Tuesday, November 20, 2012

US seeks 'durable outcome' in Gaza truce talks, Clinton says in Israel

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Secretary of State Hillary Clinton has undertaken the difficult task of helping to shepherd a possible ceasefire. Egyptian president Mohammed Morsi, meanwhile, is playing a key role as an intermediary with Hamas, a group labeled by the U.S. as a terrorist organization. NBC's Stephanie Gosk reports.

By NBC News staff and wire reports
Updated at 4:50 p.m. ET: Following her arrival in Israel, Secretary of State Hillary Clinton reiterated at a press conference Tuesday that America's commitment to Israel's security is "rock solid," adding that "the goal must be a durable outcome that promotes regional stability and advances the security and legitimate aspirations of Israelis and Palestinians alike."

"The rocket attacks from terrorist organizations inside Gaza on Israeli cities and towns must end, and a broader calm restored," Clinton said, adding that there are no substitutes for security and a just and lasting peace.

Speaking in Jerusalem, Clinton also offered her condolences for those lost in the violence.
"Our hearts break for the loss of every civilian, Israeli and Palestinian, and for all those who have been wounded and are living in fear and danger," she said, adding that she would work with Israel and Egypt on brokering a truce in Gaza "in the days ahead."

Israel is prepared to escalate its offensive but would prefer a long-term diplomatic solution, Prime Minister Benjamin Netanyahu said on Tuesday.

"If there is a possibility of achieving a long-term solution to this problem with diplomatic means, we prefer that," he said in a public statement alongside Clinton.

"But if not, I'm sure you understand that Israel will have to take whatever action is necessary to defend its people."

Earlier, a Hamas official said a truce with Israel would not be reached Tuesday because the Israeli government had yet to respond to proposals.

"The Israeli side has not responded yet, so we will not hold a (news) conference this evening and must wait until tomorrow," Ezzat al-Rishq, a senior Hamas leader, told Reuters. "The truce is now held up because we are waiting for the Israeli side to respond," he added in a short telephone interview.

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A flurry of violence hit Gaza Tuesday as Israel bombed a Gaza bank and targeted the homes of militants. Hamas responded with more than 100 rockets. NBC's Richard Engel reports.

Clinton landed at 9:51 p.m. local time in Tel Aviv, where she met with Netanyahu. Later, Clinton will meet with the President of the Palestinian National Authority Mahmoud Abbas in Ramallah before heading to Cairo.

A U.S. official stressed to NBC News that Clinton would not meet with representatives of Hamas, the Islamist organization that controls the Gaza Strip, largely because of its failure to renounce terrorism and recognize Israel's right to exist.

Egyptian officials said talks are ongoing to reach a truce in Gaza, although any agreement appears unlikely to address the long-term areas of disagreement between Israel and the Hamas leaders of the Gaza Strip, NBC's Ayman Mohyeldin reported Tuesday.

The expected "cessation of hostilities" will call on all parties to use maximum restraint, according to one former intelligence official familiar with the talks.

Earlier Tuesday, President Barack Obama spoke to Egyptian President Mohammed Morsi, who is seeking to broker a cease-fire between Israel and Hamas.

According to White House officials, Obama spoke to Morsi for the third time in 24 hours. Deputy National Security adviser Ben Rhodes said Obama wanted to talk to Morsi before Clinton's arrival in Israel.

Rhodes said Obama underscored the importance of Morsi working toward a de-escalation to the conflict in Gaza. He also commended Morsi's efforts to pursue a de-escalation and acknowledged Egypt's important role in the region's security.

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Secretary of State Hillary Clinton is attempting to bring about a ceasefire, or to prevent Israel from invading Gaza while convincing Egypt's president to pressure Hamas to stop firing rockets. NBC's Andrea Mitchell reports.

Rhodes said Obama emphasized the importance of a diplomatic solution, but said that rocket fire from Gaza into Israel must stop.

Israel Defense Forces continued airstrikes overnight, and also said 39 rockets fired from Gaza hit Israel Tuesday in a message on its Twitter account.

Since Israel launched its military campaign seven days ago in response to rocket fire, more than 100 people in Gaza and three people in Israel have been killed.

Internationally, the main focus was on stopping the violence, and Morsi hinted at a possible breakthrough Tuesday.

Speaking at his sister's funeral in Egypt, Morsi said the "aggression on Gaza" would end Tuesday. He made the apparently off-the-cuff comments in front of mourners who had come to pay their respects, but did not elaborate. Several journalists traveling with Morsi confirmed he made the remark.
In Jerusalem, Netanyahu said Israel would be a “willing partner” in a cease-fire, but also issued a warning.

He said if further military action proved necessary “to stop the constant barrage of rockets, Israel will not hesitate to do what is necessary to defend our people.”

And Mohammed Deif, the new leader of Hamas' military wing, sounded a defiant note, saying that the movement was ready to fight and would not back down from its efforts to liberate Palestine.

He was speaking in his first audio recording since the group’s previous top military commander, Ahmed Jabari, was killed in an Israeli airstrike Wednesday. Deif, who has survived several assassination attempts in the past, called for Hamas’ supporters to remain steadfast.

We are very scared': Egyptians fear being mired in Gaza-Israel crisis
'Difficult' situation

It is unclear how much influence Clinton can have on the situation.

“She is going to go out there to be in the region to have direct, face-to-face discussions with those leaders,” Rhodes said. “I don’t want to predict exactly what the outcome of those discussions will be. We all know how difficult this situation is.”

The White House thinks the leaders who are heavily involved in the region “understand what the best outcome is,” Rhodes added, but that a peaceful goal is only achievable “if Hamas takes action to stop what they’ve been doing.”

An Israeli soldier and a civilian died when rockets exploded near the Gaza frontier, police and the army said.

An Israeli air strike on two cars in the Gaza Strip killed six Palestinians Tuesday, while two children died in an attack in the north of the territory, local residents and medics told Reuters.

United Nations Secretary-General Ban Ki-moon called Tuesday for an immediate cease-fire in Gaza and said a threatened Israeli ground operation in the Palestinian enclave would be a “dangerous escalation” that must be avoided.

Later, standing alongside Netanyahu in Jerusalem, Ban urged Israel to show "maximum restraint" and condemned rocket attacks on Israel.

Also Tuesday, Arab League chief Nabil Elaraby and the foreign ministers of Turkey, Egypt, Lebanon, Tunisia and Sudan traveled from Egypt to Gaza in an unprecedented move designed to show solidarity with the Palestinians, NBC News reported.

US Embassy guard wounded

Meanwhile, a man was arrested after he stabbed a security guard Tuesday at the U.S. Embassy in Tel Aviv, a police spokesman told Reuters.

The spokesman said the guard opened fire during the attack.

Israel Radio said the attacker, who police said was armed with a knife and an ax, was wounded. 

Oded Balilty / AP
Israeli police officers detain a man who attacked a security guard at the U.S. embassy in Tel Aviv, Israel, Tuesday.

NBC's Shawna Thomas, Ayman Mohyeldin and Ian Johnston, and Reuters contributed to this report.

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ProPublica: Don’t Hold Your Breath for Real Financial ReformMonday, 19 Nov 2012 07:54 AM
By John Morgan

If you think President Barack Obama is going to crack down on Wall Street in his second term, you would probably be wrong, according to an analysis by ProPublica.

The non-profit investigative journalism project noted the Obama administration has installed tougher financial regulators, and with activists such as newly minted Sen. Elizabeth Warren, D-Mass., now in place, the pace of new bureaucratic rules should speed up now with the election over.

But there is apparently an array of institutional obstacles in the way of real reform.
“While the rule making will speed up, the core problems with the financial system and its regulators are deeper than personnel and sadly impervious to which party occupies the White House,” ProPublica asserted. “They are bipartisan and structural.”

As an example of “bipartisan cowardice and ineptitude,” ProPublica cited the failure of the Securities and Exchange Commission (SEC), even under Obama-appointed Chairwoman Mary Schapiro, to find a way to prevent money market funds from being able to hide their risks. In that instance, a Democratic commissioner joined Republicans in proposing more study of the topic, resulting in a report that called for yet more study.

The structural issues are also profound, ProPublica said. It noted the Commodity Futures Trading Commission (CFTC) and the SEC still exist as two separate agencies, despite the intent of Dodd-Frank legislation. The CFTC is overseen by the Senate Agriculture Committee, while the SEC falls under the Senate Banking Committee, so merging the two agencies would mean loss of power by one of the Senate committees.

“One of the biggest weaknesses of Dodd-Frank is that we failed to look long and hard at true independence of regulators,” said one frustrated Senate staffer who worked on the legislation.

As a result, ProPublica said oversight of credit default swaps is split by the CFTC and the SEC, meaning half of a swap trade can be regulated by one agency, and the other half by the second agency. And it noted the Volcker Rule, a key Dodd-Frank component to prevent banks from making risky proprietary trades, is still not finalized after two and a half years of multiple-agency negotiations.

ProPublica concluded: “Dodd-Frank is so sweeping in its scope yet so picayune in its application that it will be close to impossible for the public to tell whether it’s making a difference.”

However, Forbes reported that Dodd-Frank is more popular that Obamacare, according to a Gallup poll, which could make it more difficult for lobbyists to seriously dilute its provisions.

Similarly, a post-election Reuters analysis concluded that Wall Street firms, having gambled and lost on Mitt Romney, might be well-advised to build better ties to Obama and his coterie of financial regulators.

Soros Buys Gold as Record Prices Seen on Stimulus

Soros Fund Management Chairman George Soros (Thomas Peter/AFP/Getty Images)

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Monday, 19 Nov 2012 07:33 PM

Gold’s 12-year rally, the longest in at least nine decades, is poised to continue in 2013 as central bank stimulus spurs investors from John Paulson to George Soros to accumulate the highest combined bullion holdings ever.

The metal will rise every quarter next year and average $1,925 an ounce in the final three months, or 12 percent more than now, according to the median of 16 analyst estimates compiled by Bloomberg. Paulson & Co. has a $3.62 billion bet through the SPDR Gold Trust, the biggest gold-backed exchange-traded product, and Soros Fund Management LLC increased its holdings by 49 percent in the third quarter, U.S. Securities and Exchange Commission filings show.

Central banks from Europe to China are pledging more steps to boost growth, raising concern about inflation and currency devaluation. Investors bought 247 metric tons through ETPs this year, exceeding annual U.S. mine output. While both sides said talks last Friday between President Barack Obama and Congress over the so-called fiscal cliff were “constructive,” the Congressional Budget Office has warned the U.S. risks a recession if spending cuts and tax rises aren’t resolved.
“We see gold as a hedge against the follies of politicians,” said Michael Mullaney, who helps manage $9.5 billion of assets as chief investment officer at Fiduciary Trust in Boston. “It’s a good time to garner some protection in portfolios by having some real asset like gold.”

Longest Streak

Gold advanced 10 percent to $1,723.79 in London this year, headed for a 12th consecutive annual gain, the longest streak in data compiled by Bloomberg going back to 1920. Prices reached a record $1,921.15 in September 2011. The Standard & Poor’s GSCI gauge of 24 commodities gained 1 percent and the MSCI All-Country World Index of equities climbed 7.9 percent. Treasuries returned 2.8 percent, a Bank of America Corp. index shows.

Bullion held through ETPs, the first of which listed in 2003, reached a record 2,603.7 tons on Nov. 16, valued at $144.3 billion. That exceeds the official reserves of every nation except the U.S. and Germany, World Gold Council data show. The SPDR Gold Trust alone holds 1,342.6 tons.

Soros increased his investment in the trust to 1.32 million shares in the third quarter, the most since 2010, a Nov. 14 SEC filing showed. The stake, with each share representing about a 10th of an ounce, is valued at $219 million. Prices advanced 59 percent since January 2010, when Soros called gold the “ultimate asset bubble.” Michael Vachon, a spokesman for the 82-year-old who made $1 billion breaking the Bank of England’s defense of the pound in 1992, declined to comment.

Official Reserves

Paulson, who became a billionaire in 2007 by wagering against the subprime mortgage market, owns 21.8 million shares in the SPDR Gold Trust, making him the biggest shareholder, a Nov. 15 SEC filing showed. The 56-year-old raised his stake by 26 percent in the second quarter and his holding of about 66 tons exceeds the official reserves of nations from Brazil to Bulgaria to Bolivia.

The New York-based hedge fund company reduced its investments in Anglogold Ashanti Ltd. and Gold Fields Ltd., the third- and fourth-biggest producers. Armel Leslie of Walek & Associates, a spokesman for Paulson’s fund, declined to comment.

Paul Touradji’s Touradji Capital Management LP sold all of its 82,000 shares in the SPDR Gold Trust in the third quarter, according to an SEC filing. Lone Pine Capital LLC, the hedge fund run by Stephen Mandel Jr., cut its stake by 31 percent to 2.6 million shares, and Dan Loeb’s Third Point LLC lowered its bet by 10 percent to 130,000 shares, filings showed last week. Officials from all three companies declined to comment.

Eight Strategists

While some investors expect stimulus to devalue currencies, the median of eight strategist estimates compiled by Bloomberg show the U.S. Dollar Index, a measure against six major trading partners, will average 82.6 next year, from 81 now. Steven Englander, Citigroup Inc.’s head of G-10 strategy, said in an interview this month that the currency market is signaling it isn’t yet convinced the Federal Reserve will fulfill its pledge to pump record amounts of cash into the economy through 2015.

Third-quarter demand for gold fell 11 percent, the most since 2009, as China’s slowing growth curbed purchases, the London-based World Gold Council said Nov. 15. India, the biggest buyer in the quarter, consumed 24 percent less in the year’s first nine months as bullion priced in rupees reached a record in September. The Washington-based International Monetary Fund cut its 2013 forecast for world growth twice since July, to 3.6 percent.

Inflation Adjusted

While prices rose 24 percent since November 2010, the size of the futures market, based on contracts outstanding, fell 29 percent, bourse data show. The metal, down 4 percent from this year’s high, has yet to exceed previous records when adjusted for inflation, with its 1980 record of $850 equal to $2,398 today, data compiled by the Fed Bank of Minneapolis show.

Hedge funds and other large speculators pared bets on a rally in futures traded on the Comex bourse in New York by 29 percent since Oct. 9, U.S. Commodity Futures Trading Commission data show. They’re still holding a net-long position of 140,162 futures and options, about 10 percent more than this year’s average, and increased wagers by 7.7 percent last week.

The Fed said Oct. 24 it will maintain $40 billion in monthly purchases of mortgage debt and probably hold interest rates near zero until mid-2015. The European Central Bank said it’s ready to buy bonds of indebted nations and the Bank of Japan raised its asset-purchase program for the second time in two months on Oct. 30.

Quantitative Easing

Gold rallied 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011.

Investors buying bullion as a hedge against inflation and a weaker dollar generally earn returns only through price gains, increasing its allure as interest rates decline. It rose sixfold since the end of 2000, beating the 34 percent advance in the S&P 500, with dividends reinvested, and the 91 percent return on Treasuries. The Dollar Index fell 26 percent.

The first face-to-face meeting between Obama and leaders from Congress on the fiscal cliff yielded optimism and few details about how it would be resolved. The $607 billion of automatic spending cuts and tax increases is scheduled to take effect in January. U.S. equities and Treasuries rose Nov. 16 and gold futures were little changed.

Options Trading

Credit Suisse Group AG’s Tom Kendall, the most accurate gold forecaster tracked by Bloomberg over the past two years, sees prices averaging $1,880 in the fourth quarter next year and UniCredit SpA’s Jochen Hitzfeld, ranked second, expects $1,950. Deutsche Bank AG’s Daniel Brebner, the next most accurate, predicts $2,300 in the third quarter.

Options traders are also bullish, with the eight most widely held contracts conferring the right to buy at prices from $1,800 to $2,200 between November and March, Comex data show.

Central banks added to reserves for 19 consecutive months through August, the longest streak since 1964, IMF data show. Nations from Russia to South Korea to Mexico bought more to bring combined holdings to 31,461 tons, equal to about 18 percent of all the metal ever mined.

Barrick Gold Corp., the world’s largest producer, will report a 41 percent gain in profit to a record $5.04 billion next year, the mean of 10 analyst estimates compiled by Bloomberg shows. The Toronto-based company’s shares fell 27 percent this year and will gain 45 percent in the next 12 months, according to the average of 23 forecasts.

Monetary Stimulus

Analysts predict Newmont Mining Corp. and AngloGold Ashanti, the next-biggest, will also report the most profit ever next year.

“It looks as though global monetary stimulus is likely to continue, particularly in the wake of growing fiscal austerity,” said Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion of assets. “That puts pressure on the monetary authorities to stimulate the economy and that will debase the currencies and put a bid under gold.”

Bowles: Fiscal Cliff Inaction Could Lead to Ratings Downgrade
Monday, 19 Nov 2012 08:02 AM
By Forrest Jones

Failure on the part of the government to steer the country away from the fast-approaching fiscal cliff could prompt ratings agencies to strip the United States of its triple-A rating, said Erskine Bowles, co-chair of the National Commission on Fiscal Responsibility and Reform.

Standard & Poor’s downgraded the United States in 2011 when lawmakers waited until the last second to raise the country’s debt limit in a deal that did little to address longer-term debts and deficits.

Should lawmakers fail to steer the country away from the fiscal cliff — a combination of tax hikes and government spending cuts set to take effect in early January — other ratings agencies could follow suit.

“What’s worrisome is if we get over the cliff, we don’t have a deal — and the market doesn’t anticipate that we’re actually going to be so stupid as to go over the cliff — then I think you’ll see the market really crash,” Bowles, former chief of staff to President Bill Clinton, told CNBC.

“I think you’ll see the rating agencies downgrade our credit again. You’ll see Fitch and Moody’s join S&P.”

At the end of this year, the Bush-era tax cuts and other benefits are due to expire at the same time automatic cuts to government spending outlined during the 2011 debt ceiling deal are set to kick in.

The widely feared fiscal cliff could siphon over $600 billion out of the economy next year alone.

The nonpartisan Congressional Budget Office estimates failure on the part of Congress to steer the country away from the cliff could contract the economy by 0.5 percent next year.

Lawmakers are at odds over taxes, with Democrats arguing that tax cuts should expire for the wealthy to drum up revenue, while Republicans are pushing for closing loopholes and extending tax breaks for everyone.

Tax hikes on the wealthy, many have argued, would hit small business owners and hamper hiring, which the economy really needs.

Many businesses of all sizes have put off expanding and hiring this year over uncertainty surrounding the fiscal cliff, as they don’t know what they will be paying in taxes next year.

Failure to compromise could spell disaster.

“I think you’ll see corporations lose confidence as to what we’re going to do, where we’re going to go. I think you’ll see them slow down hiring and stop capital expenditures,” Bowles said.

“I think that if we do get our house in order, the future of America is really bright and we can compete with the best and brightest, wherever they are. If we don't, we're well on our way to becoming a second-rate power,” he added.

“[W]e could go bankrupt.”

Markets have remained edgy lately with investors avoiding stocks due to uncertainty surrounding the cliff.

However, given recent improvements seen in the underlying economy such as stronger housing data and gains in employment, successful navigation away from the cliff could spark a rally in the stock market next year, some experts say.

“Investors are tripping over themselves in an attempt to lighten their positions in stocks,” Sam Stovall, chief equity strategist for S&P Capital IQ, wrote to clients recently, according to U.S. News & World Report.

“This swift exodus [from stocks] may soon be followed by a V-shaped recovery should a resolution be forthcoming.”

Read more: Bowles: Fiscal Cliff Inaction Could Lead to Ratings Downgrade

Greenspan: Repeal the Debt Ceiling
Tuesday, 20 Nov 2012 08:38 AM
By Dan Weil
The government debt is quickly approaching its $16.394 trillion limit, signaling another bruising battle between the White House and congressional Republicans to get it raised. 

The best solution: “Repeal it [the debt ceiling],” former Federal Reserve Chairman Alan Greenspan tells CNNMoney.

As of last week, government debt was only $154 billion away from the limit. The Treasury expects the ceiling to be reached by year-end, though it says it can avoid default until early 2013.

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

The debt ceiling is an archaic concept established in 1917 because prior to that every individual debt issuance by the federal government required some form of congressional approval, Greenspan says.

“That’s the same debt ceiling we’ve had ever since.”

There’s no need for it, given that government appropriations legislation already is passed by Congress and signed by the president. “That tells us the difference between receipts and expenditures, or what the change in debt will be,” Greenspan notes.

The debt ceiling creates a separate process to validate spending that already has been approved. We should just use “the normal means of determining what debt will be through appropriations and tax policy,” he says.

As for the here and now, many experts don’t expect quick agreement on a debt-ceiling increase.

“It would be nice not to go down to the drop-dead date, but with the way the process has evolved over the last 20 years, operating on auxiliary engines is standard practice now," Lou Crandall of Wrightson ICAP tells Reuters

Roubini: Worst to Come for Economy, Markets in 2013
Tuesday, 20 Nov 2012 10:26 AM
By Forrest Jones

The worst is yet to come for markets and the global economy in 2013, according to New York University economist Nouriel Roubini.

Major economies are either in a recession or experiencing slow growth rates, while in the United States, uncertainty surrounding the fiscal cliff — a combination of tax hikes and spending cuts due to strike next year — will roil markets as well.

Big emerging markets like China are cooling their growth rates, while in a slew of countries, national and regional elections are set to take place in the near future, including in China, Korea, Japan, Israel, Germany, Italy and Catalonia, the latter being a pivotal Spanish province whose financing needs affects Spain and the broader eurozone.
U.S. stock prices, however, are high thanks to recent rallies stemming from Federal Reserve stimulus measures such as rate cuts or asset purchases, but with fundamentals eroding, stocks could plummet next year.

“[V]aluations in stock markets are stretched: price-earnings ratios are now high, while growth in earnings per share is slackening, and will be subject to further negative surprises as growth and inflation remain low. With uncertainty, volatility and tail risks on the rise again, the correction could accelerate quickly,” Roubini wrote in a Project Syndicate column.

Meanwhile, war could erupt in the Middle East amid rising tensions between Israel and Iran, which could further disrupt economic recovery and global financial markets next year.

In short, 2013 is shaping up to be a very volatile year.

”As consumers, firms and investors become more cautious and risk-averse, the equity-market rally of the second half of 2012 has crested,” Roubini wrote in the column.

“And, given the seriousness of the downside risks to growth in advanced and emerging economies alike, the correction could be a bellwether of worse to come for the global economy and financial markets in 2013.”

Moody’s, meanwhile, stripped France of its triple-A credit rating, downgrading the country a notch to Aa1 from Aaa and left a negative outlook, meaning more downgrades are possible.

“France’s long-term economic growth outlook is negatively affected by multiple structural challenges, including its gradual, sustained loss of competitiveness and the long-standing rigidities of its labor, goods and service markets,” the ratings agency said in a release.

“France’s fiscal outlook is uncertain as a result of its deteriorating economic prospects, both in the short term due to subdued domestic and external demand, and in the longer term due to the structural rigidities noted above.”

The country is also less cushioned from external shocks than in the past, Moody’s added.

Morgan Stanley economists, meanwhile, have said the global economy faces a “full-blown recession next year,” with global gross domestic product due to contract 2 percent next year under a worst-case scenario if U.S. policymakers fail to prevent the economy from going over the fiscal cliff and if their European counterparts fail to fight the debt crisis across the Atlantic.

“More than ever, the economic outlook hinges upon the actions taken or not taken by governments and central banks,” Morgan Stanley said in a report, according to CNBC.

Investors, meanwhile, need to stay on their toes.

“Importantly, investors should keep an open mind and be prepared to switch between the scenarios as policy developments unfold,” Morgan Stanley economists concluded.