Financial Review

Accept Responsibility

Fed stands pat; traders don their rally hats. Home sales down. The LEI’s a drag. Wall Street needs a long lead for Brexit. Yahoo’s big hack. Hanjin’s happy. Zuckerberg wants to live to be really old. We’re number 28! Budget countdown. Wells Fargo and life lessons on personal responsibility.

Financial Review by Sinclair Noe for 09-22-2016

DOW + 98 = 18,392
SPX + 14 = 2177
NAS + 44 = 5339
10 Y – .05 = 1.62%
OIL + .74 = 46.08
GOLD + 1.80 = 1337.70


The Federal Reserve kept policy on hold, yesterday. The Fed held its key interest rate unchanged at a range of 0.25% to 0.50%, saying, “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” The Federal Reserve’s long-term outlook added to optimism over stimulus policies from global central banks. For traders it was a cue to don their rally caps.  Risk on! Stocks climbed with bonds as the dollar fell. The S&P 500 tallied its best two-day performance in more than two months, while the Nasdaq closed at a record high. Oil rallied, leading commodities higher. Global equities extended a four-day advance, and Treasuries rose to a two-week high.


Filings for U.S. unemployment benefits dropped last week to match the lowest level since April. Jobless claims declined by 8,000 to 252,000 in the week ended Sept. 17. Applications for unemployment insurance are close to a four-decade low as companies focus more on filling available positions than on trimming staff. Filings have been below 300,000 for 81 straight weeks — the longest streak since 1970.


The National Association of Realtors reports existing-home sales declined 0.9% to a seasonally adjusted annual rate of 5.33 million. That was only 0.8% higher than a year ago, although year to date figures are 3% higher. First-time homebuyers comprised 31% of the market in August. As inventory tightened, it pressured prices higher. The median sales price was $240,000, which is 5.1% higher than in August 2015.


Weakness in the manufacturing sector dragged the Conference Board’s leading economic index down 0.2%. The index, which weights 10 different economic indicators, was hurt by a decline in the average workweek of production workers as well as the new-orders component of the Institute for Supply Management’s manufacturing index. While the U.S. LEI declined in August, its trend still points to moderate economic growth in the months ahead, with the economy growing at about a 1.8% rate.


Wall Street wants the UK to delay Brexit for as long as possible. At a meeting in New York, Wall Street heads asked Prime Minister Theresa May for a “long lead time” of up to two years to prepare for a Brexit.


Yahoo has confirmed a really big hack.  Information associated with at least 500 million user accounts was stolen. Yahoo confirmed that a data breach in late 2014 revealed information that may have included names, email addresses, telephone numbers, dates of birth, and some passwords and security questions and answers. Verizon, which agreed to buy Yahoo earlier this year, confirmed it was notified of the Yahoo breach within the last two days, but has “limited information” on the attack and will evaluate as the investigation continues. It is time to change your passwords.


Hanjin Shipping got some good news. The board of Korean Air Lines, Hanjin’s biggest shareholder, approved a 60 billion won $54 million loan to the shipper. After that, Korea Development Bank, the main lender to Hanjin, offered a conditional credit line of $45 million to help ease supply-chain disruptions caused by the collapse of the nation’s biggest container mover.


Mark Zuckerberg, Facebook’s chief executive, and his wife, Dr. Priscilla Chan, last year said they would give 99 percent of their Facebook shares to charitable causes. Now they are putting a large chunk of that money to work. The Chan Zuckerberg Initiative, into which Mr. Zuckerberg and Dr. Chan put their Facebook shares, said it would invest at least $3 billion over the next decade toward preventing, curing or managing all diseases by the end of the century. While the Chan Zuckerberg Initiative has already made investments in charter schools and education start-ups, the money toward curing diseases represents the group’s first major initiative in science. Zuckerberg said that if his organization’s plan to cure or manage all disease worked, it should increase human life expectancy to 100 years. “That doesn’t mean no one will ever get sick,” he said. “But they should be able to treat it and manage it.”


America is not the greatest country in the world, at least we are not the healthiest. We are number 28, when it comes to health goals set by the United Nations, according to a report published in the Lancet. Using the UN’s sustainable development goals as guideposts, which measure the obvious (poverty, clean water, education) and less obvious (societal inequality, industry innovation), more than 1,870 researchers in 124 countries compiled data on 33 different indicators of progress toward the UN goals related to health. The U.S. scores its highest marks in water, sanitation, and child development. That’s the upside. Unsurprisingly, interpersonal violence (think gun crime) takes a heavy toll on America’s overall ranking. Response to natural disasters, HIV, suicide, obesity, and alcohol abuse all require attention. The US is No. 64 in the rate of mothers dying for every 100,000 births, and No. 40 when it comes to the rate children under age five die.


The federal fiscal year ends on Sept. 30 and Congress must pass a spending measure by then to keep the government open. In recent years, lawmakers have seldom been able to agree on a full federal budget and instead have relied on stop-gap measures. Today a stop gap measure was introduced and immediately rejected. They have a full week to work it out. What could go wrong?


A couple of weeks ago, Wells Fargo agreed to pay $185 million in penalties for perpetrating a massive fraud on customers; for years they had been opening bogus accounts in customers names’ without customers’ permission and charging fees to do it. Millions of phony accounts. Fake bank card PIN numbers. Fictitious email accounts. Wells Fargo admitted to firing 5,300 employees for engaging in these shocking tactics. CEO John Stumpf was called before Congress to testify. Stumpf claimed the bank had an ethics hotline, a phone employees could call anonymously to report any type of unethical behavior; exactly the kind of safeguards put in place to prevent illegal activity from taking place and provide refuge to employees from dangerous work environments. Stumpf told lawmakers, “Each team member, no matter where you are in the organization, is encouraged to raise their hands.” He mentioned the anonymous ethics line, adding, “We want to hear from them.”


Well, CNNMoney has been hearing from some former Wells Fargo employees, and they are saying that attempts to report bad behavior got them fired. One former Wells Fargo banker not only refused orders to open phony bank and credit accounts. He called an ethics hotline and sent an email to human resources in September 2013, flagging unethical sales activities he was being instructed to do. Eight days after that email, a copy of which CNNMoney obtained, he was fired. The stated reason? Tardiness. One former Wells Fargo human resources official even said the bank had a method in place to retaliate against tipsters. He said that Wells Fargo would find ways to fire employees “in retaliation for shining light” on sales issues.


Stumpf told the Congressional committee that the bank fired 5,300 employees involved in the fake accounts starting in 2011, not in response to the Consumer Financial Protection Bureau, which revealed the scandal earlier this month. However there was no indication Stumpf or anyone at Wells Fargo notified regulators about the problems. The bank did hire consultants at PricewaterhouseCoopers to help determine the scope of the problem — but that happened in August 2015. Nor has the bank ever disclosed in its public filings to the SEC that its activities were under investigation. He said the bank has been refunding fees charged for fake accounts, but that’s nowhere near sufficient. Some customers could face decades of higher mortgage or loan payments because lenders downgraded their creditworthiness based on the fake accounts. This is the untold disaster.


Meanwhile, Stumpf’s personal stockholdings increased in value by more than $200 million while the scam was ongoing — thanks in part to Wells Fargo’s boasts about its cross-selling skills. Stumpf said several times that he accepted “personal responsibility” and “he’s accountable”. I think we can all learn a valuable lesson here. We all need to stand up and accept personal responsibility for our actions – just like John Stumpf. If you get caught speeding, don’t argue with the cop; just say “I accept full responsibility” and then zoom off. If the IRS says you owe a boatload of back taxes, don’t even bother to take your tax returns to the audit; just tell them you take full responsibility for those errors, assure them that you are accountable, and then hang up the phone, and wait for your refund check. Other banks have done pretty much the same thing. Just last year, the Justice Department charged five other big banks, Citibank, JPMorgan Chase, Barclays PLC, Royal Bank of Scotland, and UBS, with felony fraud for illegally manipulating the international currency markets. Their top executives all took “responsibility.” Nobody went to jail and most of them collected multi-million dollar bonuses. I tell you, this scam of accepting responsibility and being accountable, it is a money-maker!

And if you murder someone in cold blood, just tell the judge, “Your honor, I take full responsibility for that murder. I’m accountable.” Why that judge will surely grant you freedom to continue with your life of crime. Now, just be certain you say “I accept responsibility.” Do not, repeat, do not admit your guilt. You have to do it just like John Stumpf.





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