Day: April 23, 2019

U.S. Treasury Secretary Steven Mnuchin on Tuesday failed to meet a final congressional deadline for turning over President Donald Trump’s tax returns to lawmakers, setting the stage for a possible court battle between Congress and the administration.

The outcome, which was widely expected, could prompt House Ways and Means Committee Chairman Richard Neal to subpoena Trump’s tax records as the opening salvo to a legal fight that may ultimately have to be settled by the U.S. Supreme Court.

Neal set a final 5 p.m. EDT (2100 GMT) deadline for the Internal Revenue Service and Treasury to provide six years of Trump’s individual and business tax records. But the deadline passed without the panel receiving the documents.

After the deadline lapsed, Mnuchin released a letter to Neal in which he pledged to make “a final decision” on whether to provide Trump’s tax records by May 6. It was the second time the administration has missed a House deadline for the tax returns since Neal requested them on April 3.

“Secretary Mnuchin notified me that once again, the IRS will miss the deadline for my … request. I plan to consult with counsel about my next steps,” Neal said in a statement.

In his letter, Mnuchin said he was still consulting with the Justice Department about Neal’s request, which he termed “unprecedented.”

“The department cannot act upon your request unless and until it is determined to be consistent with the law,” the Treasury secretary told Neal.

‘Not Up to the President’

Earlier on Tuesday, the White House said Trump was unlikely to hand over his tax returns. “As I understand it, the president’s pretty clear: Once he’s out of audit, he’ll think about doing it, but he’s not inclined to do so at this time,” White House spokesman Hogan Gidley told Fox News in an interview.

“This is not up to the president. We did not ask him,” said a Democratic committee aide, who cited a law saying the Treasury secretary “shall furnish” taxpayer data upon request from an authorized lawmaker.

Neal informed IRS Commissioner Charles Rettig earlier this month that failure to comply with the deadline would be viewed as a denial.

Legal experts said House Democrats could vote to hold Mnuchin or Rettig in contempt of Congress if they ignored a subpoena, as a pretext to suing in federal court to obtain Trump’s returns. Experts say administration officials could ultimately risk financial penalties and even jail time by defying the committee.

As Ways and Means chairman, Neal is the only lawmaker in the House of Representatives authorized to request taxpayer information under federal law. Democrats say they are confident of succeeding in any legal fight over Trump’s tax returns.

“The law is on our side. The law is clearer than crystal. They have no choice: they must abide by (it),” Representative Bill Pascrell, who has been leading the Democratic push for Trump’s tax records, said in a statement to Reuters.

Democrats want Trump’s returns as part of their investigations of possible conflicts of interest posed by his continued ownership of extensive business interests, even as he serves the public as president.

Republicans have condemned the request as a political “fishing expedition” by Democrats.

Despite the law’s clarity, Democrats have long acknowledged that the effort would likely result in a legal battle that could end up with the U.S. Supreme Court.

“If the IRS does not comply with the request, it is likely that Chairman Neal will subpoena the returns,” Representative Judy Chu, a Democratic member of the Ways and Means Committee, told Reuters.

“If they do not comply with that (subpoena), a legal battle will begin to defend the right of oversight in Congress,” she said.

Trump broke with a decades-old precedent by refusing to release his tax returns as a presidential candidate in 2016 or since being elected, saying he could not do so while his taxes were being audited.

But his former personal lawyer, Michael Cohen, told a House panel in February that he does not believe Trump’s taxes are under audit. Cohen said the president feared that releasing his returns could lead to an audit and IRS tax penalties.
…

A top White House economic adviser said on Tuesday the United States and China were making progress in trade negotiations and he was “cautiously optimistic” about the prospects for striking a deal.

Speaking at a luncheon at the National Press Club, National Economic Council Director Larry Kudlow said the two nations still had issues to address and were discussing a “visitation exchange” as part of their ongoing talks.

“We’re not there yet, but we’ve made a heck of a lot of progress,” Kudlow said in response to questions from reporters.

“We’ve come further and deeper, broader, larger-scale than anything in the history of U.S.-China trade.”

“We’ve gotten closer and we’re still working on the issues, so-called structural issues, technology transfers,” Kudlow added. “Ownership enforcement is absolutely crucial. Lowering

barriers to buy and sell agriculture and industrial commodities. It’s all on the table.”

Washington and Beijing have engaged in a tit-for-tat trade war that has seen both countries imposing tariffs on billions of dollars’ worth of each others’ imports.

The United States is seeking structural changes in China’s economy, from reducing industrial subsidies to halting forced technology transfers by U.S. companies seeking to enter the Chinese market.
…

The Justice Department on Tuesday announced indictments against two Chinese nationals accused of working together to steal trade secrets from General Electric.

Xiaoqing Zheng pleaded not guilty Tuesday in U.S. federal court in Albany, New York.

Co-defendant Zhaoxi Zhang is believed to be in China.

Both are charged with economic espionage and stealing trade secrets. Zheng is also charged with lying to FBI investigators.

“The indictment alleges a textbook example of the Chinese government’s strategy to rob American companies of their intellectual property and to replicate their products in Chinese factories, enabling Chinese companies to replace the American company first in the Chinese market and later worldwide,” U.S. Assistant Attorney General John Demers said.

He said the United States will not stand by and watch the world’s second-largest economy commit “state-sponsored theft.”

Zheng was an engineer at General Electric’s power and water plant in Schenectady, New York.

U.S. prosecutors allege he stole multiple electronic files describing designs and engineering of GE gas and steam turbines and emailed them to Zhang. The indictments accuse the pair of using the stolen information to profit from their business interests in two Chinese companies — Liaoning Tianyi Aviation Technology and Nanjing Tianyi Avi Tech.

Prosecutors say the two defendants knew their activities would benefit the Chinese government.

If convicted, Zheng and Zhang could spend 25 years in prison and be fined more than $5 million. Zheng could also face an additional five years and a $250,000 fine for allegedly lying to the FBI.
…

Stock investors had to go on a harrowing round trip over the last seven months, but the market may be in a healthier place after it.

The S&P 500 index of big U.S. stocks is back to a record high, closing above 2,930 on Tuesday for the first time since Sept. 20. On the way, though, it took investors on a terrifying plunge of nearly 20%, amid worries that the economy would tip into recession. After hitting bottom in December, stocks took off on a nearly mirror-image rally .

Even though the S&P 500 is back at the same level, analysts say many of the market’s vital signs look different today than in late September.

Worries about a possible recession have dimmed, in large part because of a change in stance by the Federal Reserve. That has many investors predicting more gains for the market this go-around, despite risks still hanging over stocks, such as the still simmering global trade war and slower growth for economies and corporate profits around the world.

Here’s a look at some of the changes for the market, and one big similarity, between then and now:

AN EASIER FEDERAL RESERVE

This is the biggest difference by far, investors say.

Last autumn, the Federal Reserve was deep into its plan to gradually raise interest rates, after having kept them pinned at nearly zero for years. Higher rates would slow the economy, but it would also reduce the risk of higher inflation and the job market was in much better shape than in the aftermath of the Great Recession. When the S&P 500 set its record on Sept. 20, the Fed was a week away from raising its key short-term rate by a quarter of a percentage point for the seventh time in eight quarters.

But those and other moves by the Fed raised worries along Wall Street that the central bank was moving too fast and could push the economy into recession.

“I was feeling very cautious on the market last fall because you were seeing a lot of straws in the wind that the Fed was too tight,” said Margie Patel, senior portfolio manager at Wells Fargo Asset Management. “Even though rates were low, you could see housing and autos looking weak, and in the stock market, every now and then, you’d see a sector of the stock market plunge for really no reason.”

In December, the Fed raised rates again and said another two increases may come in 2019. But officials changed their outlook early this year, following the plunge in stock prices, and officials pledged to be patient in raising rates. Then, in March, the central bank said it may not raise rates at all in 2019.

The easier tone sent the yield on the 10-year Treasury’s yield, which affects rates for mortgages and other loans, down to 2.57% from 3.07% in late September. That’s a boost for the economy, as well as for stock prices.

“Recession, I think it’s off the radar now,” Patel said.

BOTTOMING GROWTH EXPECTATIONS

Companies are in the middle of telling investors how much profit they made during the first three months of 2019, and analysts have prepped for disappointment. Wall Street is forecasting a drop of more than 3% for S&P 500 companies, the first decline in nearly three years.

That’s a concern for investors because stock prices tend to track profits over the long term. But analysts expect growth to return and accelerate as the year progresses. After hitting bottom in the first quarter, analysts expect S&P 500 profit growth to ramp back up to 8.5% in the fourth quarter thanks to stronger than expected revenues.

Economic data has been improving around the world, which is raising optimism.

When the S&P 500 set its record last fall, dueling import taxes by the United States and China threatened global growth, higher mortgage rates were hurting home sales and the initial October jobs report hinted at slower hiring.

Now, U.S.-China trade tensions have dialed down, even if underlying conflicts are unresolved. Mortgage rates have fallen, home sales have recovered somewhat and the labor market has been solid, on average.

The economy still appears on course for slower economic growth this year than the roughly 3% pace achieved in 2018, with economists outside of the Trump administration generally pegging the annual gain at closer to 2%. But investors see a much lower risk of recession in 2019.

A LESS EXPENSIVE MARKET, THOUGH STILL NOT CHEAP

Stock prices may be back to where they were in September, but they don’t look quite as expensive by some measures of value.

One of the main ways that analysts measure the value of a stock is to measure its price against the company’s earnings. In September, the S&P 500 was trading at 20.6 times its earnings per share over the prior 12 months. That was well above its average of 16.3 over the prior 15 years.

Today, the S&P 500 is still trading above its long-term average, but not by as much: It’s closer to 18.7.

STILL HESITANT INVESTORS

When interest rates are low for a long time, the concern is that it will inflate a bubble. Two decades ago, investors piled into dot-com stocks and pushed them to prices that markets now see as ludicrous. In the middle of the last decade, it was housing prices that soared too high, too fast.

So far, at least, investors are still hesitant to pile into stocks. This is actually a reason the market may be primed for more gains, some analysts say.

Investors have pulled more money out of U.S. stock funds in the last few months than they’ve put in, according to the Investment Company Institute. If those skeptical investors come back to stocks, it could provide a further lift.

Of course, many risks still remain for markets, and few analysts are predicting the S&P 500 to continue rising in a straight line, as it has for much of 2019. Negotiations on the U.S.-China trade war are still ongoing. Low interest rates have encouraged U.S. companies to gorge themselves on debt, and some ideas percolating in Washington, such as universal health care, could drag down corporate profits.

Still, many investors are feeling better about the market’s health this go-around, most of all because the easier Fed has helped diminish threat of recession.

“This 2,900 is better than the 2,900 we had a few months ago,” said Steve Chiavarone, equity strategist at Federated investors.
…

Chinese tech giant Tencent Holdings has invested in Argentine mobile banking service Uala, which also counts George Soros and Point72 Ventures LLC among its investors, the start-up’s founder said.

Uala founder Pierpaolo Barbieri said the company planned to collaborate with the Chinese social media-to-gaming giant to further develop its app. He declined to disclose the amount of Tencent’s investment.

Tencent, one of Asia’s most valuable listed companies, announced last year it would boost investments in a number of “key areas” including digital payment, where its service jostles with rival Alipay, backed by Alibaba Group Holding Ltd.

Tencent’s own messenger-to-payment app WeChat now has more than 1 billion users in China and has launched in-app services that compete with Apple and Google apps.

“We are proud of their interest in Uala and look forward to collaborating on new products and services. This investment will allow us to grow even faster with our product roadmap,” Barbieri said in an email to Reuters.

Argentine startups face regulatory hurdles in South America’s second largest economy, but the country has spawned some of the region’s most successful tech startups, including U.S.-listed online marketplace MercadoLibre and Internet travel agent Despegar.com.

The country, which has a large unbanked population, is also seeing a boom in digital finance from start-ups like Uala to a new wave of online banks competing with more traditional lenders.
…

Every month, when his respiratory medicine runs out, Dionysis Assimakopoulos heads to the most unlikely pharmacy in Athens.

Amid derelict stadiums dating from the 2004 Athens Olympic Games, the volunteer-staffed social pharmacy of Hellinikon has handed out free medicine to hundreds of poverty-stricken patients, keeping some of them out of death’s reach.

“My wife and I have been unemployed for over two years. We need about 150 euros for medicine every month,” says Assimakopoulos, a former baker.

Established at the height of the crisis in 2011, the pharmacy runs on donated medicine and disposables. Some 40,000 people have brought medicine, many from abroad, says on-duty pharmacist Dimitis Palakas.

Another patient waiting in line is Achilleas Papadopoulos, a retired tenor. His pension of 700 euros is not enough to cover the antibiotics he has come for.

During nearly a decade of cuts imposed as Greece struggled to avert national bankruptcy, public education and health were among the sectors hit the hardest as the country lost a quarter of its national output.

Amid sweeping layoffs, wage cuts and tax hikes, many could not maintain their social insurance contributions and were pushed out of state-provided health support.

“Only 11 percent of Greeks can currently afford private insurance giving full health coverage,” says Grigoris Sarafianos, head of the association of private Greek health clinics.

According to the national statistics service, Greeks paid 34.3 percent of their medical expenses out of their own pocket in 2016.

The crisis exposed “huge state shortages,” says Petros Boteas, a member of the Hellinikon health team, which serves over 500 patients every month.

“There are fewer doctors and hospital staff. Money for medicine has been cut. There is a long waiting list for doctor’s appointments…we had a cancer patient given an appointment in three months,” he told AFP.

To avoid a long wait — especially in an emergency — many are forced to seek private healthcare, regardless of the cost. There are currently over 120 private clinics in the country.

‘Go to a better school’

A similar scenario casts its shadow over education.

When Aspasia Apostolou’s son was 11 years old and finishing Greek public primary school, his class teacher did something unexpected.

“He told us our son is bright and that he should be in a better school,” reminisces Apostolou, a 44-year-old lawyer.

According to the government, public funding for education fell by about 36 percent during the crisis.

Thousands of trained staff including teachers and doctors emigrated — part of an exodus of some 350,000 people — or opted to retire.

A recent study by the London School of Economics found 75 percent of Greek crisis emigrants hold university degrees.

The OECD in a 2017 study — prepared at Greece’s request — said austerity cuts had “a major impact on the demands on the Greek education system, and on those working within it.”

It said that in 2015, there were approximately 25,000 posts vacant for teachers in primary and secondary education schools.

Apostolou now pays 5,800 euros ($6,500) a year in tuition fees at a private school where her son can be assured of a well-structured curriculum.

“At our old school, the children usually come home early. So many school hours are lost because of teacher shortages during the year,” she says.

“There is no evaluation, no reward for effort in a public school. You wallow in mediocrity.”

Between 2011 and 2014, the state cut education wages and expenses by 24 percent, the OECD study said.

While school books are provided by the state free of charge, the cuts continue to impact other essential resources including computers and petrol for heating.

It’s not uncommon for schools to be shut down for lack of heating. The last instance was in February at the Athens school complex where Prime Minister Alexis Tsipras himself was a pupil.

In public schools, much now relies on private initiative and personal goodwill, what Greeks call ‘filotimo’, says Athanassia, a veteran public school teacher.

“I’ve worked in schools where the principal or teachers or parents paid out of their own pocket for essentials…or discreetly brought food to needy families,” says Athanassia, who has worked in 20 public schools as teachers are shared out to plug staffing gaps.

“Whatever works is based on filotimo,” she adds. “If funding were better, it would be totally different.”

According to the Greek statistics agency, around 12 percent of the country is near the poverty level.

In response, Tsipras’ government in 2016 began a program giving out free school meals at hundreds of schools in poorer regions.

Similarly, the government allowed access to public hospitals to long-term jobless with Greeks without health insurance.

“It’s a step forward, but inequalities persist,” says Petros at the Elliniko clinic.

“Without health insurance, securing a public hospital appointment might take six months, even for critical examinations,” he adds.
…

Samsung said Monday it was delaying the launch of its folding smartphone after trouble with handsets sent to reviewers.

Some reviewers who got their hands on the Galaxy Fold early reported problems with screens breaking.

Samsung said it decided to put off this week’s planned release of the Fold after some reviews “showed us how the device needs further improvements.”

The South Korean consumer electronics giant planned to announce a new release date for the Galaxy Fold in the coming weeks.

Initial analysis of reported problems with Galaxy Fold screens showed they could be “associated with impact on the top and bottom exposed areas of the hinge,” Samsung said.

There was also an instance where unspecified “substances” were found inside a Galaxy Fold smartphone with a troubled display, according to the company.

“We will take measures to strengthen the display protection,” Samsung said.

“We will also enhance the guidance on care and use of the display including the protective layer.”

A handful of U.S.-based reporters were given the flagship Galaxy Fold phones, priced at $1,980, ahead of the model’s official release, and they reported screen issues within days of using the devices.

Samsung spent nearly eight years developing the Galaxy Fold, which is part of the leading smartphone maker’s strategy to propel growth with groundbreaking gadgets.

The company essentially gave reviewers a “beta product” without enough information, such as not to peel off a protective coating meant to be permanent, according to independent technology analyst Rob Enderle.

“It was all avoidable for a company the size of Samsung,” Enderle said.

The failure of a “halo product” meant to showcase innovation and quality could tarnish the brand and send buyers to rivals.

“If a halo product fails, people don’t trust that you build quality stuff,” Enderle said.

“It can do incredible damage. And Huawei is moving up like a rocket, so this could be good for Huawei.”

Surviving life

Creative Strategies analyst Carolina Milanesi told AFP that a Galaxy Fold she reviewed worked fine, performing even in sometimes messy situations that arise in everyday life.

She wondered if some problems with smartphones reviewed were due to dust, moisture or other material getting into handsets through small openings at the tops and bottoms of hinges.

“If stuff gets in there, it can make its way under the screen,” Milanesi said.

“There seems to be a kind of real-life test that maybe didn’t occur.”

Testing folding phones in a lab is a much different scenario than challenging them “in the wild” where they need to endure pockets, handbags, greasy food, spilled coffee and more, the analyst noted.

Samsung may also need to do more to convey how folding screens warrant more careful handling than stiff displays that have been improved over generations of smartphones.

Milanesi did not expect a slight delay in the launch of the Galaxy Fold to be a major setback for Samsung, saying that the model was unlikely to be a big driver of sales given its price and that services or apps are still being adapted to the new type of smartphone.

Samsung smartphones tuned to work with super-speedy fifth-generation telecommunications networks are more important to the company’s bottom line on the near horizon, according to the analyst.

“It is still early days for 5G, but that is the product that is going to make a difference for Samsung this year,” Milanesi said.

Samsung is the world’s biggest smartphone maker, and earlier this month launched the 5G version of its top-end Galaxy S10 device.

Adding to Samsung woes

Despite the recent announcements about its new high-end devices, Samsung has warned of a more than 60 percent plunge in first-quarter operating profit in the face of weakening markets.

The firm is also no stranger to device issues.

Its reputation suffered a major blow after a damaging worldwide recall of its Galaxy Note 7 devices over exploding batteries in 2016, which cost the firm billions of dollars and shattered its global brand image.

Samsung originally planned to release the Galaxy Fold as scheduled on April 26.

While Samsung’s device was not the first folding handset, the smartphone giant was expected to help spark demand and potentially revive a sector that has been struggling for new innovations.

Other folding devices have been introduced by startup Royole and by Chinese-based Huawei.

Samsung Electronics is the flagship subsidiary of Samsung Group, by far the biggest of the family-controlled conglomerates that dominate business in the world’s 11th-largest economy, and it is crucial to South Korea’s economic health.

The company has enjoyed record profits in recent years despite a series of setbacks, including the jailing of its de facto chief.
…