Janet Yellen, head of the US Federal Reserve, told a Congressional hearing that the US would be adversely impacted if Brexit passes.

Sen.Tom Cotton (R-Ark.) is vowing that he’ll fight any attempt to punish the United Kingdom if it votes to leave the European Union this week.

Cotton spoke on the Senate floor Tuesday against politicians, including President Obama, and economists who have warned of dire economic consequences if the U.K. leaves the EU, called “Brexit.”

“The American people will stand with Britain, in or out of the EU, and will stand against punitive retaliation against the British people,” said Cotton, promising to defend the U.S. and U.K.’s close military and economic ties.

“Just as I’ll do everything in my power to preserve our special relationship against [European] meddling, so I’ll do the same with any administration who doesn’t fully appreciate that relationship,” he said.

Ernest Scheyder and Terry Wade write: The comeback of shale: Two years into the worst oil price rout in a generation, large and mid-sized U.S. independent producers are surviving and eyeing growth again as oil nears $50 a barrel, confounding OPEC and Saudi Arabia with their resiliency. That shale giants Hess Corp (HES.N), Apache Corp (APA.N) and more than 25 other companies have beaten back OPEC’s attempt to sideline them would have been unthinkable just months ago, when oil plumbed $26 a barrel and collapses were feared.

So far no U.S. producer that pumps more than 100,000 barrels per day (bpd) has gone bankrupt. The survival of these big producers partly explains why overall U.S. production has slipped only about 10 percent since peaking at 9.69 million bpd.

Their agility – which required slashing costs in half while doubling down on improved techniques to squeeze more oil from each new well – is now allowing the industry to cautiously focus on growth again.

But this time, U.S. producers say they will stay focused on capital returns, having abandoned a culture of maximizing production regardless of costs.

OPEC and Saudi Arabia “thought that there would be major capitulation and damage to U.S. shale producers as a result of the deep downturn,” said Les Csorba, a leadership consultant at Heidrick & Struggles who works with shale executives. “But what happened was that it actually created a new paradigm among U.S. producers to transform their businesses.”

Acquisition activity has picked up markedly in recent weeks, with Devon Energy Corp finding buyers for more than $2 billion in non-core assets. The company is using part of that cash to boost its capital budget by $200 million.

WPX Energy Inc spent more on acquisitions last year than any U.S. oil company, and sold 45 million new shares earlier this month, planning to use the funds to drill new Texas wells.

“We’re a leaner organization than we were before the price crash,” said Rick Muncrief, WPX’s chief executive.

True, costs were slashed in the height of the price downturn when oil plumbed $26 per barrel in February and “there’s a perception out there that if commodity prices go back up, you’re going to lose those cost savings,” Muncrief said.

But, he stressed, “that’s simply not the case.”

Industry consensus holds that costs for oilfield services – fracking and the like – may rise in tandem with oil prices, though high-tech advancements in sand, drilling and chemical technologies should stick around.

“Real progress for us has come on the cost side,” said John Christmann, Apache’s chief executive. “We plan to maintain a methodical approach to the cycle with a focus on returns.”

U.S. oil prices have recouped nearly half their losses from mid-2014 highs, almost doubling from the 13-year lows hit in February to reach over $51 in early June.

A year ago prices hit similar levels before plunging; oil executives are hoping past is not prologue.

To be sure, some executives say a bit more is needed – at least $60 a barrel – to ramp up drilling and fracking operations across most U.S. shale plays.

That attitude has been reflected in oil producers’ capital budgets, which are still billions below 2015 levels.

Hess has long said it will add rigs in North Dakota when oil prices hit that mark, even though it is profitable in the state at $40.

Some oil companies aren’t ready to even acknowledge the $50 milestone as relevant.  Others are moving ahead in the Bakken, Eagle Ford and Permian, considered the cheapest and most-prolific U.S. shale oil fields.

BBC reports:  The two most surprising political phenomena of this year have been the rise of Donald Trump and the success of the Leave Europe camp in Britain’s referendum on Brexit.

Few pundits saw either coming.  This week, polls suggest, Britain may pull out of the European Union. Opinion polls currently have the 23 June referendum too close to call but the Brexit camp (those in favour of the UK splitting from the EU) has been inching ahead in recent weeks.

Later this year, Americans will decide whether to elect Donald Trump as the 45th US President, or Hillary Clinton.

Opinion polls also suggest this race is close, though with five months to go, those polls aren’t terribly instructive yet. Yet the result next week in Britain could give us some indication of how Americans will vote in November.

Here’s five reasons why.

Angry electorate

Donald Trump and Boris Johnson, the leader of the Leave campaign, have tapped into a similar public mood of disgruntlement. On both sides of the Atlantic, a lot of people feel they’ve been handed a bad deal. In the UK, it’s European bureaucrats in Brussels who are to blame. In the US, it’s elected politicians in Washington who are held responsible. Mr Johnson promises Brits a better deal if they throw off the onerous yoke of EU regulations. Mr Trump promises Americans a better deal if they put him in the White House.

Globalisation

The forces of globalisation are causing havoc for European workers as they are for American workers. If you are a white working class man (in particular) the combined effects of immigration, free trade and technology have made your job and your wages less secure. Policy makers in the UK and the US have singularly failed to address these issues in any meaningful way. If the Brexit camp wins next week it could suggest the global anti-globalisation mood (if such a thing is possible) is stronger than we realised.

Immigration

Immigration deserves its own category because it is so critical in both campaigns. Economists argue about the relative impact of immigrants versus robots on wage stagnation – voters don’t care much. They blame immigrants. In both countries, governments haven’t handled immigration well. America tried and failed to implement immigration reform and the country’s Southern border remains porous (though to be fair, more people are using it to go south not north at the moment.) Like its European partner, the British government is caught in the nightmare story that is the European migrant/refugee crisis, with no effective response.

Lost pride

The complicated feeling of having had a bad deal has created an insidious spin off, a sense of broken pride, both national and personal.

Populism

And, finally, populism loves simplicity, especially, it seems, when it’s dressed up with an impressively wacky hair do. Boris Johnson and Donald Trump appeal to the heart not the head.

If the forces of disgruntlement, nationalism, populism and anti-globalisation are strong enough to force a radical move in the UK, they may be strong enough to force a radical election in America too.

Matt Levine writes: The basic puzzle of insider trading is that it is legal to call up corporate executives or government officials and ask them questions, and it is legal to trade stocks, and it is even legal to trade stocks after asking your question and getting an answer, except that sometimes it isn’t. .

Microsoft is trying to re-position itself as a business, but the acquisition of LinkedIn is questionable.  Microsoft is playing the equivalent of around $260 for each monthly active user of LinkedIn. To keep shareholders happy, it will need to add users to LinkedIn’s platform more quickly or be clearer about how it can make more money from their data.

Microsoft’s record with big deals is poor. Its purchase of Skype in 2011 for $8.5 billion has been no runaway success. Microsoft squandered over $6.3 billion on aQuantive, an online-advertising firm that it bought in 2007, and $7.6 billion on Nokia’s handset business in 2014. CEO Satyar Nadella intends to keep LinkedIn as an independent company, perhaps because he has seen the pitfalls of integrating large acquisitions.

Nadella wants LinkedIn to become the place to go for news and other details about people’s work lives, but firms are unlikely to want to give their employees more of an excuse to spend time on social media. Some bosses don’t like LinkedIn, because it makes money from recruiters out to poach their staff. They will not want to let LinkedIn further embed itself at their companies. Already some large firms block or restrict access to LinkedIn on their networks. Users may also grow uncomfortable if Microsoft uses their data elsewhere and could stop using the service.  Nadella has acknowledged they will have to treat what they know about users “tastefully”.

The deal has been welcomed for other reasons, however. It could signal an impending tech buying spree. In the days after LinkedIn’s purchase, investors looked around to see which other firms Nadella and his peers might have their eyes on. Optimists pushed up the share price of Twitter, another social-media firm whose growth prospects have been questioned, in the hope that a buyer might make a move. But not every tech firm is lucky enough to have Mr Nadella wanting to acquire.

We continue to watch the US Federal Reserve move into questionable territory.

The Federal Reserve “might legitimately consider” using helicopter money in an “all-out” effort to rescue the U.S. economy from a severe downturn, Fed Chairwoman Janet Yellen said.

“It is something one might legitimately consider. I would see this as a very abnormal, extreme situation,” Yellen said.

Helicopter money, a policy that has been taboo for fifty years, calls for a central bank to print money and give it to people, most likely in cooperation with fiscal policy like a tax cut or to fund spending.

Some academics have been pressing the case for using the policy in small doses in the face of weak global demand.

The imagery of dropping money from the sky was the work of Milton Friedman.

Former U.K. bank regulator Adair Turner, a leading advocate for use of helicopter money, said that the Fed would likely struggle to raise rates in coming months and should think about the policy if necessary.

Yellen’s views are similar to former Fed chief Ben Bernanke, who argued in a recent blog post that helicopter money should not be ruled out “under certain extreme circumstances —sharply deficient aggregate demand, exhausted monetary policy, and unwillingness of the legislature to use debt-financed fiscal policies.”

Bernanke earned the nickname “Helicopter Ben” for citing Friedman’s idea as a possible fix for Japan’s economic doldrums.

Fiscal policy and monetary policy would hopefully not be working at cross-purposes with severe downside risks, Yellen said.

“Whether or not, in such extreme circumstances there might be a case for, let’s say, close coordination where the central bank playing a role in financing fiscal policy” is being debated by academics, she noted.

Women on boards demonstrably help a company’s overall performance.  Here are companies that have no women on their boards:  Samsung, Nintendo, Nissan and Kia Motors have exactly zero female board members.

State Farm, Chipotle, Costco, CBS, and even make-up brand Revlon are just a few of the companies with no female executives.

LedBetter (a nod to fair pay activist Lilly Ledbetter) is tracking gender equality on boards and in the executive ranks of 2,000 big consumer brands.

The hope is that with this information readily available, consumers can make purchasing decisions that better align with their values, according to cofounder and CEO Iris Kuo.

“People need to be educated on this topic and understand where their money is going,” said Kuo, who said the idea came from a 2013 interview with Sallie Krawcheck.  Krawcheck noted that women told her they’d buy differently if they just knew the company’s gender makeup.

Women hold the vast majority of purchasing power, roughly 80%.

The data underlines Catalyst’s latest findings on the representation of women at S&P 500 companies.

Women hold just 19.9% of board seats at S&P 500 companies, and only 14% of companies are even approaching gender parity on their boards.

Gender equality was a hot topic at the first-ever United State of Women Summit on Tuesday. To coincide with the event, the Obama administration, companies and foundations pledged $50 million to support women around the world. That includes 28 companies that signed onto the White House’s Equal Pay Pledge, like Amazon, American Airlines, L’Oreal, Gap and Staples.

“We should shop and frequent those companies that are doing the right thing,” said President Barack Obama during a speech at the summit.

Of the 230 parent companies in LedBetter’s database, only 6% — just 14 — had female CEOs.

Personal care, apparel and retail are the best industries for women on in leadership roles. H&M’s board is 58% women and 41% of its top leadership are female; Gap’s board is 36% female and its executive team is 57% female.

Energy and transportation, on the other hand, are the worst industries for gender equity by LedBetter’s measures.

But gender representation on the board and the executive team don’t always go hand-in-hand.

Revlon has no female executives but an above average female board, 33%. Mattel, which makes Barbie, similarly has no women on its executive team, but its board is 30% female.

The fact that the US Federal Reserve commands a tense watch as possible dates for a rise in rates come up shows how powerful the Fed has become.  Whether this is good or not is debatable.  It’s also a fact of US life right now.

With the next interest rate decision coming from the Federal Reserve on Wednesday, Wall Street is voicing some distress that Janet Yellen is overly ambiguous about the path of the Fed’s monetary policy.

“There’s a little criticism starting to stir, that she’s not very clear about what matters the most to her or other members of Federal Open Market Committee (FOMC),” said Hugh Johnson of Hugh Johnson Advisors.

Charles Plosser, a former Philadelphia Fed president, has described as a “problem” the desire to reach consensus on FOMC statements that he believes has made them “more vague and uncommunicative.”

Yellen reinforced the notion in a recent speech in Philadelphia, saying investors should not count on the Fed to map out its plan for rate hikes.

“Charlie Plosser and a lot of others would like her to be more transparent. They’re saying something just short of ‘tell us what you’re going to do,’ which is unreasonable at best. They [Fed members] don’t know until they get into the meeting,” Johnson said of the FOMC, which begins its two-day policy-setting session Tuesday.

“I think those rumblings are unfounded. I think she’s been abundantly clear,” Johnson said, referring to Yellen’s frequently repeated refrain that Fed moves are data-dependent.

The Fed has also made clear that it’s looking to hike borrowing costs, with its stated strategy most recently derailed by a shockingly poor jobs report in May.

The Fed is eager to normalize, and would love to increase rates two to three times this year, according to Tom Anderson, chief investment officer at Boston Private Wealth. But he added, “they need the data to show up in a certain way to make the market digest their decisions better.”

Yellen and her colleagues are under pressure to raise rates, in large part because if the economy runs into trouble they need to have some room to lower them again.

The Fed is looking to avoid a scenario where they “don’t have any arrows in their quiver” should it appear the economy is headed into a recession a year or so down the road, Jim Russell, principal and portfolio manager at Bahl & Gaynor, said.

What’s needed, in Anderson’s view, is a good jobs number for June, a slightly higher inflation number or further growth in wages. “If we get any positive data points that would support the case for raising, July is a definite possibility. If not then, they’ll be looking at September.”

“The jobs report was weak, but the overall employment data has been consistently in the right direction,” Anderson said. “The trend has been in favor of a hike.”

“By any objective measure, 4.7 percent, that is full employment,” Russell said of the nation’s unemployment rate. “And it does appear that the inflation rate is starting to increase a bit, to a level where they need to cut off extraordinary accommodation.”

If the June jobs report shows the May report was “not a fluke, then we’ll have an entirely different conversation,” Anderson said.

However, Johnson also pointed out that “The numbers don’t tell you everything. Yellen thinks broadly about what’s going on in the world. She cares about the dollar, she cares about Brexit, she cares about the global financial markets and what’s going on in China.”

So long as the U.K. remains in the European Union and the June nonfarm payrolls numbers don’t confirm a trend that May’s awful numbers imply, the Fed will hike two times in 2016, Johnson and Russell believe. Anderson thinks Yellen & Co. will move only once before the end of the year.

“My guess would be July and October,” Johnson said.

If Britain votes to leave the EU, a divorce would have to be negotiated. It could lead to an orderly transition or a much more unpredictable process, buffeted by political pressure, volatile markets and the clash of national interests.

Leaving the EU is a daunting challenge with no clear precedent. Brexit would unwind economic relations of “incomparable complexity and depth”, according to Stephen Weatherill, professor of law at Oxford university. He argues it would be more legally complicated than decolonisation or the break-up of sovereign countries in the past.

The negotiation would not just concern divorce, the technical parting of ways and the settling of old bills. It would also have to re-engineer the world’s biggest single market, setting new terms of access and legislating to “renationalise” volumes of law rooted in the EU.
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House of Commons research has estimated that EU-related law makes up at least a sixth of the UK statute book. That excludes 12,295 EU regulations with direct effect on everything from bank and consumer rules to food standards, which cease to apply the moment Britain leaves.  Britain would also have to renegotiate or reconfirm a web of EU-negotiated free trade deals with dozens of countries that anchor the UK in world commerce but are not automatically inherited if it leaves.

To prevent the bloc from unravelling, EU countries may seek to punish Britain, so others dare not follow its exit path. “They would try to make it as painful as possible, be it financially painful or politically painful,” said Gordon Bajnai, a former Hungarian prime minister. “The UK would face a hostile Europe.”

 

 

Pro-leave politicians liken such predictions of doom to past warnings over Britain’s rejection of the euro, which did not pan out. The day after the referendum, Britain’s rights and obligations would remain the same, as would the rule book for business. Champions of Brexit say all sides — from London to Brussels to Berlin — would have the incentive to agree a smooth transition.

Article 50 sets departing countries a two-year deadline to agree terms with a weighted majority of remaining EU states. But a comprehensive EU-UK trade deal would require unanimity and national ratification — giving parliaments a veto all the way down to the assembly for the 76,000 strong German-speaking community of Belgium.

In the US, states try to fill their coffers by taxing the very wealthy.  When this drives the wealthy to move to more favorable tax environments, they turn around and offer subsidies to the companies they run.

From an editorial in the Wall Street Journal: Connecticut lost General Electric’s headquarters to Massachusetts earlier this year, so Governor Dannel Malloy is now trying Illinois’s business model: Raise taxes, and then when businesses threaten to leave, write a check to other businesses so they’ll stay.

Last week the Governor presented Bridgewater hedge fund with $5 million in grants and $17 million in low-interest, forgivable loans to renovate its headquarters in Westport along the state’s Gold Coast. Mr. Dalio could probably dig up $22 million from petty cash.

The Governor’s office says tax revenues could shrink by $4.9 billion over the next decade if all of Bridgewater’s employees departed. After Appaloosa Management’s David Tepper escaped to Florida from New Jersey last year, Trenton’s budget gnomes sounded the public alarm.

Like other states with progressive tax codes, Connecticut is dependent on high earners. As recently as 1990, the state had no income tax and had long been a refuge for companies and employees fleeing high-tax New York. But as usual after an income tax is introduced, the political class keeps raising the rate.

Raising taxes has backfired on the state economy and budget. Higher taxes have also depressed business and income growth.

Fitch Ratings and Standard & Poor’s downgraded Connecticut debt last month because of structural deficits and slow income growth, which Mr. Malloy calls “our new economic reality.” Fitch noted that employment growth between 2012 and 2015 was half that of the U.S. average. Median home prices have declined during the past two years.

Connecticut has lost 105,000 residents to other states over the last five years while experiencing zero real economic growth.

Here is the new-old progressive governing model: Raise taxes relentlessly in the name of soaking the 1% to pay off government unions. When that drives people out of the state, subsidize the 0.1% to salvage at least some jobs and revenue. Ray Dalio gets at least some of his money back. The middle class gets you know what.