Final 2013 Country Stock Market Performance Numbers

With the 2013 trading year now closed for business, below is a look at the final stock market performance numbers for 76 countries around the world (% chg in local currencies).

As shown, Dubai finished up the most in 2013 with a gain of 107.69%.  Japan was up the fourth most with a gain of 56.72%, making it the best performing G7 country.  The US ended up in 9th place globally with a gain of 29.6% -- not bad!

Of the other G7 countries, Germany finished third with a YTD gain of 25.48%, followed by France (17.99%), Italy (16.56%), the UK (14.43%) and Canada (9.55%).  

Only 16 of the 76 countries shown finished in the red in 2013.  Peru was down the most with a decline of 23%, while Brazil was the second worst performer on the list at -15.50%.  It ended up being a rough year for the BRICs (Brazil, Russia, India and China).  Of the four BRIC countries, three finished down (Brazil, Russia, China) while India was up just 8.98%.  Will 2014 be the year where the BRICs make a comeback?  We'll get our first data point on Thursday.  Happy New Year!

Fannie Mae: Mortgage Serious Delinquency rate declined in November, Lowest since December 2008

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in November to 2.44% from 2.48% in October. The serious delinquency rate is down from 3.30% in November 2012, and this is the lowest level since December 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Last week, Freddie Mac reported that the Single-Family serious delinquency rate declined in November to 2.43% from 2.48% in October. Freddie's rate is down from 3.25% in November 2012, and is at the lowest level since March 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

The Fannie Mae serious delinquency rate has fallen 0.86 percentage points over the last year, and at that pace the serious delinquency rate will be under 1% in less than 2 years. Note: The "normal" serious delinquency rate is under 1%.

Maybe serious delinquencies will be back to normal in late 2015 or 2016.

Restaurant Performance Index increases in November

From the National Restaurant Association: Restaurant Performance Index Hit a Five-Month High in November
Driven by improving same-store sales and customer traffic levels, the National Restaurant Association’s Restaurant Performance Index (RPI) hit a five-month high in November. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.2 in November, up 0.3 percent from October and the strongest level since June. In addition, the RPI stood above 100 for the ninth consecutive month, which signifies expansion in the index of key industry indicators.

Recent growth in the RPI was fueled in large part by improving same-store sales and customer traffic levels,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the National Restaurant Association. “In addition, restaurant operators are somewhat more confident that sales levels will improve, and a majority plan to make a capital expenditure in the next six months.”
...
The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 101.2 in November – up 0.3 percent from a level of 100.9 in October and the highest level in six months. ...

Fifty-seven percent of restaurant operators reported a same-store sales gain between November 2012 and November 2013, up from 54 percent in October and the highest level in six months.
emphasis added
Restaurant Performance Index Click on graph for larger image.

The index increased to 101.2 in November, up from 100.9 in October. (above 100 indicates expansion).

Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month - and this is fairly positive.

Getting an Earful on Obamacare: Live from **La Farine** <strike>the Roasterie</strike> LXIV: December 31, 2013

Brian Francisco: Getting an earful on Obamacare:

A health insurance consultant said his own insurance premiums are climbing because of the Patient Protection and Affordable Care Act. But a meat market owner said the health care law will cut his insurance rates by more than half. Rep. Marlin Stutzman, R-3rd, had asked for input on the Affordable Care Act during an open house Monday at his office in the E. Ross Adair Federal Building, and he got it. Nearly 20 people showed up to speak individually with him, and most wanted to talk about the law that is requiring most Americans to obtain medical coverage from private insurers.

The experiences and opinions of Matt Hatfield, the insurance consultant and seller, and Lee Albright, owner of the south-side meat market carrying his last name, were drastically different. Hatfield, a past president of the Northeast Indiana Association of Health Underwriters, told Stutzman his insurance premiums are increasing 50 percent and his medical provider network is shrinking because of changes in his policy prompted by President Barack Obama’s signature legislation. He predicted even greater sticker shock for insurance consumers starting next summer, when policies come up for renewal. “The sooner people get the bad news, especially in an election year, the better” for voters to express their displeasure in the 2014 congressional elections, Hatfield said. “I think Priority One is getting the current (law) tossed out,” he said. “But you also have to come back with, what are you proposing?”

Stutzman replied: “What are you replacing it with? That’s what everybody is asking right now.”

Albright doesn’t want the Affordable Care Act repealed, which Stutzman and the Republican-controlled House have voted to do numerous times. Albright told his congressman that his monthly payment for family health coverage will drop from $3,800 to $1,700 by enrolling in a plan offered through the much-maligned law. Albright said most of his dozen employees also are enrolling in Affordable Care Act plans and will have coverage for the first time. “If the Republican Party thinks they’re going to kill Obamacare, you guys need to realize that those nine people that I add on, are they going to vote Republican ever again if you take their health care from them?”

Stutzman responded: “No, probably not.”...

James Hamilton, of Spencerville... had earlier said to Stutzman, “I’m really disappointed that the Republicans haven’t come forward with an alternative plan,” adding that he would “like to see something that is very different” from the Affordable Care Act.

Stutzman replied: “There’s several Republican plans that are competing with each other right now just internally. After the first of the year, we are going to try to sort through that.”

Apple Denies Working With NSA on iPhone Backdoors; NSA Toolbox Catalog; Celebrate the New Year: 1984

Today Apple denied creating backdoors on the iPhone for the NSA to exploit. First let's review some articles that preceded the denial.

Within the last few days came numerous reports NSA Reportedly Has Total Access To The Apple iPhone.

Back in September, Der Spiegel online reported iSpy: How the NSA Accesses Smartphone Data

AppleInsider notes "New documents revealed on Monday show the U.S. National Security Agency has the capability of deploying software implants on Apple's iPhone that grants remote access to on-board assets like SMS messages, location data and microphone audio."

NSA Toolbox

Please consider Der Spiegel article Shopping for Spy Gear: Catalog Advertises NSA Toolbox by Jacob Appelbaum, Judith Horchert and Christian Stöcker.
After years of speculation that electronics can be accessed by intelligence agencies through a back door, an internal NSA catalog reveals that such methods already exist for numerous end-user devices.

According to Juniper Networks' online PR copy, the company's products are "ideal" for protecting large companies and computing centers from unwanted access from outside. They claim the performance of the company's special computers is "unmatched" and their firewalls are the "best-in-class." Despite these assurances, though, there is one attacker none of these products can fend off -- the United States' National Security Agency.

A document viewed by SPIEGEL resembling a product catalog reveals that an NSA division called ANT has burrowed its way into nearly all the security architecture made by the major players in the industry -- including American global market leader Cisco and its Chinese competitor Huawei, but also producers of mass-market goods, such as US computer-maker Dell.

A 50-Page Catalog

These NSA agents, who specialize in secret back doors, are able to keep an eye on all levels of our digital lives -- from computing centers to individual computers, and from laptops to mobile phones. For nearly every lock, ANT seems to have a key in its toolbox. And no matter what walls companies erect, the NSA's specialists seem already to have gotten past them.

This, at least, is the impression gained from flipping through the 50-page document. The list reads like a mail-order catalog, one from which other NSA employees can order technologies from the ANT division for tapping their targets' data. The catalog even lists the prices for these electronic break-in tools, with costs ranging from free to $250,000.

In the case of Juniper, the name of this particular digital lock pick is "FEEDTROUGH." This malware burrows into Juniper firewalls and makes it possible to smuggle other NSA programs into mainframe computers. Thanks to FEEDTROUGH, these implants can, by design, even survive "across reboots and software upgrades." In this way, US government spies can secure themselves a permanent presence in computer networks. The catalog states that FEEDTROUGH "has been deployed on many target platforms."

Some of the equipment available is quite inexpensive. A rigged monitor cable that allows "TAO personnel to see what is displayed on the targeted monitor," for example, is available for just $30. But an "active GSM base station" -- a tool that makes it possible to mimic a mobile phone tower and thus monitor cell phones -- costs a full $40,000.
Inside TAO

A second Der Spiegel article takes a look Inside TAO a top-secret National Security Agency team known as Tailored Access Operations.
In January 2010, numerous homeowners in San Antonio, Texas, stood baffled in front of their closed garage doors. They wanted to drive to work or head off to do their grocery shopping, but their garage door openers had gone dead, leaving them stranded. No matter how many times they pressed the buttons, the doors didn't budge. The problem primarily affected residents in the western part of the city, around Military Drive and the interstate highway known as Loop 410.

Fault for the error lay with the United States' foreign intelligence service, the National Security Agency, which has offices in San Antonio. Officials at the agency were forced to admit that one of the NSA's radio antennas was broadcasting at the same frequency as the garage door openers. Embarrassed officials at the intelligence agency promised to resolve the issue as quickly as possible, and soon the doors began opening again.

It was thanks to the garage door opener episode that Texans learned just how far the NSA's work had encroached upon their daily lives.

An internal description of TAO's responsibilities makes clear that aggressive attacks are an explicit part of the unit's tasks. Indeed, TAO specialists have directly accessed the protected networks of democratically elected leaders of countries. They infiltrated networks of European telecommunications companies and gained access to and read mails sent over Blackberry's BES email servers, which until then were believed to be securely encrypted. Achieving this last goal required a "sustained TAO operation," one document states.

Having Fun at Microsoft's Expense

One example of the sheer creativity with which the TAO spies approach their work can be seen in a hacking method they use that exploits the error-proneness of Microsoft's Windows. Every user of the operating system is familiar with the annoying window that occasionally pops up on screen when an internal problem is detected, an automatic message that prompts the user to report the bug to the manufacturer and to restart the program. These crash reports offer TAO specialists a welcome opportunity to spy on computers.



When TAO selects a computer somewhere in the world as a target and enters its unique identifiers (an IP address, for example) into the corresponding database, intelligence agents are then automatically notified any time the operating system of that computer crashes and its user receives the prompt to report the problem to Microsoft. An internal presentation suggests it is NSA's powerful XKeyscore spying tool that is used to fish these crash reports out of the massive sea of Internet traffic.

The automated crash reports are a "neat way" to gain "passive access" to a machine, the presentation continues. Passive access means that, initially, only data the computer sends out into the Internet is captured and saved, but the computer itself is not yet manipulated. Still, even this passive access to error messages provides valuable insights into problems with a targeted person's computer and, thus, information on security holes that might be exploitable for planting malware or spyware on the unwitting victim's computer.
NSA Intercepts Packages to Install Bugs

The NSA does not stop there. The Verge reports NSA intercepts laptops purchased online to install spy malware before routing to the customer.

OK, but what is Apple's, Google's, and Microsoft's response as to whether backdoors are purposely built into the phones and computers?

Apple Denies Working With NSA

Today, Techcrunch reports Apple Says It Has Never Worked With NSA To Create iPhone Backdoors, Is Unaware Of Alleged DROPOUTJEEP Snooping Program.
Apple has contacted TechCrunch with a statement about the DROPOUTJEEP NSA program that detailed a system by which the organization claimed it could snoop on iPhone users.

Apple says that it has never worked with the NSA to create any ‘backdoors’ that would allow that kind of monitoring, and that it was unaware of any programs to do so.

Here is the full statement from Apple:

Apple has never worked with the NSA to create a backdoor in any of our products, including iPhone. Additionally, we have been unaware of this alleged NSA program targeting our products. We care deeply about our customers’ privacy and security.  Our team is continuously working to make our products even more secure, and we make it easy for customers to keep their software up to date with the latest advancements.  Whenever we hear about attempts to undermine Apple’s industry-leading security, we thoroughly investigate and take appropriate steps to protect our customers.  We will continue to use our resources to stay ahead of malicious hackers and defend our customers from security attacks, regardless of who’s behind them.

The statement is a response to a report in Der Spiegel Sunday that detailed a Tailored Access Operations (TAO) unit within the NSA that is tasked with gaining access to foreign computer systems in order to retrieve data to protect national security.

Among these options was a program called DROPOUTJEEP — a program by which the NSA could theoretically snoop on ‘any’ Apple iPhone with ’100% success’. The documents were dated 2008, implying that these methods were for older devices. Still, the program’s detailed capabilities are worrisome.

Researcher and hacker Jacob Applebaum — the co-author of the articles, coinciding with a speech he gave at a conference about the programs — pointed out that the ’100% success rate’ claimed by the NSA was worrisome as it implied cooperation by Apple. The statement from the company appears to preclude that cooperation.

This year has been an eventful one for NSA spying program revelations. Apple joined a host of large companies that denied that they had been willing participants in the PRISM data collection system — but later revelations of the MUSCULAR program indicated that the NSA could get its hands on data by monitoring internal company server communications anyway. This spurred targets like Google and Yahoo to implement internal encryption.
Operations Muscular and Prism

Inquiring minds may also be interested in these Tech Crunch articles.

Operation "Muscular": NSA Infiltrates Google And Yahoo Networks

Operation "Prism": Google, Facebook, Dropbox, Yahoo, Microsoft, Paltalk, AOL And Apple Deny Participation In NSA PRISM Surveillance Program

Reflections on NSA Gag Orders

Unfortunately, the NSA has made it difficult or even impossible for companies to comment on precisely what the NSA requires of them.

Clearly these gag orders makes backdoor denials at least somewhat suspicious. 

Apple Files Suit

On November 5, Tech Crunch reported Apple Files With U.S. Government For More Information Request Transparency As It Releases First Report.
Today, Apple has released its first ever report on government information requests, detailing exact numbers of account information and data requests internationally. The report highlights how restrictive the rules are for Apple in the US, as only ranges of 1,000 are represented there.

Apple also specifies the exact FBI letters and requests that it had to comply with. In the report, Apple goes into detail about what it would like to see changed about the process.

“This report provides statistics on requests related to customer accounts as well as those related to specific devices. We have reported all the information we are legally allowed to share, and Apple will continue to advocate for greater transparency about the requests we receive,” the report states. “At the time of this report, the U.S. government does not allow Apple to disclose, except in broad ranges, the number of national security orders, the number of accounts affected by the orders, or whether content, such as emails, was disclosed.”
Open Letter on Government Surveillance

Recently AOL, Apple, Facebook Google LinkedIn, Microsoft, Twitter, and Yahoo sent an Open Letter on Global Government Surveillance seeking reforms that would limit government authority to collect user information.

Will anything come of it? I highly doubt it.

Celebrate the new year: 1984 is here.

Addendum: Reader "Robert" provided the correct link for the Apple first ever report on government information requests

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Why Aren’t the 90% More Vocal for Policies That Would Support Them?: Project Syndicate: Tuesday Focus (December 31, 2013)

At Project Syndicate: Brad DeLong: Why Aren't the 90% More Vocal for Policies That Would Support Them?: Unless something goes unexpectedly wrong in 2014, the level of real per capita GDP in the United States will match and exceed its 2007 level. That is not good news.

To see why, consider that, during the two business cycles that preceded the 2007 downturn, the US economy’s real per capita GDP grew at a 2% average annual pace; indeed, for a century or so, the US economy’s real per capita GDP grew at that rate. So US output is now seven years--14%--below the level that was reasonably expected back in 2007. And there is nothing on the horizon that would return the US economy to--or even near--its growth path before the 2008 financial crisis erupted. The only consolation--and it is a bleak consolation indeed--is that Europe and Japan are doing considerably worse relative to the 2007 benchmark.

The US economy’s annual per capita underperformance in 2014 will thus amount to $9,000. That means $9,000 per person per year in consumer durables not purchased, vacations not taken, investments not made, and so forth. By the end of 2014, the cumulative per capita waste from the crisis and its aftermath will total roughly $60,000.

If we project that forward--with nothing visible to restore the US to its pre-2008 growth path--at the annual real discount rate of 6% that we apply to equity earnings, the future costs are $150,000 per capita. If we use the 1.6% annual real discount rate at which the US Treasury can borrow via 30-year inflation-protected Treasuries, the future per capita costs are $550,000. And if we combine the costs of idle workers and capital during the downturn and the harm done to the US economy’s future growth path, the losses reach 3.5-10 years of total output.

That is a higher share of America’s productive capabilities than the Great Depression subtracted--and the US economy is 16 times larger than it was in 1928 (5.5 times larger in per capita terms). So, unless something--and it will need to be something major--returns the US to its pre-2008 growth trajectory, future economic historians will not regard the Great Depression as the worst business-cycle disaster of the industrial age. It is we who are living in their worst case.

One would think that such a macroeconomic disaster--one that robs the average American family of four of $36,000 per year in useful goods and services, and that threatens to keep Americans poorer than they might have been for decades, if not longer--would focus policymakers’ minds. One would think that America’s leaders would be clambering to formulate policies aimed at returning the economy to its pre-2008 growth path: putting people back to work, cleaning up underwater mortgages, restoring financial markets’ risk-bearing capacity, and boosting investment. CommentsBut no. Part of the reason is that, at the top, there is no crisis. According to the best estimates, the income share of America’s top 10% probably crossed 50% in 2012 for the first time ever, and the 22% income share that went to the top 1% was exceeded only in 2007, 2006, and 1928. The incomes of America’s top 10% are two-thirds higher than those of their counterparts 20 years ago, while the incomes of the top 1% have more than doubled.

Those who fall into the top strata thus regard themselves as doing well in the current US economy. And indeed they are. Only those who spend more time talking to competent macroeconomists than is healthy know that they could be doing even better if the economy were rebalanced at full employment. So the absence of distress among America’s top 10% and its top 1%--and hence political pressure for measures to return the economy to its pre-2008 growth path--is understandable.

But, for everyone else--roughly 90% of the US population--there has been no jump in income share relative to ten or 20 years ago to offset what now looks to be a permanent lost decade. On the contrary, the bottom 90% has continued to lose ground.

When income inequality began to rise in the 1980’s and 1990’s, those of us who cut our teeth on the long march of North Atlantic history expected to see a political reaction. Democratic politics, we thought, would check the rising power of a largely parasitic economic over-class, especially if its influence caused governments to fail to live up to their commitments to provide full employment with increasing--and increasingly shared--prosperity. CommentsAfter all, in early-nineteenth-century Britain, growing inequality caused by the Industrial Revolution gave rise to movements for government regulation in the interests of the middle and working classes, and for a rebalancing of real incomes away from rich landlords. Similarly, the Great Depression produced enormous political pressure for reform and change (often for destructive and dangerous change, to be sure, but pressure nonetheless).

Why can’t America launch similar movements today? To the extent that this has become a valid question, most Americans should be as worried today about the quality of their democracy as they are about the inequality of their incomes.

It Is Very Difficult to Have a Technocratic Conversation with This Generation’s Republican Officeholders: Barney Frank and Dick Cheney Edition

What is the right way for Barney Frank to deal with this? Indeed, what is the right way for all of us to deal with things like this?:

Recently, while waiting to be interviewed by the Huffington Post, I read something that gave me a very odd sensation. I knew what it must have felt like to be an alleged Iraqi weapon of mass destruction: Dick Cheney had lied about us both.

A copy of Cheney’s autobiography was on the table, and I gave it what is known as a “Washington read”--I went to the index and found my name--and read one of the most inaccurate criticisms ever made of my public record. Cheney wrote that in 2003 the Bush administration had sent legislation to reform Fannie Mae and Freddie Mac to Congress, but “it was killed by Financial Services Committee Chairman Barney Frank.”

That year he led us into war to destroy weapons of mass destruction that did not exist. And I was not the chairman of the financial service committee in 2003--or in 2004, 2005 or 2006. A Republican was.

[...]

To be clear, Cheney’s statement that I killed the bill as chairman of the Financial Service Committee in 2003 is not an exaggeration; it is not a misinterpretation; it is not a distortion. It is a lie.

[...]

As a final demonstration of the right wing’s total rewriting of history on the subject, when our committee did vote out a bill to restrict subprime mortgages, we were attacked in an editorial on Nov. 6, 2007, by The Wall Street Journal for interfering with the free market. In a passage they now must wish they never wrote, the editorialists strongly defended the subprime loans that were a major cause of the crisis: “But for all the demonizing, about 80 percent of even sub-prime loans are being repaid on time and another 10 percent are only 30 days behind. Most of these new homeowners are low-income families, often minorities, who would otherwise not have qualified for a mortgage. In the name of consumer protection, Mr. Frank’s legislation will ensure that far fewer of these loans are issued in the future.”

As to Cheney, I guess I should feel consoled that he simply lied about me, and did not invade my home.

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