope to retire. Media coverage, already a source of constant irritation for Trump, could get even more unfavorable. As he is put on the defensive, Trump could further damage his standing with new shocking statements and actions. If Trump claims credit when the market is rising, he must also take the blame when it falls.

By tying political power to market gyrations, Trump is gambling. If Trump claims credit when the market is rising, he must also take the blame when it falls. Of course, since Trump never accepts blame for anything, he will, at the least, be deprived of a favorite talking point. He also could try to blame someone else if the high-performing market he inherited runs out of gas.

Either way, the consequences for his presidency could be serious. In the first days of Barack Obama’s presidency, politically conservative commentators gleefully exclaimed that each down day for the market was a vote of no-confidence against Obama. As it turned out, Obama presided over a long and lucrative market boom. Trump might find himself experiencing the reverse — early market gains followed by a steep slide, creating a market storm that leaves political damage in its wake.


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Fed Expected To Raise Rates As U.S. Economy Flexes Muscle

By Howard Schneider
Reuters
March 15, 2017

The Federal Reserve is expected to raise interest rates for the second time in three months on Wednesday, encouraged by strong monthly job gains and confidence that inflation is finally rising to its target.

A rate hike at the conclusion of the Fed's latest two-day policy meeting is already baked into bond yields and financial markets overall, with investors putting the likelihood of such a move at 95 percent, according to CME Group's FedWatch program.

Attention is turning instead to whether the U.S. central bank will signal an even faster pace of monetary tightening this year than the current three rate hikes that it projected at the December policy meeting.

"Expectations have some catching up to do regarding the Fed's need to 'lean into the wind' of rising inflation, strong growth, robust sentiment, easy financial conditions, and the likelihood of fiscal stimulus in 2018," analysts from Goldman Sachs wrote ahead of the meeting.

They said they regarded a fourth rate increase this year as a "close call."

A rate increase on Wednesday would push the Fed's target overnight lending rate to a range of between 0.75 percent and 1.00 percent, still low but approaching the range that the central bank has typically operated within.

The Fed is scheduled to release its latest policy statement along with updated economic forecasts at 2 p.m. EDT (1800 GMT). Fed Chair Janet Yellen is due to hold a press conference half an hour later.

The U.S. economy has flexed its muscle in recent months, with job gains above 230,000 in both February and January. Consumer confidence also has risen and inflation has been firming.

Fed policymakers are also pleased by an improving global economic outlook, with euro zone growth edging up and China looking more stable than a year ago. Over the past two years Fed policymakers had worried that a weak global economy would limit U.S. growth and hold down inflation, leaving no compelling reason to raise rates.

The Fed's growing comfort with the economic outlook does not mean it will tighten monetary policy faster than planned.

The solid U.S. job gains have had little impact of late on the unemployment rate, indicating that there may be more sidelined workers ready to reenter the labor force as jobs become more plentiful.

That has been a key goal for Yellen and one that may keep the Fed on the "gradual" rate hike path it has committed to in prior policy statements, said Beth Ann Bovino, U.S. chief economist for S&P Global Ratings.

"If the incoming data show the economy heating up faster than we expect, the Fed may want to do more," Bovino wrote in a recent analysis. But "the fact that more folks are coming into the labor force may dissuade the Fed" from moving faster than currently anticipated.


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