The Breaking Point? APPLE Faces First Profit Drop in Decade, Obama Seeking to End Business Tax Breaks, Global Unemployment to Hit Record, And Investment Banking On The Brink…
APPLE Faces First Profit Drop in Decade; IPhone Slows
Eighteen months after taking over from Steve Jobs, Cook is facing rising production costs, competition from Samsung Electronics Co. and slowing growth in smartphones, threatening profits for the world’s most valuable company.
An earnings report tomorrow may show that fiscal first- quarter net income slipped 2 percent to $12.8 billion, or $13.48 a share, according to analysts’ estimates compiled by Bloomberg. That would be the first drop since 2003. In all except one quarter since that same year, profit has jumped more than 10 percent. Analysts project sales will rise 18 percent to $54.8 billion, the slowest growth rate since 2009.
Apple’s shares have dropped almost 30 percent since September, erasing about $190 billion in market value, on concern that demand for iPhones and iPads is ebbing. Cook, 52, overhauled most of the company’s product line ahead of the holiday shopping season, and results for the period will show for the first time whether the effort paid off.
…The most significant item left on Obama’s list is a cap on tax breaks, which would limit their benefit to 28 percent. In other words, someone in the top tax bracket with $100,000 in charitable contributions who could deduct $39,600 because of the 39.6 percent rate would be able to deduct only $28,000.
Over his first term, Obama expanded the cap from itemized deductions to other breaks, and would require those in tax brackets above 28 percent to pay taxes on their employer-provided health insurance and municipal bond interest.
“Even the possibility of altering the tax treatment on outstanding municipal bonds — essentially a retroactive tax — creates uncertainty and would have adverse effects on governments needing to access capital markets,” government and market groups, including the National Governors Association, wrote to Obama and congressional leaders last month.
Stein splits with Krugman, admits truth about deficits.
I shudder at posting Ben Stein, but he’s dead right. Watch the first 2 minutes.
BEN STEIN: I mean the situation is just hopeless. I mean poor Mr. Lew, who was just nominated to be secretary of the Treasury. It’s a very prestigious post. I’ve been in that room in the Treasury Department many times. It’s a magnificent office. It has its own fireplace. But he might as well burn himself up in it. I mean there’s nothing to be done about this budgetary situation. The budgetary deficit is just going to grow and grow and grow until it eats us all alive. There’s nothing to be done but accept things that are very, very uncomfortable. And as I say, you have to laugh to keep from crying.
CHRISTINE ROMANS, CNN: But Congress won’t do anything uncomfortable. This Congress for 20 years has only passed laws and made policies with an eye to getting re-elected again. You know, if you looked at Congress as a stock, an 18 percent approval rating. The least productive Congress in history last year. And they’re just running up a bill for taxpayers. I mean it’s ridiculous.
STEIN: Well, Thomas Jefferson predicted that the democracy would not last in this country because politicians would just endlessly vote to spend money on things that the country couldn’t afford in order to get themselves re-elected. And that’s exactly what has happened. But it’s happening now at a geometrically higher rate than has happened in the past.
On today’s “Reganomix,” former U.S. Senator Alan Simpson discusses the U.S. debt and budget.
UN Jobs Watchdog: Global Unemployment to Hit Record 202 Million
The global jobless queue will stretch to more than 200 million people this year, the International Labor Organization said in its annual report on Tuesday, repeating a warning it has made at the start of each of the last six years.
The U.N. jobs watchdog estimates unemployment will rise by 5.1 million this year to more than 202 million, and by another 3 million in 2014, following a rise of 4.2 million in 2012.
If those predictions are right, global unemployment will hit a record. But the ILO has revised its jobless figures down each year as the number of those giving up the job hunt altogether swells, meaning they are no longer classed as unemployed.
Snakes and Ladders: Investment Banking on the Brink (EU)
The crisis has struck at the heart of the financial center. In 2012, banks began to downsize their investment banking activities. For years, the area had been seen as a playground for those seeking instant riches and guaranteed success, and it provided tens of thousands with sometimes exorbitant incomes.
October 30 would become a horrific day for the financial district after the Swiss bank UBS announced that it was slashing 10,000 jobs in the sector. On one morning alone, the bank’s London office let hordes of bankers go. Some were intercepted at the entrance, still carrying their coffee in to-go cups, only to be shown the door a short time later with a piece of paper filled with instructions.
David Cameron To Propose EU Referendum Tomorrow
In a move that may cause some consternation in Europe due to its adverse implications for trade paterns in the continent, tomorrow British PM David Cameron will announce that he will propose a referendum on whether or not to stay in the European Union, a move that as the WSJ qualifies it “threatens to inhibit trade and cast a new shadow over the troubled bloc.” That may be a slight exageration: the referendum would take place, if at all, before the end of the first half of the next Parliament, roughly by late 2017, after an election. Which means that if Cameron loses the election, it is a non-issue, just as it would be a non-issue of course if the UK public voted to stay: according to a survey of the British public late last week by pollsters YouGov showed 34% indicated they would vote to leave in a referendum, while 40% said they would vote to stay. A week earlier, 42% said they would opt out, compared with 36% preferring to remain. Obviously a volatile topic for the population.
Still, as the WSJ notes, an “explicit vote on whether to leave the EU would be the first such move by a member in some time. In 1985, Greenland, which is part of Denmark, voted to leave the EU’s predecessor, the European Economic Community. And, in 1975, the U.K. held a referendum on whether to leave the then-EEC, which resulted in a large majority voted in favor of staying in.” Finally, since the UK has its own currency it certainly does not have all the adverse side effects of being fully integrated into the Eurozone, which is why Cameron’s gambit may have very little if any market relevance. If anything, the move will merely further alienate the UK from the continent, aggravating a process that started over a year previously.
Realistically, this may be merely internal horse trading with the other UK parties, which however will have little impact on the broader macroeconomic picture.
Then again, with the BOE preparing to engage all other central banks in currency warfare, there may be far bigger issues on the horizon quite soon.
Mr. Cameron plans to say that, if elected in 2015, a Conservative government would renegotiate the U.K.’s relationship with the EU, and then hold a referendum on the new settlement in the first half of its five-year parliamentary term. Such a referendum would mark the first time in recent years that an EU member has offered its citizens such a vote….
Meanwhile In Europe:
- Weidmann says BoJ?policy risks a currency war
- UK AAA rating under threat as government deficit increases
- New pay cuts trigger transport strikes in Greece, protesters defy court order to resume work
- Portugal asks eurozone to extend rescue loan dates: Reports
- Grim outlook for global unemployment
- Fed-up Mickelson mulls fleeing California over taxes
- Sarkozy’s plans ‘to dodge new 75% French tax rate by moving to London