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Alan Simpson Levels 'Hysteria' Criticism At Paul Krugman

2012-05-16T16:27:06Z

Alan Simpson, the former Republican senator from Wyoming who co-chaired President Barack Obama's debt commission in 2010, took a swipe at one of his most fervent critics on Tuesday, saying that economist and New York Times columnist Paul Krugman's work often "borders on hysteria."

During an interview with Bloomberg TV, Simpson was asked what he thought of Krugman's argument that more U.S. government spending would help lift the economy.

"Paul Krugman is a great economist, but he ain't the best in the world," Simpson said. "I love to read his stuff because it borders on hysteria. He talks about the lost souls of the past, and he is in there, too."

Krugman, a Nobel Prize winner, accused Simpson of "blood lust" in 2010 for his affinity for spending cuts.

Simpson also commented on debt commission reforms he proposed with co-chairman Erskine Bowles, a Democrat. The initial Simpson-Bowles plan, which proposed for bringing the top tax rate down by repealing a number of tax cuts and credits, was ignored by lawmakers. A bipartisan budget modeled after their report was also rejected by the House this year. Simpson said he remains optimistic about his recommendations.

"It's like a stink bomb in a garden party, it ain't going away," Simpson, who is known for his colorful turns of phrase, said. "Buckle up your guts."

Simpson also relayed some advice to lawmakers on how to sell his plan to the American public. According to Simpson, it is essential to push the idea of a "shared sacrifice" to get the country out of debt.

"Everybody will get hit," he said. "If you tell people that and be honest with them, and let them bitch and roar and snort, you can make it through there."

Look through more of Simpson's history of colorful statements below:

Defense Chief Restricts Flights Of Stealth Fighter That's Been Choking Pilots

2012-05-16T08:46:47Z

For five years, America’s most expensive fighter jets have been poisoning their pilots and crew. On Tuesday, the Defense Secretary finally stepped in — restricting the flights of the F-22 Raptor, and ordering the Air Force to begin an “expedited installation” of an automatic backup oxygen system for the entire fleet of Raptors, Pentagon spokesman George Little tells reporters. But Panetta is allowing the stealthy dogfighter to keep flying — for now.

Female Farmworkers Commonly Suffer Sexual Assault, Harassment

2012-05-16T06:33:36Z

FRESNO, Calif. (AP) — Female farmworkers across the United States are commonly sexually harassed and assaulted, in part because their immigration status makes them fearful of calling police, according to a report being released Wednesday by Human Rights Watch.

The survey by the international rights group mirrors two previous reports on the risks facing women and girls that had focused on California, where most of the nation's farmworkers reside.

"Our research confirms what farmworker advocates across the country believe: Sexual violence and sexual harassment experienced by farmworkers is common enough that some farmworker women see these abuses as an unavoidable condition of agricultural work," said the report.

An estimated 630,000 of the 3 million people who perform migrant and seasonal farm work are women. The federal government estimates that 60 percent of them are undocumented.

"It's easiest for abusers to get away with sexual harassment where there's an imbalance of power, and the imbalance of power is particularly stark on farms," the report's author, Grace Meng, told The Associated Press.

The report calls on Congress to pass laws protecting immigrant farmworker women, and for the U.S. Department of Homeland Security to repeal rules that encourage local police to report federal immigration violations.

The report describes incidences of rape, stalking, fondling and vulgar language used against women, who say they often don't report it because they are afraid of being fired or, worse, deported.

Meng interviewed 52 farmworkers and 110 attorneys, social service providers, law enforcement officials and members of the agriculture industry in New York, North Carolina, Florida, Texas, Colorado, Ohio, Arizona, Pennsylvania, Tennessee, and the state of Washington, but focused primarily on California because of its large farmworker population.

Women who work for labor contractors are more vulnerable than those who work directly for a farmer, the report said.

"The goal of our report was to show that this was a national problem. And to show the governmental barriers that exist to reporting these crimes and abuses. And to demonstrate it's a human rights problem," Meng said.

While previous studies have said that up to 80 percent of women who work in the fields have been harassed or assaulted, a counselor in the heart of California's agriculture region says her experience puts it at closer to half. She said the problem exists in all businesses where immigrant women may lack English language skills and trust in law enforcement, but that farms are the biggest employers so the abuses occur more frequently there.

Incidences are rarely reported to authorities, said Amparo Yebra of the nonprofit Westside Family Preservation Services Network in Huron, Calif.

"We have had a lot of complaints," said Yebra. "Most of the people are farmworkers, but if they get the opportunity to get out of the fields to work in a store, some of the owners take advantage of those people also."

Sexual harassment in the workplace is illegal in California, and Bryan Little of the California Farm Bureau Federation says the legislature identified it as a universal problem. The Farm Bureau's affiliate group, Farm Employers Labor Service, provides sexual harassment prevention and training, which employers are required to provide every other year to anyone who works in a supervisory capacity.

"Agriculture is a big industry in California, but it seems unlikely that they passed this law just for ag," Little said. "They must have responded to something bigger going on in the workplace."

Facebook's IPO Could Generate Billions For California

2012-05-16T02:17:55Z

SACRAMENTO, Calif. -- Facebook's public stock offering this week is projected to generate between $1.6 billion and $2.1 billion through mid-2013 for California's budget as shareholders cash in their shares.

The nonpartisan Legislative Analyst's Office on Tuesday increased the state's revenue projection after the online social network raised the upper range of its initial stock price from $35 per share to $38.

The higher state revenue projection assumes voter approval of Gov. Jerry Brown's tax-hike initiative in November.

The analyst's report says Facebook is expected to drive one-fifth of the growth in California's personal income this year.

CEO Mark Zuckerberg will make a significant contribution to the state's finances. Department of Finance spokesman H.D. Palmer says California could receive $195 million when he exercises his option on 60 million shares.

Is Anyone Clicking On Facebook's Ads?

2012-05-16T02:10:13Z

NEW YORK (AP) — Facebook's reach is wide but not deep. Few users surveyed in an Associated Press-CNBC poll say they click on the site's ads or buy the virtual goods that make money for it.

More than 40 percent of American adults log in to the site — to share news, personal observations, photos and more — at least once a week. In all, some 900 million people around the world are users. But many of them don't have a very high opinion of Facebook or trust it to keep their information private.

If Facebook the company were a Facebook user, it would have a lot of virtual friends but not many real ones, the poll suggested.

Users' distrust limits the value of the site's ads. Advertisers want to target their messages to the people most likely to respond to them. And the more Facebook knows about us, the better it will be at tailoring those ads to our interests.

Yet in the poll of U.S. adults published Tuesday, only 13 percent said they trust Facebook "completely" or "a lot" when it comes to keeping their personal information private. A majority, or 59 percent, said they trust Facebook "only a little," or "not at all."

Users' desire for privacy and Facebook's need to target advertising aren't necessarily opposing interests. Facebook doesn't expose information about its users directly to advertisers. Instead, it effectively accepts missions to deliver ads to groups of people, like "moviegoers" or "people planning trips to Europe." It's up to Facebook to figure out how to find those people.

But the company doesn't seem to be connecting very well. In the poll, 83 percent of respondents said they "hardly ever" or "never" click on the ads Facebook serves up.

The ones who did click through were enough to yield the company $4.34 per user in advertising last year. That's up from $3.07 in 2009. So the company is getting better at making money from its user base, but it has a long way to go to fill out the market capitalization of nearly $100 billion implied in its IPO pricing.

Google, another online advertising company that walks a similar line between ad targeting and privacy, makes more than $30 per user, per year. People also like it more. In the AP-CNBC poll, 71 percent of respondents had a favorable opinion of Google, compared to 51 percent for Facebook.

"Somehow Facebook still hasn't stumbled upon a model that's proven consistently successful for marketers, or that brings in the massive revenues to match the site's massive user base," Forrester Research analyst Nate Elliott said in a blog post.

The Wall Street Journal reported Tuesday that General Motors Co. plans to stop advertising on Facebook because the company has concluded that the ads are ineffective. The paper cited anonymous sources.

GM spokesman Greg Martin confirmed that the company doesn't plan to continue ads on Facebook, but said it will keep paid content on company pages that promote its products. He would not say why, but the company said it reassesses ads continually to measure how effective they are.

Debra Aho Williamson, an analyst at research firm eMarketer, said Facebook has plenty of opportunities to be a better link between advertisers and users. For instance, it can be more effective when it places an ad in a social context. People are much more likely to click on an ad if a friend has already "liked" it or if it consists of a comment a friend posted on the brand website, she said.

"This all fairly new and experimental. I don't think we've seen the full results of what adding social context means when it comes to the response to advertising," she said.

Advertising made up 82 percent of Facebook's revenue in the latest quarter. The rest came from the purchase of Facebook "credits" for the purchase of virtual goods, like cows in "Farmville" or chips in "Zynga Poker." But like advertising, this is a business that touches only a minority of Facebook users. Last year, 15 million users, or only 2 percent of the total, bought any credits at all.

If Facebook wants to help stores selling something other than virtual bling, it has to overcome skepticism among users first: The poll found that a majority of respondents, or 54 percent, would feel "not too safe" or "not safe at all" buying goods such as clothes or services such as travel from the site. Only 8 percent said they would feel "extremely safe" or "very safe."

The Associated Press-CNBC Poll was conducted May 3-7, 2012, by GfK Roper Public Affairs and Corporate Communications. It involved landline and cell phone interviews with 1,004 adults nationwide and had a margin of sampling error of plus or minus 3.9 percentage points.

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Online:

http://www.ap-gfkpoll.com

http://facebook.cnbc.com

Facebook Reportedly Expands IPO Size

2012-05-16T01:17:00Z

By Olivia Oran and Alexei Oreskovic

NEW YORK/SAN FRANCISCO (Reuters) - Facebook Inc will increase the size of its initial public offering by 25 percent, a source familiar with the matter said, and could raise as much as $16 billion as strong investor demand for a share of the No.1 social network trumps debate about the company's long-term potential to make money.

Those concerns over revenue growth were underscored earlier on Tuesday, when General Motors said it planned to pull out of advertising on Facebook.

Facebook, founded eight years ago by Mark Zuckerberg in a Harvard dorm room, will add about 85 million shares to its IPO, floating about 422 million shares in an offering expected on Friday, the source told Reuters, declining to be identified because the information was confidential.

The expanded size, coupled with Facebook's recently announced plans to raise the IPO price range, would make Facebook the third-largest initial share sale in U.S. history after Visa Inc and GM. Facebook declined to comment on the increased IPO size, which was first reported by CNBC on Tuesday.

The social networking company is drumming up massive demand for the offering even as slowing revenue and user growth spur questions about the long-term Facebook story.

"This is much more a spectacle, a media event and a cultural moment than it is an IPO," said Max Wolff, an analyst at GreenCrest Capital. "This is not a game of models and fundamentals at this point."

GM's announcement, while ill-timed, should not seriously hurt Facebook's IPO reception for now as it may not be representative of advertisers' overall attitude, said Brian Wieser, an analyst with Pivotal Research Group. "The demand for the IPO probably won't be affected materially by this," he said, noting, however, there were probably a lot of calls between underwriters and investors following GM's announcement.

The IPO, Silicon Valley's largest, eclipses the roughly $2 billion debut by Google Inc in 2004.

Facebook raised the target price range to $34-$38 per share in response to strong demand, from $28-$35, according to a Tuesday filing. That would value the company at $93-$104 billion, rivaling the market value of Internet powerhouses such as Amazon.com Inc, and exceeding that of Hewlett-Packard Co and Dell Inc combined.

The increased price range made it very unlikely that Facebook shares would double on their trading debut as they might have if the company had come out at the low end of its initial price range, Wolff said. He expects a first-day gain of about 10 percent.

"No rational person thought they were buying the stock for $28," said Wedbush Securities analyst Michael Patcher, noting Facebook had traded as high as $44 in the secondary markets in recent months.

Facebook said in its latest filing that it arrived at the higher IPO price range after one week of marketing the offering - part of a cross-country roadshow in which CEO Zuckerberg has taken the stage to lay out his vision for the company's money-making potential and its top priorities.

The price range hike, coupled with strong results from Internet and social media players Groupon Inc and China's Renren Inc, contributed to a dotcom rally on Wall Street on Tuesday. Shares of Pandora Media Inc rose 10.3 percent, Zynga Inc was up 7.7 percent, Groupon climbed 3.7 percent and Renren gained 6.4 percent.

LONG-TERM GROWTH

Before the IPO size was increased, Facebook would have raised about $12.1 billion based on the midpoint price of $36 and the 337.4 million shares on offer originally.

At this midpoint, Facebook would be valued at roughly 27 times its 2011 revenue, or 99 times earnings. Google went public at a valuation of $23 billion, or 16 times its trailing revenue and 218 times earnings. Apple Inc went public in 1980 at a valuation of 25 times its revenue and 102 times earnings.

Facebook's IPO comes as some investors worry the company has not yet figured out a way to make money from a growing number of users who access the social network on mobile devices such as smartphones. Meanwhile, revenue growth from Facebook's online advertising business, which accounts for the bulk of its revenue, has slowed in recent months.

With some 900 million users, it had $1 billion in net income on revenue of $3.7 billion in 2011.

The company has also extended the time frame for its $1 billion acquisition of mobile app maker Instagram, projecting the deal would close this year instead of the second quarter as it previously indicated.

It provided no reasons, though a source familiar with the matter told Reuters last week that the U.S. Federal Trade Commission has reached out to Google and Twitter as part of the agency's standard review for deals of that size.

Facebook is scheduled to price its shares on Thursday and begin trading on the Nasdaq on Friday. A host of Wall Street banks are underwriting the offering, with Morgan Stanley, JPMorgan and Goldman Sachs serving as leads.

(Additional reporting by Tanya Agrawal; Editing by Edwin Chan, Maureen Bavdek, Matthew Lewis, Richard Chang, Ryan Woo and Ian Geoghegan)

Dan Solin: The Hidden Message in JP Morgan's $2-Billion Loss

2012-05-16T00:57:00Z

Unless you were living under a rock, you are aware of JP Morgan's stunning $2-billion loss. According to The Wall Street Journal the loss was caused by a trader in London nicknamed "the London whale." Mr. Whale guessed wrong in making complicated trades tied to the values of corporate bonds, causing massive losses in the bank's derivative positions.

Jamie Dimon, the Chief Executive of JP Morgan, called the trades "flawed, complex, poorly reviewed, poorly executed and poorly monitored." Mr. Dimon was nonplussed by this event, adding, "We will admit it, we will fix it and move on."

If you are a shareholder in JP Morgan, you are not "moving on" so quickly. According to Reuters, the bank lost $15 billion in market value since this announcement. Standard & Poors revised its outlook on the bank from stable to negative, while affirming its A/A-1 issuer credit rating.

In an odd coincidence, the state of New York announced the appointment of JP Morgan as the new advisor for its $2-billion adviser-sold 529 plan, marking its entry into the college savings market. JP Morgan's "Global Multi-Asset Group" will handle the new business. It manages $74.6 billion in assets.

Mr. Dimon was right. JP Morgan is "moving on." The question is whether investors in this 529 Plan, and other clients whose assets are managed by this bank, are doing the same. The massive loss suffered by the bank is yet another indication of the inability of this huge institution (or anyone else) to predict the direction of the markets. Yet, the entire securities industry is premised on the false assumption that its members can add value by stock picking, market timing, and fund-manager picking.

The real skill of these "wealth managers" lies in their ability to convince you they have an expertise that doesn't exist. This latest debacle is one more example demonstrating the irrefutable fact that these investment gurus are emperors with no clothes, representing a significant, little-understood peril to your financial security.

Here's the hidden message: You would likely be better off without them. Read The Smartest Investment Book You'll Ever Read, The Little Book of Common Sense Investing and Index Funds: The 12-Step Recovery Program for Active Investors.

You can't fight this system, but you don't have to be part of it.

Dan Solin is a senior vice president of Index Funds Advisors. He is the New York Times bestselling author of The Smartest Investment Book You'll Ever Read, The Smartest 401(k) Book You'll Ever Read, The Smartest Retirement Book You'll Ever Read, and The Smartest Portfolio You'll Ever Own. His new book is The Smartest Money Book You'll Ever Read. The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.

The Best Business Signs (Submit Your Favorites!)

2012-05-16T00:45:00Z

A sign can make or break your business. Size, design and wording can be the deciding factor as to whether a new customer walks through the door or keeps driving to your competitor, according to a new survey by FedEx Office.

Seventy-six percent said they would enter a store they've never been in before based on its sign, while 68 percent have actually purchased a product because a sign caught their attention.

While signs can draw in customers from the street, they can also be good general marketing tools. Seventy-five percent of those polled said they've told someone about a business simply based on its signage. Sixty-eight percent of respondents said they believe a store's sign is reflective of the quality of products or services that the business offers and 52 percent said they are less willing to enter a business with misspelled or poorly made signs.

If you think a sign isn't worth your investment, think again -- 60 percent of consumers are deterred from entering a business with no signage. According to the results, two to three signs on a storefront will get your business the attention it deserves.

Check out some of our favorites -- the good, the bad, the ridiculous -- and then submit a photo of any signs that have caught your eye.

PHOTOS: Huge Boost For San Francisco Produce Market

2012-05-16T00:37:46Z

This article comes to us courtesy of Associated Press

A San Francisco produce market that supplies fruits and vegetables to many of the city's restaurants could be getting a $100 million upgrade.

The San Francisco Chronicle reports that Mayor Ed Lee and Supervisor Malia Cohen are set to introduce legislation on Tuesday that would lead to the redevelopment and expansion of the San Francisco Wholesale Produce Market.

The market in the Bayview neighborhood is on city property. Under Lee and Cohen's plan, the nonprofit that manages it would sign a new, 60-year lease. It would then use the revenue from merchants who rent the space to expand to an adjacent city-owned parcel and make improvements. The remaining rent revenue once the upgrades and expansion are paid for would go to the city's general fund.

The market is the largest produce wholesale facility in Northern California.

Check out a few of our favorite San Francisco produce markets in the slideshow below:

Romney Debt Talk Debunked

2012-05-15T23:58:41Z

WASHINGTON (AP) — When Republican presidential hopeful Mitt Romney decried the "prairie fire" of U.S. debt Tuesday, he ignored some of the sparks that set it ablaze.

One was the Great Recession that took hold before Barack Obama became president. That landmark event went unmentioned in Romney's speech. Another was a series of Bush-era tax cuts that Romney wants to follow with even lower rates.

Instead he laid the blame on Obama, a president who has certainly increased the nation's eye-popping debt — but not, as Romney claimed, by nearly as much as all other presidents combined.

A look at some of Romney's assertions and how they compare with the facts:

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ROMNEY: "America counted on President Obama to rescue the economy, tame the deficit and help create jobs. Instead, he bailed out the public sector, gave billions of your dollars to the companies of his friends, and added almost as much debt as all the prior presidents combined."

THE FACTS. Hardly. Presidents from George Washington through George W. Bush ran the national debt up to $10.62 trillion, the amount it was on the day Obama took office. Today, it is $15.67 trillion, according to the Treasury Department's Bureau of Public Debt. So it has gone up by $5.05 trillion under Obama. That's roughly half of the amount amassed by all the other presidents combined.

In short, the debt has gone up by about half under Obama. Under Ronald Reagan, it tripled.

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ROMNEY: "I will lead us out of this debt and spending inferno. We will stop borrowing unfathomable sums of money we can't even imagine, from foreign countries we'll never even visit. I will bring us together to put out the fire."

THE FACTS: Romney's tax and spending plans don't support his vow to dampen the debt fire. He proposes to cut taxes and expand the armed forces, putting yet more stress on the budget, and his promise to slash domestic spending isn't backed by the big specifics. Romney's tax plan would cut the top income tax rate to 28 percent from 35 percent and other rates by 20 percent each. He says he'd broaden the tax base and eliminate many deductions in the process, but details are missing.

A study by the nonpartisan Committee for a Responsible Federal Budget concluded earlier this year that Romney's plans would not make a dent in deficits, and could worsen them considerably. That study was done before Romney upped his tax cuts, inviting even deeper debt.

That's not to say he can't at some point lay out the spending cuts necessary to achieve his aims. But he would have to slash domestic programs by more than 20 percent — far more than the 5 percent in immediate cuts he has proposed. It is nearly unthinkable that Congress would approve the evisceration of basic federal functions such as food inspection, air traffic control, the Border Patrol, FBI, grants to local governments, health research, housing and heating aid for the poor, food aid for pregnant women, national parks and much more.

Nowhere in Tuesday's speech was there a new idea of how Romney would accomplish the promised deficit reduction. He spoke generally of reforming Social Security and Medicare, eliminating duplicative government programs, and transferring some functions to the states or the private sector, adding that he would "streamline everything that's left."

The closest he has come to laying out a specific spending plan has been in his endorsement of the budget blueprint passed this year by House Republicans, which also fails to produce his promised deficit reductions.

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ROMNEY: "The people of Iowa and America have watched President Obama for nearly four years, much of that time with Congress controlled by his own party. And rather than put out the spending fire, he has fed the fire. He has spent more and borrowed more. ... When you add up his policies, this president has increased the national debt by $5 trillion."

THE FACTS: Much of the increase in the debt is due to lower tax revenues from depressed corporate and individual incomes and high joblessness in the worst recession since the Great Depression. The recession officially began in December 2007, when George W. Bush was president and the national debt stood at just over $9 trillion. Financial bailouts, stimulus programs and auto rescue spending that started under Bush and continued under Obama contributed to the run-up of the debt.

But so did the Bush-era tax cuts enacted in 2001 and 2003. With bipartisan support, Congress has extended the tax cuts until the end of this year, and Romney's proposals for big cuts of his own would risk another squeeze on revenue.

To be sure, Obama as a presidential candidate in 2008 was just as eager as Romney is now to pin blame for mounting debt on a president from the other party.

Ignoring economic circumstances and the role of both parties in Congress, Obama accused President George W. Bush in that campaign of driving up debt by $4 trillion "by his lonesome" and taking out "a credit card from the Bank of China in the name of our children."

Mohamed A. El-Erian: The Global Economy: What the Next Three Years Will Look Like

2012-05-15T23:34:00Z

Editor's note: The following post is adapted from a document originally sent to clients of PIMCO, an investment firm led by William H. Gross and Mohamed A. El-Erian. It summarizes discussions that took place at the PIMCO 2012 Secular Forum, an annual event that brings together investment professionals from PIMCO's 12 offices around the world with thought leaders from outside PIMCO to discuss and debate global financial trends. Here El-Erian relays their collective attempt to lay out for PIMCO's clients what the next three years will look like in the global economy.

This year's Secular Forum was particularly interesting and, also, very challenging. For 2 ½ days, we debated a range of issues, with lots of time spent on the familiar -- such as the twin problem of too much debt and too few jobs, and the related austerity versus growth debate -- but also on the less prominent but equally consequential -- including the game theoretics of large debt overhangs, as well as how technology is redefining economic, political and social interactions. In the process, we iterated to findings that, we believe, are both consequential and actionable for investment strategies including ... but, wait, I am trying to fast-forward a summary write-up that warrants proper introduction and context.

The Secular Forum has proven enormously important for PIMCO's ability to deliver consistent value to you, our clients. Indeed, if we were to pick the handful of factors that have enabled us to serve you well for more than 40 years, this annual event would certainly be among them. It gathers investment professionals from PIMCO's 12 offices around the world. Collectively, we engage in a lively debate aimed at identifying the major trends that will play out over the next three to five years (and, critically, not what should happen but, rather, what is likely to happen). Think of the outcome as providing medium-term guardrails for where and how we invest the funds that you have entrusted to us.

It is never easy to take an individual -- let alone a group -- out of the day-to-day routine and focus on issues that are not urgent now, but will prove both urgent and important over the next few years. To help us do so, we turn each year to thought leaders from outside PIMCO to act as catalysts and to challenge our views, thus also reducing the risk of groupthink; and again this year we were privileged to interact with terrific thinkers who brought lots of interesting ideas to the table. We also listened to our brilliant new class of MBAs and PhDs; and, once again, they provided us with valuable, fresh and provocative perspectives. And all this was mixed with quite a bit of background work and back-and-forth discussion.

Context

To provide context for our discussions, we explicitly started with our priors -- the conclusions of previous Forums, adjusted for recent developments, new information and additional analysis.

A year ago, PIMCO concluded that the world would continue to exhibit multi-speed characteristics. Specifically, advanced countries would appear to cyclically recover. But, with lagging policy mindsets, growth would prove insufficient to overcome problems of unusually high (and persistent) unemployment, large budget deficits, rising debts, and worsening income and wealth inequality. For some countries with acute economic and balance sheet stress, we postulated the "virtual certainty of at least one (and probably more) sovereign debt restructurings" during our secular horizon.¹

We painted a different picture for emerging economies. Because they are powered by higher growth, we argued that they would continue to close the global income and wealth gap, lifting millions more out of poverty in the process. We recognized that this would not be linear as countries confront inflationary concerns, disruptive surges in capital inflows and tricky internal transitions (including what Mike Spence, Nobel Laureate in Economics and author of the recent book on "The Next Convergence," calls the "middle income transition").

At the global level, we anticipated that the international monetary system would experience stress in accommodating these historic global realignments. Remember, not only would emerging economies grow faster, but they would also have an increasing and ultimately defining influence on the structural behavior of the global economy. Yet, due to deeply entrenched entitlement mindsets in advanced economies and outdated mechanisms in multilateral organizations, global governance would find it difficult to catch up with the evolving new reality, let alone get ahead of it.

This, of course, is what PIMCO had labeled the "new normal" back in early 2009 -- one that spoke to delevering in advanced economies, structural imbalances, and global convergence.² It thus portrayed, as reiterated in last year's write-up, a post-2008 global financial crisis world that "heals only slowly and unevenly," "transitions ... in a rather messy and uncoordinated fashion," becomes "increasingly fragmented in terms of cognitive recognition," and in which "social cohesion is uneven."

Our medium-term baseline was seen as being subject to two-sided risk scenarios. It could tip into a much better equilibrium if policymakers came up with three "grand bargains" -- in Europe, the U.S. and China. But it could also fall victim to a more rapid and disorderly delevering.

These two scenarios were important enough for us to argue for a gradual morphing in the distribution of expected outcomes that underpins many investors' behavior (and analytical constructs): away from the traditional bell curve that exhibits a dominant mean and thin tails (both very comforting), to a flatter distribution with much fatter tails that, in certain circumstances (Europe), could even go bimodal.

Much of what has transpired over the last 12 months is consistent with these priors. Indeed, at times it has felt as if the fast-forward button had been pressed on our secular themes.

In the run-up to the Forum, we found longer-term issues featuring more prominently in our cyclical discussions, as well as in the deliberations of the Investment Committee (which meets four times a week for two to three hour sessions). And with incrementalism dominating way too many policy reaction functions, these developments also help explain why the world/markets now face potential inflection points over the next three to five years -- some probable and others possible.

Key Issues

It did not take us long last week to figure out that this would be one of the more challenging Secular Forums. After all, we were analyzing a global economy buffeted by complex realignments yet lacking proper historical precedents. Meanwhile, monetary policy is in full real-time experimentation mode, political anti-incumbency is growing, and extreme polarization is amplifying rising social tensions. And if this were not enough of a complex cocktail, let us not forget what our colleague Ramin Toloui called the disparate adherence to "alternate realities." The resulting disagreements -- which, increasingly, cover the past, present and future -- further undermine any convergence to a common analysis of what ails individual countries, let alone the vision and sense of shared responsibility to solve it.

This combination results in what Jerome Schneider described as a self-reinforcing cycle of largely reactive partial responses, subsequent complacency and recurrent localized crises. The longer this persists, the greater the probability of a series of market inflection points in the next three to five years. Indeed, it should come as no surprise that both policymakers and economists are struggling with what has been oversimplified into the growth versus austerity debate. And the resulting confusion, together with a pronounced tendency for politicians to bicker and dither, has made the problems more complex and the solutions more demanding.

In such a world, we believe that it is particularly important to differentiate well between what one knows with a high degree of both foundation and conviction (the "knowns"), and where sufficient knowledge and confidence can only be built through additional data and analysis ("known unknowns"). This should be combined with enough intellectual agility to change the composition as more information become available; and also with the operational responsiveness required to evolve investment strategies accordingly.

Knowns

The knowns speak to the likely persistence of what has become a familiar combination for too many advanced economies -- too little growth, too much debt, high joblessness (particularly among the young and long-term unemployed), excessive political polarization and growing calls for greater social justice.

Given current policies, none of these are likely to go away any time soon absent a major crisis and/or a big political pivot. Moreover, the adjustment processes in certain countries (with Greece being the lead example) have already been undermined by "policies that hurt but don't work," a phrase used by British politician Ed Miliband in a different context. As such, they risk a frightening economic, financial, political and social implosion.

This reality will continue to play out most distressingly in a few European countries where the institutional setup is already under strain. Indeed, politicians will find it increasingly difficult to reconcile what Andy Bosomworth labeled as the requirements of democracy, mutualization and conditionality - thus robbing the region of the type of mutual assurances that are critical to a cooperative orderly solution. With that, allocating balance sheet losses becomes even more difficult, both within and across countries.

Simply put, the status quo is no longer an option for Europe over the three to five year horizon. The higher probability outcome is that the eurozone will evolve into a smaller and less imperfect entity -- namely, a closer political union of countries with more similar conditions. We believe that this smaller union would likely include the big four (France, Germany, Italy and Spain) which, together with other remaining members, would be underpinned by much stronger regional coordination and financing mechanisms.

We did not come to this view easily -- especially as there is no orderly, easy and costless way to get there. Evolving into a smaller and less imperfect zone -- as leaders need to do in order to save their important and historical European project, and thus also avoid a major disruption to the global economy - is expensive and uncertain. It requires a lot of proper coordination, a more balanced policy mix, stronger financial circuit breakers (well beyond the ECB's lender of last resort facilities), less vulnerable banks, and quite a bit of luck too. It could even take a major fragmentation scare to force political leaders to act in a sustained manner.

All this also means that risk of a big derailment (an "existential risk" for the European project) is far from de minimis. Given the series of sustained negative shocks that this would entail -- for individual nations, the region and the world as a whole -- every political avenue should be pursued to avoid it. But we cannot count on that.

As Thomas Kressin noted, it is not just about the willingness of politicians to keep the eurozone intact. If it does fragment, it will most probably be because the population loses patience, resulting in political and social rejection that is aggravated by a tsunami of private capital outflows. Fortunately, politicians and policymakers still have the ability to get ahead of this, but they need to do so very seriously and very quickly. And for that, they also need a common analysis, a shared vision, and sufficient support.

Over the next three to five years, the U.S. will look good relative to Europe, outperforming in terms of growth and financial stability. That is the good news. The bad news is that Americans live in an absolute and not a relative dimension.

Our political analysis led us to conclude, using Libby Cantrill's notion, that political scrimmages rather than grand bargains would dominate Washington -- a forecast that reflects not only the reality of extreme polarization, but also the impact of significant disagreements among "technocrats" and related policy confusions. The fiscal cliff debate, which is certain to get louder in the coming months, will provide insights in this regard.

In a world that is so far away from any notion of a policy first best, look for the Federal Reserve to maintain its pursuit of financial repression for a number of years; and look for other regulatory bodies to pursue similar avenues in the context of a generally more restrictive regulatory environment. The resulting policy mix, however, will do little to alleviate legitimate concerns about growth, jobs, inequality, debt and deficits. In the process, the underlying structural fragilities of the economy will grow, in both economic and financial terms.

Turning to the emerging economies, we expect them to continue to outpace both Europe and the U.S. over our secular horizon. But don't look to them to compensate fully for problems elsewhere in the global economy. Also, you should expect them to deliver a more volatile growth path, especially as some countries undertake needed and tricky transition in growth models (including China). Along with all this, also look for greater differentiation among countries in what will become an increasingly heterogeneous grouping.

Yes, we expect emerging economies will account for more than 50% of global GDP in the next three to five years (in purchasing power parity terms). And yes their size and growth rate will influence even more the functioning of the global economy. But this will not overwhelm developments in the advanced countries anchoring the core of the international monetary system. Moreover, with advanced economies attempting to hold on to outdated entitlements, the undeniable shift in economic gravity will not be accompanied by sufficient changes in the manner the global system is governed, wired and interconnected -- changes that are important for laying a proper foundation for more balanced global growth and a more robust international system in the future.

So, turning to illustrative numbers, we expect growth in advanced economies to average some 1% annually over the next three to five years (compared to 2'ish% at the 2011 Forum); and some 5% for emerging economies (6% previously). Meanwhile, look for the inflation versus disinflation debate to continue unabated as the tug of war between stimulus and debt deflation plays out.

On balance, we believe that over the next few years, inflationary pressures will slowly build in the global system due to several drivers. Too many cyclical dislocations risk becoming embedded as structural impairments to long-term growth potential, particularly when it comes to the labor markets in advanced economies. With other government entities doing too little, central banks will likely maintain highly accommodating policies for too long. And do not forget the political appeal of resorting to inflation as a means to delever.

Known Unknowns

What about the known unknowns? There are quite a few, including some with the potential to turn some of the slow burn dynamics into sudden shocks, either negative or positive.

Elections and transitions could certainly be game changers. According to calculations by our MBAs/PhDs, more than 50% of global GDP will face a potentially defining change in 2012. Moreover, eight out of 17 eurozone governments have been voted out of office in the last couple of years. So the potential for political upheavals is certainly with us.

Armed with strong new mandates, governments could deliver the "Sputnik moment" that acts as a catalyst for a series of beneficial grand policy bargains. And the impact would be amplified by the crowding-in of significant private capital that is now on the sidelines. More likely, however, is that elections result in a further polarization that complicates economic management. And, as illustrated recently in Greece, the mounting loss of credibility of traditional political parties facilitates the emergence of fringe parties that are eager to dismantle the past but have as yet no coherent and comprehensive plan for the future.

Over the next few years, elections will compound the pressures that governments feel from increasingly restless populations (especially in countries with high youth unemployment, including 51% in Greece and Spain and 36% in Italy and Portugal). As one of our new colleagues, Min Zhang, put it, her generation is looking for "hope and opportunity." Instead, and also lacking control of the ballot box, they are being saddled by an older generation's debt and growth impediments. And demographic trends will accentuate the challenges. Under such circumstances, we should not dismiss the possibility of unpredictable sociopolitical reactions that end up further complicating long-standing social compacts and the related functioning of an already stressed international monetary system.

What happens in advanced countries will be of more than passing interest to the healthier part of the global economy, namely the emerging world -- a point that Francesc Balcells, Michael Gomez, Ramin Toloui and others stressed.

The longer it takes for the advanced countries to grapple with their growth and debt problems, the greater the imperative for emerging economies to transition to sources of domestic demand to sustain growth. Nowhere is this more important systemically than China.

History suggests that economic, political and social frictions are inherent to such transitions, requiring careful and responsive management. Moreover, as the emerging world itself starts with a set of different initial conditions among individual economies -- and a few differences are quite pronounced -- some countries will likely be more successful than others, with related surprises.

Have no doubts, the "concentric circle" construct underpinning the international monetary order will be pressured in significant ways in the next three to five years. This is not to postulate a different system. As Rich Clarida argued, there is no alternate system and, therefore, you cannot replace something with nothing. Rather, it is about an increasingly hobbled international order whose anchoring core is weakening on a daily basis, thus undermining the standing of global public goods over the secular horizon. Also, don't be surprised to see countries in the outer circles (particularly some emerging economies) increasingly establish direct links that bypass the core. Indeed, changing clusters of global influence are likely to be a notable feature of the next three to five years; and the systemic impact is inevitably uncertain.

Technology also provides for meaningful two-sided tails for our baseline hypotheses, especially given that disruptions in this domain easily catch people by surprise.

You would have to be in North Korea to deny that the world is in the midst of empowerment advances that fundamentally alter the relationship between individuals, between states, and between these sets of global actors. As discussed, it is a changing ecosystem that results in two worlds operating simultaneously -- but with different protocols, speeds and legal protections: a physical world with government and institutional control, and a virtual one with individuals dominating the creation, dissemination and sharing of content. Over time, the latter will have even greater economic, political and social impact -- and do so at times through unanticipated channels.

This provides for the exciting possibility of leapfrogging structural impediments through what Mike Spence calls off-sequence development. Several specific examples were put on the table where technology could serve as a beneficial accelerator. And if we are really lucky (and we mean really, really lucky), perhaps this could also help in dealing with some of the real dangers of self-limiting growth patterns, including those associated with society's past abuse of the environment. But, again, we should not count on that.

Yet this phenomenon has more than one potential outcome. Some of the empowering technical revolutions can be negatively used to undermine social cohesion and security. Others offer the likelihood of disruptive revolutionary dynamics that are easy to start but prove difficult to control and complete, especially in the absence of sustained leadership.

Implications -- The "What"

Our 2012 Secular Forum discussion confirmed that the distribution of expected outcomes for the global economy is both flatter in its belly and fatter in its tails. This is a potentially unstable situation, especially when compared to the conventional bell curve. Moreover, its density has shifted unfavorably in the past 12 months as a result of growing uncertainty, complexity and policy risk premia. In Europe, it has already morphed into a bimodal distribution -- a phenomenon that colleagues in our five European offices confront on a daily basis.

In such a world, investors need to retain a claim on the upside while protecting against the downside, including gap risk. They need to be highly differentiated, positioning portfolios for the knowns (both for return generation and for risk mitigation), while also maintaining the right level of optionality in the face of the unknowns. And they must ensure sufficient operational agility to evolve as more data become available, as will inevitably be the case.

In the short run, investors are well advised (indeed, urged) to supplement careful bottom-up security selection with macro, and in particular a deep understanding of the implications of the different policy approaches being used to deal with over-indebted economies generating insufficient growth -- directly in advanced economies and indirectly in how this impacts the behavior of others. Specifically, and in the words of Bill Gross, they must seek to engineer a "great escape" from a range of actual and likely realities -- be it financial repression in the U.S., default in Greece, or other forms of de facto confiscation elsewhere.³

This, of course, translates into a sizeable quality bias for sovereign and company exposures, the latter both in corporate credit and equity space. Focus on names with high cash balances, low financial leverage, high operating margins and exposure to growth areas. Higher quality sovereign exposure should be concentrated in parts of the yield curve that offer meaningful roll down and are anchored by credible central bank policies. Exposure further out the curve should be taken with caution, focusing on sovereigns with a lower risk of inflation and also utilizing inflation-protected securities. Meanwhile, higher-quality equity exposure should be supplemented, where possible, with a dividend dimension as a means of de facto shortening duration.

Consider real assets when thinking of the range of responses to minimize the multi-faceted risk of financial confiscation, especially as inflationary pressures slowly mount. Again, differentiation will be essential, with emphasis placed on those with low supply elasticities and offering a degree of geopolitical protection.

Currencies are the hardest to call in the world we have described. On the one hand, emerging market currencies will likely be supported by continued productivity gains, strong balance sheets and capital inflows. On the other hand, policymakers there will be hesitant to see their currencies strengthen in a world that is so uncertain, especially if the appreciation is turbocharged by leakages from what they view as excessive liquidity creation in the U.S. Also, expect the U.S. dollar to continue to be the main recipient of flight-toquality capital, at least for the first part of the secular horizon.

These considerations speak to relatively limited scaling of currency positions pending additional information. And they also shout for careful differentiation.

The bottom line here is a simple one: Wherever you are in the capital structure and in geographical space, be very alert to situations where valuations do not reflect the confiscation risk. And remember, confiscation is not just default. It is also a function of poor protection against inflation, nationalization or the large preemption of company and currency earnings by governments.

And...

The emphasis on minimizing exposure to financial repression will remain as long as central bankers are in control, including a Federal Reserve that is both able and willing to compress interest rates while underwriting the mounting collateral damage and unintended consequences. At some point during the secular horizon, however, investors will most likely need to pivot. Why? Because, absent a much more comprehensive policy response, central bank measures will prove insufficient by themselves to ignite growth dynamics and safely delever over-indebted segments in advanced economies.

Think of two corner solutions anchoring the range of possibilities in this pivot. At one end, central banks end up providing a bridge for other government entities with more effective measures, including on the structural front. And this serves to crowd in private capital currently on the sidelines. At the other end, central bank policies become not just ineffective but also counterproductive as the collateral damage and unintended consequences eventually overwhelm the intended benefits.⁴ In addition to the direct negative impact, this would encourage the private sector to de-risk further, thus sucking more oxygen out of the economy.

For investors, the essence of this pivot involves an overwhelming emphasis on capturing solid and growing value streams that reflect company and sovereign ability to "earn" them through sound fundamentals rather than to "buy" them through financial wizardry. Its exact nature depends on whether other policymakers, with better tools, finally step up to their challenges.

If they do, then an across-the-board risk-on posture would make sense; and government bonds would prove a bad place to be. But this requires the type of political decisiveness and effectiveness that sadly eludes most advanced economies; and it also necessitates better global policy coordination. Accordingly, the other pivot involves even greater emphasis on principal protection -- or, to use Bill's recent characterization, reinforcing the coming of age of investment defense.⁵ And, together, all this speaks to the need more than ever to allow for portfolio repositioning as new data come in and circumstances dictate.

Implications -- The "How"

So far, we have discussed "what" investors should consider if they agree with our secular analysis. It does not stop here however. The analysis suggests that the "how" is equally consequential.

Given the likelihood of inflection points, investors will need to be extra careful of traditional market capitalization indices that underpin not just conventional benchmarks but also many passive investment approaches. These can be particularly counterproductive in fixed income when debt is growing beyond safe levels (remember, they encourage the allocation of large and rising sums to increasingly vulnerable credits). In equity space, many of the traditional indices and approaches risk missing out on disruptors that will thrive in dislocated and changing markets and ecosystems.

It is also high time to revisit a whole host of backward-looking labels and dividing lines that often lurk in asset allocation, investment guidelines and mindsets. Are "domestic equities" really domestic when a large and growing portion of company revenues and profits come from other countries? Are advanced government bonds really interest rate risk when countries continue to slip down the credit curve? And are all emerging market sovereign bonds as risky as the term is often seen to imply?

All this speaks not only to increasingly outdated historical distinctions, but also to correlations among asset classes and the flexibility to react to (and combine more optimally) different risk factors. Remember, as Josh Davis, David Fisher and Curtis Mewbourne note, it is about how an investment behaves rather than what it is called.

Led by our analytics and solution capabilities, PIMCO has done a lot of work on this. This particular effort was initiated back in 2006 and we now have encouraging results to share with you -- from forward-looking indices (including "Global Advantage" that just celebrated its third anniversary) to solution methodologies and risk factor analysis.

Finally, and perhaps most disappointing for many, society will need to lower its return expectations in general, and particularly its risk-adjusted return expectations. Having produced what Scott Mather called a period of "false economic prosperity," the enormous multi-year levering of both the public and private sectors in advanced economies also involved the front-loading of investment returns. This can only be maintained and enhanced now through additional leverage (and the set of binding constraints here is set to grow) or through the lifting of structural impediments to growth (a much better approach but unfortunately problematic, at least for now).

As return expectations come down, the asset side of the balance sheet will not be sufficient on its own to meet the objectives of many investors. An even stronger linkage to the liabilities side will be paramount. In many cases, this requires a concurrent evolution in portfolio construction. Moreover, as demonstrated by Vineer Bhansali and Jim Moore, an investment approach that places risk mitigation just on the shoulders of asset class diversification will suffer. It will need to be appropriately supplemented by more sophisticated asset-liability management, cost-effective tail hedging, and a solution (as opposed to just product) mindset.

Bottom Line

In July 2010, the Chairman of the Federal Reserve Board, Ben Bernanke, came up with an elegant term to characterize the United States' cyclical outlook -- he called it "unusually uncertain." PIMCO's 2012 Secular Forum suggests that this term could well prove as resilient as our May 2009 forecast for a "new normal." Given our analysis, Bernanke's unusual uncertainty applies to more than the cyclical timeframe, and to more than just the United States. It is both secular and global.

Now uncertainty, even of the unusual variety, does not -- and should not -- translate into investor paralysis. We believe that specific areas of the secular horizon are already clear and actionable today; others are subject to significant two-sided fat tails that should be detailed and managed accordingly.

Over the next few weeks, we will provide you with several more detailed notes from our specialists on how the Forum's conclusions affect their individual sectors. We will also continue to fill out the secular topology, especially as we learn more about how the global economy is accommodating historic multi-dimensional changes -- be they in advanced countries, in emerging economies or in the functioning of the international monetary system. And you can be assured that we will work very hard to do so well ahead of others.

References:

1. "Secular Outlook: Navigating the Multi-Speed World," PIMCO, May 2011.

2. "Secular Outlook: A New Normal," PIMCO, May 2009.

3. "The Great Escape: Delivering in a Delevering World," PIMCO, April 2012.

4. "Evolution, Impact and Limitations of Unusual Central Bank Activism," PIMCO, April 2012.

5. "Defense," PIMCO, March 2012.

Kellogg's In Hot Water Over Allegedly Fake Recipes

2012-05-15T23:22:24Z

If you were confused today when recipes supposedly by Grant Achatz appeared on Kellogg's-owned website Snackpicks.com, you weren't the only one.

Nick Kokonas, co-founder of Achatz's famed Chicago eatery, Alinea, was also surprised. One recipe, titled "Chef Grant Actatz' [sic] Sweet Potato Toppers," is a snack of Keebler Town House Toppers crackers, pureed sweet potatoes and bourbon-soaked raisins. And yes, that's how the site spelled Achatz's name.

Kokonas was quick to deny the recipes were Achatz's on his Twitter account:

Kellogg's has since taken the sweet potato recipe down, but plenty of sites had already managed to snag a screen capture of the page.

There's also another recipe credited to the Alinea chef, titled "Chef Grant Achatz's Ham and Curry Toppers." Here, the chef's name is spelled correctly and the recipe link is still live.

There are still plenty of other chefs' recipes up Snackpicks.com -- or recipes we presume to belong to said chefs, at any rate -- including Michelin-starred Shea Gallante. HuffPost Food reached out to Gallante's press reps; they weren't immediately available for comment.

Eater spoke with Kokonas today, who has been in contact with Kellogg's. Alinea never gave the company authorization to use the recipe or received any payment for it, he stressed.

There may be an explanation for how the recipe got on the site to begin with, but Kokonas says something is still amiss. Eater writes:

Doing a quick Google search, Kokonas found a recipe as part of an article in the Shelton-Mason County Journal from 2006 that lists the [sweet potato] recipe by Achatz. He said he's verifying whether an interview was ever done with this small-town paper, but said, there's "no way would we endorse that on Keebler's site either way. [It] just seems fishy."

The Chicago Tribune spoke with Kellogg's spokeswoman who said the company is "reaching out to the chef" and that Kellogg's is investigating.

For more evidence of strange goings-ons on Snackpicks.com, head over to The Braiser.

Honda Shows Off UNI-CUB Unicycle

2012-05-15T23:21:32Z

Honda unveiled an updated version of a robotic unicycle which it said could revolutionize travel for people with disabilities.

The UNI-CUB uses what Honda calls an omni-directional driving wheel system, which allows riders to sit upright almost as tall as pedestrians, using their body weight to change directions and turn.

The device raises the question: Are the folks at Honda way more in tune with the future transportation needs of the world than the rest of us, or have they gone a little wacky? Time will tell.

The UNI-CUB is part of Honda's robot family, which includes a humanoid robot called ASIMO.

In 2011, Honda brought the UNI-CUB's predecessor, the U3-X, to New York and let tech writers and auto writers tool around on it for a while. Reviews said it was smooth and a little nerve-wracking to get used to, but overall kind of cool.

Honda said the device is part of its efforts to "offer more and more people the joy and fun that comes from freedom of movement." And the company might be onto something. Currently, scooters are the only offerings for people who can't walk far, but are otherwise able to move around.

The UNI-CUB advances the technology from the U3-X, allowing riders to move forward, backward, sideways and diagonally, which enables them to move through crowds more easily.

And the height, "promotes harmony between the rider and others, letting the rider travel freely and comfortably inside facilities and among people."

The device will be at Japan's National Museum of Emerging Science and Innovation starting in June. Although Honda says it doesn't have plans to sell it at this time, the automaker is clearly working on getting this kind of technology into consumers' hands.

WATCH: The Jamie-Dimon-Hates-Regulation Mashup

2012-05-15T23:06:42Z

As one of the only banks that remained profitable during the financial crisis of 2008, JPMorgan was considered by many to be the sturdiest bank in the world.

But in the wake of news that the bank had lost $2 billion due to a trading mistake, it now appears that CEO Jamie Dimon was over-confident when he pointed to the strength of his institution as an argument for limited regulation. Over the past few years, Dimon has railed against new rules aimed at protecting the American economy from another meltdown, saying they constitute an excessive regulatory response.

Dimon, who has earned a reputation for brash talk, once called international bank rules "anti-American" and said public criticism of bankers is "a form of discrimination." Dimon has referred to the Dodd-Frank Financial Reform Act as "Dodd Frankenstein."

When a team of reporters led by Stephanie Ruhle at Bloomberg revealed that a JPMorgan trader working from London was placing bets so large they were distorting prices, Dimon called those concerns "a complete tempest in a teapot."

Just two days before the news broke of JPMorgan's massive loss, Dimon lamented to NBC's David Gregory that the "anti-business behavior" of Democrats and the "attacks on work ethic and successful people" were disturbing and "counter-productive."

In an emergency conference call on Thursday afternoon, Dimon reiterated his opposition to the Volcker rule, a Dodd-Frank provision that bars banks from placing speculative bets with their own money and might have restricted the trade at issue.

He did, however, admit that the loss played "right into the hands of a bunch of pundits out there."

Although he acknowledged that the losses were not good, Dimon has maintained that his business will always make mistakes.

One of the few signs of contrition from Dimon came during a follow-up interview with NBC that aired Sunday, when he said he had been "dead wrong" to laugh off concerns about the size of trades being made from the London office.

Hospital Debt Collector Taps Washington Bigwigs In Bid To Restore Reputation

2012-05-15T22:58:12Z

Accretive Health, a debt-collection company under fire for allegedly hounding hospital patients over unpaid bills, has hired former President George W. Bush's top health official as part of a campaign to restore its battered reputation.

Leavitt Partners, a consulting firm chaired by former Department of Health and Human Services Secretary and ex-governor of Utah Mike Leavitt (R), will oversee a project financed by Accretive Health to "develop a process for implementing national standards for how hospitals and other providers interact with patients regarding their financial obligations," according to a news release from Accretive Health.

Other ex-politicians will serve as advisers to Leavitt, including Donna Shalala, HHS secretary during former President Bill Clinton's administration, and former Senate majority leaders Tom Daschle (D-S.D.) and Bill Frist (R-Tenn.), the company said.

This panel of elder statesmen is another weapon in Accretive Health's counteroffensive against Minnesota Attorney General Lori Swanson (D), federal agencies and Democratic lawmakers who have questioned whether the company's methods of obtaining payments from hospital patients overstep the bounds of decency and the law. Accretive Health employees working inside Minnesota hospitals allegedly pressured emergency room patients to pay upfront or to make payments on old bills, and even visited some patients in their rooms to demand money, according to a six-volume report Swanson issued last month. The company denies the charges.

The Accretive Health-founded panel will develop "clear standards" for how medical providers and their financial contractors balance providing health-care services and their need to get paid, Leavitt said in the release. "Medical providers face a dilemma. In order to assure hospitals remain financially viable and available to patients, they must assist these same patients in making financial arrangements for payment."

He wasn't available for a telephone interview nor the advisors.

Accretive Health will pay Leavitt Partners an undetermined amount for the work, but is hoping other organizations will chip in, said Wayne Sensor, a partner at Leavitt. Accretive Health will not participate in the development of the guidelines, company spokeswoman Ruth Pachman said.

Federal and state laws already regulate hospital billing and debt collection, and prohibit hospitals from refusing to treat patients in need of emergency care.

"This isn't about compliance with the law," Sensor said. The attention brought to hospital bill and debt-collection in recent weeks has made clear that national guidelines are needed, he said.

The advisory panel will convene in June and also includes Mark McClellan, who ran the Food and Drug Administration and the Centers for Medicare and Medicaid Services under Bush, and Clinton-era Deputy Attorney General Jamie Gorelick.

Swanson's reports attracted the attention of investigators from HHS and members of Congress including Sen. Al Franken (D-Minn.) and Rep. Henry Waxman (D-Calif.), who have been looking into whether Accretive Health violated federal laws requiring hospitals to treat all emergency room patients regardless of their ability to pay.

State and federal officials are also inquiring whether the company broke federal patient-privacy laws. In January, Swanson sued Accretive Health over a laptop computer containing confidential patient information that was stolen from an employee's car. The Federal Trade Commission is investigating whether the company followed federal statutes governing debt-collection and credit-reporting.

Accretive Health issued a 29-page report last Friday to rebut these charges and to respond to questions Franken posed in a letter to the company. Employees of Chicago-based Accretive Health and its hospital clients speak with nearly every patient about billing, the company said, but no one was told they wouldn't receive medical care if they didn't pay. Chicago Mayor Rahm Emanuel (D), President Barack Obama's former chief of staff, wrote Swanson this month asking her to back off Accretive Health.