"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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The information presented in this blog and its individual articles is provided for informational use only and should not be considered investment advice or an offer for a particular security. The contents reflect the views and opinions of the individual writer as of the date the article was written and do not necessarily represent the views of the individual writer on the current date. They also do not in any way, shape, or form represent the views of the Firm Never-To-Be-Named. Any such views are subject to change at any time based upon market or other conditions and The Great Redoubt and its individual writers disclaim any responsibility to update such views. These views should not be relied on as investment advice, and because investment decisions for any security are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any contributor to The Great Redoubt. Neither The Great Redoubt nor any individual author can be held responsible for any direct or incidental loss incurred by applying any of the information offered. Please consult your tax or financial advisor for additional information concerning your specific situation.

Friday, March 25, 2011

Remarks by Treasury Secretary Tim Geithner at NanoMech Manufacturing Plant and Labs

Springdale, AR
As Prepared for Delivery
Thanks to Jim Phillips and Dr. Ajay Malshe. I admire what you have built.
And thanks to Congressman Steve Womack for welcoming me to Arkansas. A quick note about Steve. I had a chance to testify the other day before one of his Committees. And he was tough, but smart and civil and fair, and he was focused not on the politics of the moment, but on what works and what doesn't.
It is excellent to be out of Washington.
I had a chance this morning to meet with a group of business leaders from your community, and then to take a look at what NanoMech is creating and building here in America.
Why this state, this community, this company?
Across the United States, not just in Silicon Valley or the Research Triangle, despite the damage caused by this crisis, despite all the challenges we have as a nation, and despite stronger competition from around the world, American companies are designing and building the products of the future, demonstrating the fundamental dynamism and resilience of the American economy.
This community and this company can help Americans understand our strengths, help Americans appreciate what it is going to take to win the future, and help Americans be confident that we can meet that challenge.
Our most important economic policy challenge is to make sure that the United States of America is the best place on the planet to do business, the best place in the world to do what Dr. Ajay Malshe did—to transform an idea into a company, a company that provides the chance for an American family to earn a decent living, put their children through college, save for retirement.
To help make this possible, we need Washington to do a lot of things better.
We need a skilled, highly educated workforce.
We need to support cutting edge research and technology.
We need a fast and reliable transportation and communications network.
Innovate, educate, invest – these are the foundations of the American economic strategy.
And they require investments and reform in Washington.
Investments in education, innovation and infrastructure.
A financial system that will provide the capital and funding businesses need to grow.
Reforms to cut spending and deficits so that we can afford those investments.
A centerpiece of this strategy is to create stronger incentives for investment and innovation in the United States.
The President has proposed a permanent and more powerful tax credit for research and development. And we released a report today on the economic benefits of this kind of incentive in helping support more than $100 billion dollars in innovative research and nearly 1 million research workers in professions that pay a good salary. And most of these benefits will go to manufacturing companies.
This proposal should be part of a comprehensive reform of the corporate tax system to make American companies more competitive. Reform that eliminates loopholes and preferences, lowers the tax rate on investments in the United States, and replaces a complicated muck of temporary provisions, with a more powerful, but more targeted set of permanent incentives, like the R&E tax credit.
These incentives can help companies like NanoMech innovate and expand.
We have a lot of challenges ahead of us. Millions and millions of Americans are still looking for work, at risk of losing their homes, less confident about their future, struggling to provide for their families in the face of higher gas prices. And the rest of the world is getting better at things that had defined America's strengths.
But we are a very strong country, and we are getting stronger again.
As we dig out of this crisis and fix our budget deficits so that we are living within our means, we need to make sure we keep working to strengthen our ability to grow. We need to bring a relentless focus to making this country the best place on earth to create and build things, to start a company, to raise a family and educate your children, and to invest in the future.
This is the President's economic strategy. This is our responsibility. And I hope we can find a way to get Washington to work together to make that happen.

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Secretary Geithner, Northwest Arkansas Business Leaders Discuss Efforts to Create Jobs, Spur Economic Growth and Boost US Competitiveness

New Treasury Report Shows Research Tax Credit Will Leverage More Than $100 Billion in U.S. Private-Sector Research Over the Next 10 Years, Support More Than 1 Million Research Workers
WASHINGTON – Today, Secretary of the Treasury Tim Geithner visited Northwest Arkansas to meet with regional business leaders to discuss how government and the private sector can work together to out-innovate our competition, and to tour NanoMech – a small business that demonstrates how innovative research can spur economic growth and high-wage jobs. In conjunction with the visit, the Treasury Department released a new report today detailing the economic benefits of the Research and Experimentation (R&E) tax credit and the President's Fiscal Year 2012 Budget proposal to expand and simplify the credit and make it permanent.
"This Administration is committed to increasing our investment in innovation – investments that help create the high-tech, high-wage jobs that we need to remain the world's most advanced economy," Secretary Geithner said. "By helping to spur more research activity here at home, we can help drive the technological advancements that increase our productivity and improve the living standards of all Americans."
Secretary Geithner's visit was an opportunity to hear first-hand from leaders of Arkansas businesses – large and small – about their efforts to create the jobs of the 21st century. The group discussed measures designed to encourage innovation, investment and hiring, including the Administration's proposal to expand the R&E tax credit and make it permanent. This tax credit has been extended on a temporary basis 14 times since its creation in 1981, often retroactively. This leaves businesses with uncertainty about whether the R&E tax credit will be available in the future, making it difficult to factor it into decisions to invest in long-term research projects that will not be completed prior to the credit's expiration. Making the R&E tax credit permanent will strengthen its incentive effect by providing certainty to businesses that the credit will be available for future research investments.
The President proposed making the R&E credit permanent in his Fiscal Year (FY) 2010 and 2011 budgets and extended the current credit through 2011 as part of the bipartisan tax agreement in December 2010. In addition to making it permanent, the President proposed last September to increase the total amount of the R&E tax credit by 20 percent and simplify it, making it easier and more attractive for businesses to claim it for their research investments. This proposal was subsequently included in the President's FY 2012 Budget.
A new Treasury report shows that the President's proposal to expand the R&E tax credit and make it permanent will leverage more than $100 billion in domestic private-sector research over the next 10 years. It will also support nearly 1 million research workers in the U.S. in professions that pay higher-than-average wages. The vast majority of research costs supported by the R&E credit are labor costs and much of the research that takes place in the United States is done by highly skilled employees in science and technology professions that pay more than 75 percent more than the average annual wage for all professions.
The full report on the R&E credit is available here.
Following his roundtable meeting with regional business leaders, Secretary Geithner visited the manufacturing plant and labs of NanoMech, an award-winning, innovative small business that uses nanotechnology to manufacture products with broad applications, including machining and manufacturing, lubrication and energy, and biomedical implant coatings.
Because the R&E credit was extended through 2011 as part of the bipartisan tax package, companies like NanoMech that increase their qualified research and development spending in 2011 can potentially benefit from the existing R&E credit. According to the Treasury report, in 2008, the most recent year for which data are available, nearly 70 percent of all R&E credits claimed went to corporations in the manufacturing sector such as NanoMech.
"With only 5 percent of the world's population, the United States must rely on our science and technology advantage to maintain global leadership and competitiveness through brilliant innovation," said NanoMech CEO Jim Phillips. "The Administration's plan to simplify and make Research and Experimentation tax credits permanent is critical and essential to providing support for U.S. companies of all sizes to continue creating technological breakthroughs that make our country the strongest financially and militarily in the world."
NanoMech and its workers also will benefit from a number of other Administration tax cuts and investment incentives in 2011. In particular, NanoMech plans to take advantage of the new business expensing proposal that the President signed as part of the tax package. The proposal will temporarily allow businesses to expense 100 percent of their investments through 2011, potentially generating more than $50 billion in additional investment in the United States in 2011, which will help fuel job creation.
Because of the expensing proposal, NanoMech will immediately be able to expense 100 percent of the millions of dollars of equipment investments it has planned for 2011, potentially accelerating hundreds of thousands of dollars in tax cuts. NanoMech has already ordered new equipment in 2011 to support advanced manufacturing – equipment which arrived in the last few weeks – and has additional equipment on order.

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Regional and State Employment and Unemployment (Monthly) News Release

The latest Regional and State Employment and Unemployment news release (http://www.bls.gov/news.release/pdf/laus.pdf) was issued today by the Bureau of Labor Statistics. Highlights are below.

In February 27 states and the District of Columbia had over-the-month unemployment rate decreases, 7 had increases, and 16 had no change. Nonfarm payroll employment rose in 35 states, fell in 14 states and the district, and was unchanged in 1 state.

News releases archives: http://www.bls.gov/schedule/archives/all_nr.htm
To subscribe or unsubscribe to BLS news releases please visit http://www.bls.gov/bls/list.htm
For help, email news_service@bls.gov

G.E.'s Strategies Let It Avoid Taxes

So David Kocieniewski reports in the New York Times that:
"General Electric, the nation's largest corporation, had a very good year in 2010.
"The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.
"Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion."
Now, it's hard to read that and not have a kneejerk reaction like "those crooks!". But, stop and be fair for a second. If you, as a private citizen, could figure out a way to not only not pay taxes, but to get the US government to give you 62% of your US income as a tax credit, you would (probably) be on that in a heartbeat. And you'd be laughing all the way to the bank. Why should GE be any different? They don't like paying taxes either.
The only thing that offends me here is the fact that they're taking a tax credit. I fully believe that taxation is theft, but tax refunds in excess of the taxes you've paid[1] is also theft. You're taking money from another victim of taxation.
So, lets not hate GE for managing not to pay taxes. Let's just hate them for accepting stolen goods.
[1] At gunpoint, effectively.

World News

  • A 6.8 magnitude earthquake in Myanmar yesterday destroyed 225 homes and 9 government buildings, killed at least 74 people and injured at least 100 more.
  • Myanmar gemstone dealers set a new sales record of 2 billion euros during a 12-day emporium that ended today. For comparison purposes, the three emporiums from last year did a total of 2.2 billion euros in sales. the nation produces around 90% of the world's rubies and fine jade and, despite sanctions and embargos imposed by Western countries, business is brisk.
  • Thailand was shaken by a 5.5 magnitude aftershock from yesterday's earthquake in Myanmar. No casualties are being reported and there is only limited property damage, but residents living near the epicenter have been advised to leave their homes.

Q4 2010 GDP, Final Revision

GDP, or Gross Domestic Product, is the sum of all private domestic consumption plus gross private domestic investment plus government spending plus the current trade balance. This is a huge economic data point, because it represents the economic health of a nation. It gets reported three times in a quarter - the first month is the advance figures, the second month is the preliminary revision, and the third month is the final revision. This month, we're getting the final revision.
Now, things weren't looking all that good when the preliminary revision was released. Real GDP was revised downward to 2.8%, the GDP price index[1] came in at 2.1%, and the "core" GDP price index came in at 1.2%.
Looking towards the Q4 final revision, the Econoday-surveyed analysts are expecting real GDP to be revised upwards to 3.1%. Of course, they're also expecting to see the GDP price index remain unchanged at 0.4%[2], so take their predictions with a grain of salt.
Now, turning to the Bureau of Economic Analysis, we examine the Fourth Quarter 2010 final estimate for GDP. GDP increased at an annual rate of 3.1% in Q4 (right in line with expectations). The BEA credits a downturn in imports, an increase in personal consumption expenditures, an upturn in residential fixed investments, and an acceleration in exports for the GDP growth. The price index increased 2.1%, with the "core" price index increasing 1.1%.
[1] One measure of inflation.
[2] No, I have no idea where they're getting that from either. The Bureau of Economic Analysis report was pretty clear in showing that the Q4 preliminary revision GDP price index was 2.1%.

Thursday, March 24, 2011

What's Happening In The World?

  • The PIIGS are back! Portuguese Prime Minister Jose Socrates resigned yesterday after parliament rejected his government's latest austerity measures. This may very well pave the way for Portugal to go to the EU and the IMF for a bailout, particularly since they will need to refinance some 4.5 billion euros of sovereign debt next month.
[1] Meaning the coolant system is at atmospheric pressure and at a temperature below 200 degrees Fahrenheit.
[2] And by "UN", read "US". In the last 24 hours there have been 175 air strikes, and the US has flown 113 of them.

Durable Goods Orders

So. What are durable goods orders, and why does anyone care? Well, the durable goods orders report tracks the percent change in manufacturing orders for real, physical products. Positive results mean that new orders are increasing, which is an indication that the manufacturing sector is doing well, which is in turn an indication that GDP may be growing. And everyone likes to see GDP growth.
Now, for January, durable goods orders increased 2.7%. Most of this growth was driven by transportation and defense orders. Ex-transportation, durable goods were down 3.6% while ex-transportation, durable goods orders were only up 1.9%.
Looking at February, the Econoday-surveyed analysts are expecting some slowdown in new durable goods orders, with an increase of only 1.5%.
The US Census Bureau provides us with the actual results. New orders for manufactured durable goods fell 0.9% (substantially missing expectations). Ex-transportation, new orders decreased 0.6%. Ex-defense, new orders increased 0.4%.

First Time Jobless Claims

Reviewing the news for the week of 3/12, seasonally-adjusted first time jobless claims came in at 385,000, right in line with expectations, and the unadjusted number of initial claims was 372,370. The seasonally-adjusted level for state program insured unemployment was 3,706,000, and the unadjusted level was 4,276,916. And finally,a s of 2/26, the total number of persons claiming unemployment benefits in all programs was 8,953,610.
Looking at the week ending 3/19, the Econoday-surveyed analysts are expecting another week of 385,000 new first time claims.
As always, we turn to the US Department of Labor for the actual results. First off, the seasonally-adjusted first time claims was revised upwards to 387,000 (so, things were a little bit worse than anticipated). Now, for the week ending 3/19, the advance figure for seasonally adjusted initial claims came in at 382,000, down 5000 from last week's revised numbers and beating expectations by 3000. The unadjusted advance number of initial claims is reported at 351,204, down 21,166.
The seasonally-adjusted level for state program insured unemployment was revised upwards for 3/12 to a level of 3,723,000 (an increase of 17,000). For the week ending 3/19, the seasonally adjusted state program insured unemployment level is being reported at 3,721,000 (down 2000 from the revised level). The unadjusted level comes in at 4,260,519 (down 16,397[1]).
As of 3/5, the total number of people claiming benefits in all programs was 8,766,062 (down 187,548[2]).
[1] Hopefully down due to an increase in employment levels. But, since the Employment Situation report isn't due out until the inauspicious date of April 1, we won't know for another week.
[2] See [1], above.

Tuesday, March 22, 2011

Chavez says capitalism may have ended life on Mars

Because a day without Hugo Chavez is like a day without sunshine...

On Tuesday March 22, 2011, 2:47 pm EDT
By Eyanir Chinea
CARACAS (Reuters) - Capitalism may be to blame for the lack of life on the planet Mars, Venezuela's socialist President Hugo Chavez said on Tuesday.
"I have always said, heard, that it would not be strange that there had been civilization on Mars, but maybe capitalism arrived there, imperialism arrived and finished off the planet," Chavez said in speech to mark World Water Day.
Chavez, who also holds capitalism responsible for many of the world's problems, warned that water supplies on Earth were drying up.
"Careful! Here on planet Earth where hundreds of years ago or less there were great forests, now there are deserts. Where there were rivers, there are deserts," Chavez said, sipping from a glass of water.
He added that the West's attacks on Libya were about water and oil reserves.
Earlier this month, the U.S. National Research Council recommended that NASA's top priority should be a robot to help determine whether Mars ever supported life and offer insight on its geological and climatic history.
It would also be the first step in an effort to get samples from Mars back to Earth.
A NASA team recently tested a space suit in a setting with extreme conditions akin to some of those found on Mars -- an Argentine base in Antarctica -- for possible use on a visit to the Red Planet.
(Writing by Frank Jack Daniel; Editing by Daniel Wallis)

Obama Administration Announces Funds for Connecticut, Missouri, and Vermont to Spur at Least $534 Million in New Small Businesses Lending, Help Create Jobs

WASHINGTON – Today, the U.S. Department of the Treasury announced the approval of State Small Business Credit Initiative (SSBCI) applications from Connecticut, Missouri, and Vermont. The planned use of SSBCI funds by these states will help create new jobs and is expected to spur more than $534 million in additional small business lending. The SSBCI program, which supports state-level small business lending programs, is an important component of the Small Business Jobs Act that President Obama signed into law last fall.
“These critical funds will help small businesses access the capital they need to expand their operations, create new jobs, and continue supporting our nation’s economic recovery,” said Treasury Secretary Tim Geithner. “Public-private lending partnerships, such as the State Small Business Credit Initiative, have a proven track record of success, and I’m pleased that this funding is on its way to support economic growth in these states.”
Under the SSBCI, all states are offered the opportunity to apply for federal funds for state-run programs that partner with private lenders to increase the amount of credit available to small businesses. States must demonstrate a reasonable expectation that a minimum of $10 in new private lending will result from every $1 in federal funding. Accordingly, the $1.5 billion federal funding commitment for this program overall is expected to result in at least $15 billion in additional private lending nationwide.
Details on the applications approved today, which the states expect will generate a cumulative total of at least $534 million in new small business lending in Connecticut ($133 million), Missouri ($269 million), and Vermont ($132 million), are included below.
Treasury Secretary Tim Geithner announced the approval of this latest wave of SSBCI applications during a conference today at the Treasury Department entitled, “Access to Capital: Fostering Growth and Innovation for Small Companies.” The conference brings together policymakers, entrepreneurs, investors, academics, and other market participants to explore how both the public and private sectors can help promote access to capital at each stage of growth for a small business – from seed capital, to growth equity, to accessing the public markets.
Treasury has previously approved funding for SSBCI programs in California, Michigan, and North Carolina. Additional applications are expected to be approved in the coming weeks. For more information about the SSBCI, please visit link.
Connecticut (At Least $133 Million in New Small Business Lending)
With SSBCI approval of Connecticut’s application, can access up to $13.3 million in SSBCI funding, which Connecticut expects to generate more than $133 million in new small business lending in the state.
"Connecticut's economic recovery is driven by small businesses and their strong plans for growth. We need to ensure they have the capital necessary for hiring, purchasing of machinery and equipment and expansion of facilities in our state," said Connecticut Governor Dannel P. Malloy. "In partnership with the banks and the Connecticut Development Authority, Connecticut's small business owners will now have more resources for that growth."
Connecticut’s approved plan dedicates its $13.3 million in SSBCI funding to support its Capital Access Program (CAP), which provides loan portfolio insurance to encourage private financial institutions to lend to creditworthy small businesses. Connecticut has administered its CAP for more than 19 years. During this period, it has provided portfolio insurance for about 630 enrolled loans, totaling over $53.4 million, resulting in the creation of or saving of 6,120 jobs.
Missouri (At Least $269 Million in New Small Business Lending)
With SSBCI approval of Missouri’s application, Missouri can access up to $26.9 million in SSBCI funding, which it expects to generate more than $269 million in new small business lending in the state.

“Along Main Streets in every corner of Missouri, small businesses are a critical force for creating jobs and growing our economy,” Missouri Gov. Jay Nixon said. “These new resources will help Missouri entrepreneurs grow their operations and turn their dreams into bricks and mortar. We appreciate the leadership shown by President Obama and Secretary Geithner in providing these resources for our state, and we will invest these tools wisely and strategically in businesses that will transform Missouri’s economy for the 21st Century.”
Missouri’s approved plan dedicates $16.9 million of the state’s SSBCI funding to establish the hi-tech Missouri IDEA Seed and Venture Capital Funds (IDEA Funds). IDEA stands for Innovation, Development and Entrepreneurial Advancement.
The Missouri IDEA Funds promote the formation and growth of businesses that engage in the transfer of science and technology into job creation. The funds provide financing to eligible businesses through four components that correspond to the four stages of venture growth: (1) pre-seed capital stage financing; (2) seed capital stage financing; (3) venture capital stage financing; and (4) expansion stage debt.
Collectively, these four components will provide financing opportunities throughout the process entrepreneurs call the “continuum of capital.” In this way, the funds will support new venture formation and growth all the way from research and development to commercialization.
Missouri’s approved plan also dedicates $10 million of SSBCI funding to the Grow Missouri Loan Participation Fund. That program supports the formation and growth of businesses in the industrial, commercial, agricultural, and recreational sectors. It provides loans of up to $3 million to businesses with under 500 employees to help attract new enterprises and expand existing companies.
Vermont (At Least $132 Million in New Small Business Lending)
With SSBCI approval of Vermont’s application, Vermont can access up to $13.2 million in SSBCI funding, which it expects to generate more than $132 million in new small business lending in the state.
“This $13.2 million in federal small business funding is terrific news for Vermont,” said Vermont Governor Peter Shumlin, “and it would not have been possible without the strong advocacy efforts of our Congressional delegation. We thank Senator Patrick Leahy, Senator Bernie Sanders, and Congressman Peter Welch for their efforts, and also thank the U.S. Department of the Treasury for this well-timed award. With the help of Vermont’s private sector leverage, these federal funds will go far, giving our small businesses the critical boost they need to create jobs for Vermonters.”
Vermont’s approved plan dedicates $1 million of the state’s SSBCI funding to support its Financial Access Program (FAP), which provides loan portfolio insurance to encourage private financial institutions to lend to creditworthy small businesses. The remaining $12.2 million is allocated to three additional programs:
  • Vermont has allocated a total of $5.9 million to its Commercial Loan Participation Program, which provides financing for the purchase of land; construction and renovation of facilities; and purchase and installation of equipment for eligible projects.
  • Vermont has allocated $3.0 million to its Technology Loan Participation Program. This initiative supports loans to early stage firms primarily in the information technology and bioscience sectors.
  • Vermont has also allocated $3.3 million to its Small Business Loan Program, which finances smaller commercial businesses’ fixed asset and working capital needs.

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Remarks by Treasury Secretary Tim Geithner at the Access to Capital Conference

As Prepared for Delivery
Good morning. Welcome to Treasury. We're very pleased to have everyone here today for our Access to Capital Conference.
I'd like to thank some of the people who are working so hard to help small businesses succeed in today's tough environment. At the SBA, Administrator Karen Mills, whose leadership has been key to so many of the Administration's initiatives.
And here at Treasury, Assistant Secretary Mary Miller, who organized today's conference; Don Graves, who's in charge of our small business programs; Treasurer Rosie Rios; and many others.
At the SEC, OCC, and other regulators, our colleagues are thinking about ways that they can help remove burdens and channel credit to small businesses. And we're pleased to be joined by our colleagues from the White House, Gene Sperling and Aneesh Chopra.
Finally, I want to acknowledge the entrepreneurs and investors who have joined us here today. As we consider ways to help small businesses from here at Treasury and throughout the Administration, we're going to need your expertise and creativity.
We're here because the ability of entrepreneurs to access financing is essential to building a more competitive economy.
Today, we want to explore how we can help make that happen.
What are the barriers to accessing capital? Where can the government do more or help eliminate barriers and where should we stay out of the way? What can the private sector and the public sector both do to help small companies get access to the capital that they need to grow?
The financial crisis caused a great deal of damage to the capacity of innovators to access capital, and we can't promote innovation and investment in the United States unless we help these innovative companies get the funding they need to succeed.
Now, we moved quickly in face of the crisis to restart economic growth, to re-open markets for capital and credit, and to build a stronger financial system that supports growth and innovation.
Alongside the broad measures we took to stabilize the financial system and financial markets, we supported three types of policy measures to help small companies – both start-ups and existing small businesses.
First, tax cuts and incentives – over the past two years, the President has signed into law 17 different tax cuts for small businesses, including eliminating capital gains taxes on key small business investments and raising the amount small businesses can expense to $500,000 – making it easier for small businesses to invest and hire more workers.
Second, we've put significant resources into support for innovation, particularly in health care and clean energy. And in those industries, small companies are often the most innovative.
And third, we have developed several special credit programs, through and alongside SBA, including loan guarantees and capital investments to encourage lending – such as the Small Business Lending Fund – and support for state small business credit programs.
Under the State Small Business Credit Initiative, for example, we've already announced funding for three states – California, Michigan, and North Carolina. Last week, the SSBCI contribution to North Carolina leveraged private capital to produce the first loan under the program – to J&S Reel Logging in Raleigh. And today, we are announcing funding for three more states – Missouri, Connecticut, and Vermont – that is expected to spur $534 million or more in new small business lending.
This program presents a low cost to taxpayers with a high impact for small businesses: to obtain the federal funds, each state demonstrates how it can leverage every 1 dollar of public investment into 10 dollars of new lending. Our $1.5 billion funding commitment nationwide is expected to spur $15 billion or more in additional small business lending.
These policies are making a difference. The cost of borrowing and credit terms are improving. Equity markets are open.
But it's still a tough financing environment out there for small companies, and we want to draw more attention today to the challenges facing start-ups and high-growth companies.
Over the past two decades, our financial system has undergone a significant transformation, and the way small start-ups find financing at each stage of growth has been part of that change.
At the earliest stages of funding, small companies have become more reliant on angel investors, universities, or sector-specific investment shops.
And as these small companies find their footing, they are waiting longer than ever to go public – financing themselves instead through multiple rounds of private equity or venture capital.
The number of IPOs in the U.S., for example, has decreased during the last two decades. And even though IPOs have picked back up in the wake of the financial crisis, an increasing number of U.S. companies are going public in other countries, or even deciding to stay private and access different sources of funding.
So, we want to get a better feel from you for where we need to focus the attention of policy makers going forward.
I want you to tell us not just what we can do, but how we can do it, especially if the ideas can be implemented quickly and don't require significant investments of taxpayer dollars.
This conference provides an opportunity to convene policymakers and market participants to gain insight and make progress on removing the barriers that stand before small companies today. It's an opportunity to find solutions that run from the traditional – such as tax incentives and direct lending – to the innovative and alternative, such as creating a way to efficiently pool investments in small companies.
We face a complex set of challenges – challenges that don't just affect small companies but the broader economy and the nation as a whole.
Today's conference is one more step in our work to address these problems.
I'd now like to turn the podium over to Administrator Mills.

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Market Impacting News

There's a lot of stuff going on out there. Here's some highlights.
  • Internationally, equities have recovered somewhat. The Tokyo exchange is up about 4% on reports of progress in containing radiation leaks at Fukushima, but oil and gold were up on the fighting in Libya and the unrest in the Middle East. The euro hit $1.4249 on expectations that the European Central Bank will raise interest rates next month. JPMorgan analysts are also expecting to see crude oil prices rise further once the Japanese nuclear crisis is resolved and the nation shifts to reconstruction.
  • Japan parts paralysis spreads as firms cut output. Sony has cut output at five more factories (bringing the total number affected to 15 out of 25), which produce digital and video cameras, televisions and microphones. A sixth plant could reopen Tuesday, but could be disrupted by rolling blackouts. Toyota has delayed restarting all 12 of its Japanese assembly plants until at least Saturday. Iron mining company Rio Tinto has warned that these supply disruptions are a threat to their expansion plans, and companies such as Apple, GM, and Nokia are also feeling the impact.
  • Steam is venting from Fukushima reactor No. 2, and haze has been seen above reactor No. 3. On the up side, technicians have managed to attach power cables to all six reactors and have started at least one of the cooling pumps. Radiation has been found in seawater near the plant - specifically radioactive iodine (at 126.7 times the allowed limit) and cesium (at 24.8 times the allowed limit). However, according to a TEPCO official, "it would have to be drunk for a whole year in order to accumulate to one millisievert.[1]" The Japanese government has stopped shipments of milk, spinach, and kakina[2] from the area for the time being.
  • On top of everything else, fuel shortages, icy rain, and power outages are slowing efforts to get humanitarian aid into Japan. Right now, estimates put damage at $250 billion with 21,000 dead or missing. 2.4 million people are without access to water, and 221,000 households remain without power.
  • The Norwegian Institute for Air Research has detected traces of radioactive particles from Japan in Iceland. "It's only a matter of days before it disperses in the entire northern hemisphere," says Andreas Stohl, a senior scientist for the Institute, "Over Europe there would be no concern about human health."
[1] A sievert, symbol Sv, is the SI derived unit of dose equivalent radiation. For comparison, public dose limits for exposure to radiation are usually at 1 millisievert (1 mSv) per year above background. The maximum permissible dose to radiation workers is an average of 20 mSv per year, with no more than 40 mSv in a single year. Sleeping next to a human being for 8 hours a night, every night, for a year exposes you to 0.02 mSv, eating a banana exposes you to 0.0001 mSv, the sky exposes you to 0.24 mSv per year, and smoking 1.5 packs per day exposes you to between 13 and 60 mSv per year. For a more visual look, check out this Radiation Dose Chart.
[2] Some sort of Japanese vegetable. I got nothing, here.


Continuing the trend of retail sales figures of minor importance to the market, we now have the Redbook Report. The week ending 3/12 saw a year-over-year increase in chain store and department store sales of 2.0% Econoday is now reporting that, for the week ending 3/19, year-over-year sales are up 2.4%.

A Day In The Life Of A Financial Advisor

It's far more like this than you would think.

ICSC-Goldman Store Sales

Today, what metrics we have are pretty much retail sales figures. For the week ending 3/12, the ICSC-Goldman Store Sales survey showed week-over-week sales up 0.1% (which was rather mediocre), with year-over-year sales up 3.1% (which was fairly impressive). And for the week ending 3/19? Not a whole lot of change, according to Econoday. Week-over-week sales were down 0.1%, and year-over-year sales were up 3.0%.
Remember, this is store sales at major retail chains, so it only represents about 10% of total retail sales. Try not to draw too strong a conclusion from these results.

Monday, March 21, 2011

Treasury to Begin Orderly Wind Down of Its $142 Billion Mortgage-Backed Securities Portfolio

Treasury Will Authorize Sale of up to $10 Billion in Agency-Guaranteed Mortgage-Backed Securities per Month
Part of Continued Wind Down of Holdings Acquired as Part of the Financial Stabilization Actions in 2008 and 2009 to Help Combat the Financial Crisis
WASHINGTON – Today, the U.S. Department of the Treasury announced that it will begin the orderly wind down of its remaining portfolio of $142 billion in agency-guaranteed mortgage-backed securities (MBS). Starting this month, Treasury plans to sell up to $10 billion in agency-guaranteed MBS per month, subject to market conditions.
"We're continuing to wind down the emergency programs that were put in place in 2008 and 2009 to help restore market stability, and the sale of these securities is consistent with that effort," said Mary J. Miller, Assistant Secretary for Financial Markets. "We will exit this investment at a gradual and orderly pace to maximize the recovery of taxpayer dollars and help protect the process of repair of the housing finance market."
Treasury acquired its portfolio of agency-guaranteed MBS under authority provided to it by Congress under the Housing and Economic Recovery Act of 2008. These purchases of agency-guaranteed MBS helped preserve access to mortgage credit and promote economic stability during a period of unprecedented market stress and volatility.
The market for agency-guaranteed MBS has notably improved since the time Treasury purchased these securities in 2008 and 2009. Based on current market prices, Treasury expects to make a profit for taxpayers on this investment. The sale of these securities will not alter our previously stated debt management objectives, nor change the path on which we intend to achieve those objectives.
In 2008, Treasury retained State Street Global Advisors to acquire, manage, and dispose of its agency-guaranteed MBS portfolio. That firm will manage the wind down of this investment. At the end of each month, Treasury will post on its website the total agency-guaranteed MBS sales it has made, broken down by coupon and agency.

The sale of these securities is part of Treasury's continued efforts to wind down emergency programs that were put in place in 2008 and 2009 to promote financial stability and restore economic growth. On October 3, 2010, new Troubled Asset Relief Program (TARP) purchasing authority expired, and Treasury is moving to exit its remaining TARP investments in private companies. In December 2010, Treasury sold its final share of Citigroup common stock, locking in a profit of more than $12 billion on that TARP investment. General Motors' (GM) recent initial public offering cut Treasury's common stock stake in that company nearly in half and brought in a total of $13.5 billion for taxpayers. Additionally, Treasury recently received $9.6 billion in TARP repayments through the sale of its Ally Financial trust preferred securities holdings and AIG's sale of its MetLife equity stake.
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