Tuesday, July 24, 2012

Wealthy Stash $21 Trillion in 'Pirate' Banks

There are two banking systems for the wealthy. Private banks. And "pirate" banks.
"Pirate banks" form a large and fast-growing virtual banking system that has helped the wealthy hide more than $21 trillion offshore, according to a new report from the left-leaning Tax Justice Network USA.
That hidden wealth is costing governments $280 billion a year in lost tax revenue, the report says.
The report says much of that wealth is held by fewer than 10 million of the global super-wealthy and is handled by the world's 50 largest banks. Today's "pirate banking" clients include everyone from "30-year-old Chinese real-estate speculators and Silicon Valley software tycoons to Dubai oil sheks, Russian presidents, mineral-rich African dictators and Mexican drug lords," the report said.
"The 'pirate banking' system now launders, shelters, manages and, if necessary, re-domiciles the riches of many of the world's worst villains, as well as the tangible and intangible assets and liabilities of many of our wealthiest individuals," said the report.
The report was written by James Henry, a former economist for McKinsey & Co.
Of course, determining how much wealth is hidden overseas is an imprecise science. And many conservative groups contest the estimate.
The problem, says Dan Mitchell, a senior fellow at the Cato Institute, is that the estimate is based on a series of assumptions aimed at making people "believe that much of cross-border investing is all about tax evasion and that all this money should go to government, and that this would be a good thing." The real problem facing governments, Mitchell says, is spending not revenues.
The Tax Justice Network used data from the World Bank and International Monetary Fund, the United Nations, central banks and national accounts to model capital flows for 139 countries. It supplemented this with other data on transfer prices and reserve currencies, along with consulting firm research on offshoring.
All that data-crunching resulted in the estimate that the world's wealthy have between $21 trillion and $32 trillion stashed offshore, and that the world's top 50 banks collectively manage more than $12 trillion of that money. Smaller banks, investment banks, insurance companies, hedge funds and independent money managers oversaw the rest.
The $21 trillion to $32 trillion estimate does not include real estate, yachts, thoroughbreds or gold bricks, which could also increase the number.
The report says that traditional offshore havens like Switzerland and Singapore hold substantial amounts. But much of the offshore fortune is held in a "virtual country" - a network of complicated cross-border entities designed to shelter wealth.
An asset may be "owned by an anonymous offshore company in one jurisdiction, which is in turn owned by a trust in another jurisdiction, whose trustees are in yet another jurisdiction," the report said.

Monday, July 23, 2012

American manufacturers importing workers

U.S. manufacturers, frustrated by a shortage of skilled American factory workers, are going abroad to find them.
Business for factories has surged recently, creating a huge demand for machinists, tool and die makers, computer-controlled machine programmers and operators.
"These jobs are the backbone of manufacturing," said Gardner Carrick, senior director with the Manufacturing Institute. "These are good quality middle-class jobs that Americans should be training for."
The United States is experiencing a shrinking pipeline of manufacturing talent, said James Wall, deputy director of the National Institute for Metalworking Skills.
"It's been in the making for years," he said. Factories didn't feel the labor pinch as much when manufacturing was in a slump. But the latest "Made in USA" resurgence has them scrambling.
Wall said some manufacturers have been relying on foreign workers to fill the gaps through H-1B visas.
The popular H-1B program allows high-skilled foreign workers to be employed in the United States for a maximum duration of six years. Each year, the government issues a quota of new H-1B work visa applications, and all industries compete against the quota. Last year's cap was set at 65,000.
High-tech companies tend to submit the most applications for H-1B visas. Manufacturers typically aren't big users of the program. Out of all the H-1B applications sent to the Labor Department less than 10% were from manufacturers.
A total of 39,551 foreign workers for manufacturing positions were certified by the Labor Department in 2011 for H-1B visas.
That number was up from 34,830 workers in 2010.
The agency certifies an application after a U.S. employer has demonstrated that it was unable to find a willing and qualified American worker for the job.
The H-1B visa still needs to be approved by the State Department to be granted. So the number of issued H-1B visas could be much fewer than the number of approved applications.
A majority of the applications for manufacturing last year were for architecture, engineering and other non-production related jobs, said Carrick, analyzing Labor Department data.
Less than 100 certified applications were for core factory jobs, such as machinists and computer-controlled machine operators, he added.
So even though manufacturers are going down this path, "H-1B is never going to be the answer to the skills shortage in production jobs in manufacturing," he said.
"The H-1B certainly isn't the best long-term solution," said Carrick. "We have to grow this talent at home."
But don't tell that to Vincent Spinali, general manager with Prattville Machine & Tool Company. The Peabody, Mass.-based manufacturer with 100 employees is a machine shop whose clients are in the aerospace and defense industries.
Spinali said the company invested a year and a "significant amount of money" to bring back one of its former machinists from Colombia through the H-1B visa program.
"He was in the U.S. on political asylum. We hired him, trained him and he was with us for 15 years after that. He was a great worker," said Spinali.
In 2010, Spinali said the worker's status changed, and he was sent back to Colombia.
The company got the worker back six months ago. "We realized he had become invaluable to us, and it would be hard to replace someone with his experience quickly," said Spinali.
Spinali said the H-1B program is difficult to maneuver, time-consuming and expensive, but he would consider using it again to hire more workers.
"Our business has picked up," he said. "Also, half of our workers are over 50. It's going to be very difficult to replace them when they retire because there's a shortage of young skilled workers."
Meanwhile, the Labor Department is trying to discourage American manufacturers from using H-1B visas, by offering grants to manufacturing associations and companies that train and hire domestically.
The agency recently awarded the National Institute of Metalworking Skills a $2.2 million grant that will encourage members to start in-house apprenticeships.
"We can and should develop our own skilled production workforce through career and technical institutes," Carrickn said. "These schools can provide U.S. manufacturers with the reliable supply of skilled production workers that they so desperately need."

Wednesday, July 18, 2012

8 Things Not to Keep in Your Wallet

That overstuffed wallet of yours can’t be comfortable to sit on. It’s probably even too clunky to lug around in a purse, too.

And with every new bank slip that bulges from the seams, your personal information is getting less and less safe. With just your name and Social Security number, identity thieves can open new credit accounts and make costly purchases in your name. If they can get their hands on (and doctor) a government-issued photo ID, they can do even more damage, such as opening new bank accounts. These days, con artists are even profiting from tax-return fraud and health-care fraud, all with stolen IDs.

[More from Kiplinger: How to Protect Your Identity, Finances If You Lose Your Phone]

We talked with consumer-protection advocates to identify the eight things you should purge from your wallet immediately to limit your risk in case your wallet is lost or stolen.

And when you’re finished removing your wallet’s biggest information leaks, take a moment to photocopy everything you’ve left inside, front and back. Stash the copies in a secure location at home or in a safe-deposit box. The last thing you want to be wondering as you're reporting a stolen wallet is, “What exactly did I have in there?”

1. Your Social Security Card...

...and anything with the number on it.

Your nine-digit Social Security number is all a savvy ID thief needs to open new credit card accounts or loans in your name. ID-theft experts say your Social Security card is the absolute worst item to carry around.

Once you’ve removed your card, look for anything else that may contain your SSN. As of December 2005, states can no longer display your SSN on newly issued driver's licenses, state ID cards and motor-vehicle registrations. If you still have an older photo ID, request a new card prior to the expiration date. There might be an additional fee, but it's worth it to protect your identity.

Retirees, pull out your Medicare card, too, because it has your SSN on it. Instead: Photocopy your Medicare card (front and back), black out the last four digits of your SSN on the copy, and carry it with you instead of your real card.

[More from Kiplinger: The 5 Money Smartest (and 5 Money Dumbest) States]

2. Password Cheat Sheet

The average American uses at least seven different passwords (and probably should use even more to avoid repeating them on multiple sites/accounts). Ideally, each of those passwords should be a unique combination of letters, numbers, and symbols, and you should change them regularly. Is it any wonder we need help keeping track of them all?

However, carrying your ATM card’s PIN number and a collection of passwords (especially those for online access to banking and investment accounts) on a scrap of paper in your wallet is a prescription for financial disaster.

Instead: If you have to keep passwords jotted down somewhere, keep them in a locked box in your house. Or consider an encrypted mobile app, such as SplashID ($9.95; Android, Blackberry, iPad, iPhone), Password Safe Pro (free, Android only) or Pocket (free, Android only).

[Related: Common Money Traps to Avoid]

3. Spare Keys

A lost wallet containing your home address (likely found on your driver's license or other items) and a spare key is an invitation for burglars to do far more harm than just opening a credit card in your name. Don't put your property and family at risk. (And even if your home isn't robbed after losing a spare key, you'll likely spend $100+ in locksmith fees to change the locks for peace of mind.)

Instead: Keep your spare keys with a trusted relative or friend. If you’re ever locked out, it may take a little bit longer to retrieve your backup key, but that’s a relatively minor inconvenience.

4. Checks

Blank checks are an obvious risk—an easy way for thieves to quickly withdraw money from your checking account. But even a lost check you've already filled out can lead to financial loss—perhaps long after you've canceled and forgotten about it. With the routing and account numbers on your check, anybody could electronically transfer funds from your account.

Instead: Only carry paper checks when you will absolutely need them. And leave the checkbook at home, bringing only the exact amount of checks you anticipate needing that day.

[More from Kiplinger: 10 Riskiest Places to Give Your Social Security Number]

5. Passport

A government-issued photo ID such as a passport opens up a world of possibilities for an ID thief. “Theives would love to get (ahold of) this,” says Nikki Junker, a victim adviser at the Identity Theft Resource Center. “You could use it for anything”—including traveling in your name, opening bank accounts or even getting a new copy of your Social Security card.

Instead: Carry only your driver’s license or other personal ID while traveling inside the United States. When you're overseas, photocopy your passport and leave the original in a hotel lockbox.

6. Multiple Credit Cards

Although you shouldn’t ditch credit cards altogether (those who regularly carry a card tend to have higher credit scores than those who don’t), consider a lighter load. After all, the more cards you carry, the more you’ll have to cancel if your wallet is lost or stolen. We recommend carrying a single card for unplanned or emergency purchases, plus perhaps an additional rewards card on days when you expect to buy gas or groceries.

Also: Maintain a list, someplace other than your wallet, with all the cancellation numbers for your credit cards. They are typically listed on the back of your cards, but that won’t do you much good when your wallet is nowhere to be found.

[Related: How Hackers Attack]

7. Birth Certificate

The birth certificate itself won’t get ID thieves very far. However, “birth certificates could be used in correlation with other types of fraudulent IDs,” Junker says. “Once you have those components, you can do the same things you could with a passport or a Social Security card.”

Be especially cautious on occasions—such as your mortgage closing—when you may need to present your birth certificate, Social Security card and other important personal documents at once. “Everything’s together,” Junker notes, “and someone can just come along and steal them all. Take the time to take them home, and don’t leave them in your car.”

8. A Stack of Receipts

Beginning in December 2003, businesses may not print anything containing your credit or debit card’s expiration date or more than the last five digits of your credit card number. Still, a crafty ID thief can use the limited credit card info and merchant information on receipts to phish for your remaining numbers.

Instead: Clear those receipts out each night, shredding the ones you don’t need. But for receipts you save, keep them safe by going digital. Apps such as Lemon and Shoeboxed create and categorize digital copies of your receipts and business cards. 

Monday, July 16, 2012

LIBOR Scandal Is “Huge”: Eliot Spitzer

Wednesday, July 11, 2012

Market Update

Market Update

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11:00 am : The major averages hold near session lows during what has been a rather uneventful session. Both the Dow and Nasdaq trade down 0.5% to lead the decline while the S&P outperforms with a 0.2% loss. 

Luxury goods maker Burberry (BURBY 37.10, -2.50) is down sharply after announcing disappointing earnings. The company announced revenues increased 11.0% for the quarter to GBP408 mln, but that number fell short of the GBP418 mln Capital IQ Consensus Estimate. U.S. rival Coach (COH 55.60, -1.32) is down 2.3% as it piggybacks the move.  DJ30 -53.78 NASDAQ -13.55 SP500 -2.49 NASDAQ Adv/Vol/Dec 817/424.8 mln/1653 NYSE Adv/Vol/Dec 1026/174.2 mln/2008
10:35 am : In the energy space, Aug crude oil is trading notably higher today and just extended their gains and hit a new session high of $85.68. Following inventory, oil was rather muted and is now trading +1.7% at $85.30/barrel. 

July natural gas is higher as well as rose as high as $2.80 a short while ago and is now just one penny below that HoD at $2.79, up 2.1%. 

In metals, August gold and Sept. silver rallied nicely in recent trade, while the dollar index only ticked lower. Gold pushed into positive territory, while silver hit a new session high of $27.22. In current trade, gold is now back in the red, currently -0.4% at $1574.20/oz, while silver has pulled back a little from its new HoD and is +0.8% at $27.09/oz. 

In agriculture, the USDA released its July WASDE report, which showed notable cuts in production and yield forecasts. Dec corn is now +2.2% at $7.33/bushel, Sept wheat is +1.6% at $8.35/bu and Nov soybeans are +1.7% at $15.64/bu.DJ30 -29.86 NASDAQ -0.94 SP500 +1.31 NASDAQ

JPMorgan Clawbacks: Step in Right Direction, But Nowhere Near Enough

Compensation clawbacks are in store for JPMorgan's (JPM) executives at the center of the bank's 'London Whale' trading losses, reports The Wall Street Journal. The bank plans to revoke millions in pay in the form of unvested stock awarded to members of the Chief Investment Office (CIO), where the risky bet was made.
Ina Drew, former head of JPMorgan's CIO, will likely face the financial penalties as will Bruno Iksil, the London trader who oversaw the trades that are estimated to have lost $5 billion (and counting). Iksil's direct bosses are also said to face forfeiture of pay.
Clawbacks are certainly a step in the right direction as recourse for the huge trading loss. But as The Daily Ticker's Aaron Task and Henry Blodget discuss in the accompanying video, revoking unvested stock certainly does not go far enough to penalize the individuals responsible for the loss, which has cost the bank nearly $25 billion in market capitalization since May.
"We still have to have a system in place for both for individuals and for the banks where there is real recognition that the downside is not going to hurt so you just don't go to Vegas and roll the dice every day and if you lose $5 billion 'so what'?" says Henry.
Last year, Drew earned more than $15 million, half of which included compensation in the form of stock. But what really shocks The Daily Ticker team is how much her contract awards her for her termination from the bank. Proxy filings show Drew is set to receive almost as much as her total compensation in all of 2011 after resigning over the trading losses, reports WSJ.
Even if she wasn't technically fired, this kind of "golden parachute" is impossible to justify given the circumstances surrounding Drew's departure, even if was part of her employment contract, Aaron says.
The news of clawbacks comes ahead of JPMorgan's second-quarter earnings call Friday when more details are to be released about the details and size of the loss, which recent reports signal have grown to $5 billion from the original $2 billion estimates.
Stay tuned for more coverage and tell us what you think: Do you believe the clawbacks go far enough to penalize the JPMorgan executives?