Ed’s Daily Notes for February 11th   Leave a comment

Bloomberg: Yellen Testimony Guide From Payrolls Report to Emerging Markets

Here’s what to look for when Janet Yellen testifies before the House Financial Services Committee today in her first public remarks since becoming Federal Reserve chairman on Feb. 3. Yellen’s prepared remarks will be released at 8:30 a.m., and the hearing will begin at 10 a.m. Yellen plans to speak to the Senate Banking Committee on Feb. 13 in a second day of semi-annual testimony.

…Yellen probably will indicate she plans to press on with a strategy to trim bond buying by $10 billion at coming policy meetings even after a weaker-than-forecast report for payroll growth in January, according to Joseph Lavorgna, chief U.S. economist at Deutsche Bank Securities Inc. and a former New York Fed economist.

Here is one thing to specifically watch for:

Yellen will probably back further away from the Federal Open Market Committee’s promise to begin considering raising the main interest rate when unemployment falls below 6.5 percent, Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York and former Fed economist, said in an interview. The FOMC in December said it probably won’t raise the federal funds rate until “well past the time” the jobless rate falls below 6.5 percent. “Most” panel members didn’t favor moving the threshold, according to minutes of the meeting.

Remember, the rate on last Friday’s report was 6.6%. We could be at 6.5% by next month. If the Fed holds to that number, it is conceivable they could be raising rates even before they finish tapering, or even pull a fast “taper to $0 and raise rates” in one month. Mister Market will NOT be pleased if they do that!

One thing to ignore: Politicians from both sides might try to get Yellen to take a position on Obamacare (i.e. Republicans might try and get her to say it is bad for employment, whereas Democrats might try and play on her more liberal views to get her to say it is a good law). What Yellen thinks about Obamacare is irrelevant unless it pertains to Fed policy, which is unlikely. However, if she takes a position, that may be the “headline” from her testimony, even if it’s as meaningful as what Tom Cruise thinks about Obamacare.

Wall Street Journal: Health-Law Mandate Put Off Again

Most employers won’t face a fine next year if they fail to offer workers health insurance, the Obama administration said Monday, in the latest big delay of the health-law rollout.

The Treasury Department, in regulations outlining the Affordable Care Act, said employers with 50 to 99 full-time workers won’t have to comply with the law’s requirement to provide insurance or pay a fee until 2016. Companies with more workers could avoid some penalties in 2015 if they showed they were offering coverage to at least 70% of full-time workers.

The move came after employers pressured the Obama administration to peel back the law’s insurance requirements. Some firms had trimmed workers’ hours to below 30 hours a week to avoid paying a penalty if they didn’t offer insurance.

…Under the original 2010 health law, employers with the equivalent of at least 50 full-time workers had to offer coverage or pay a penalty starting at $2,000 a worker beginning in 2014. Last year, the administration delayed the requirement for the first time by moving it to 2015.

This is completely illegal since the president doesn’t have the authority to just decide to not enforce a law. However, in the “Age of Obama”, things like laws don’t really matter, do they? Laws are for the little people…

Bloomberg: Google Deal Machine Ramps Up to Pass Intel in Top Spot

Google Inc. (GOOG), the company that leads Internet search, has gained a new superlative: top dealmaker.

From buying a digital-thermostat developer to selling a mobile-phone business, Google has executed more deals than any company in the world over the past three years, according to data compiled by Bloomberg through January, up from 13th place in the three years prior. Advertising-firm WPP Plc (WPP) was second, followed by chipmaker Intel Corp. (INTC)

Since taking over as chief executive officer in 2011, co-founder Larry Page has pushed Google beyond Web advertising. He’s used the company’s cash, which totaled $58.7 billion in the latest quarter, to invest in connected devices, business services and mobile applications. The mergers and acquisitions group, led by Don Harrison, has expanded by at least 50 percent in the past two years, a person with knowledge of the unit said. Meanwhile, Google Ventures has become a big startup spender, and a new group called Google Capital backs later-stage companies.

“It is absolutely starting to feel like a deal machine,” said Maha Ibrahim, a partner at venture firm Canaan Partners in Menlo Park, California, which has co-invested with Google Ventures and Google Capital. “Because they have such a diverse base of interests, you see these acquisitions coming out of left field that have very little to do on the surface with the ad business.”

Is this a good thing? While we can sit here and argue the benefits of any specific acquisition, overall I like that Google is doing this. In the tech sector, you have to innovate or die. And where you can’t innovate, you acquire.

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Posted February 11, 2014 by edmcgon in Federal Reserve, News, Politics, Stocks, Technology

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