20+ Reasons The Fed Won't Raise Even After The Strong October Jobs Number
             


 
- The Fed is again threatening to raise rates in December 2015.
       
- The 271,000 added jobs in October 2015 and the 5.0% unemployment rate are providing a basis for such a raise.
       
- The real unemployment rate of 10%+ is good reason not to raise. The recent weak economic data are reasons to not raise.
       
- The likely adverse economic effects on both the US and the economies using the USD as a secondary currency are good reasons not to raise.
       
- Read more to get an in depth explanation of why the Fed should not raise (and likely won't). A political raise would be a bad raise. 
       
The October 2015 Non-Farm Payrolls number came out today at +271,000. Many are hailing this as a great number. They are saying the US Fed is now sure to hike. However, that is just one piece of data.

When taken with the other recent US and world economic data, the total doesn't translate into a situation in which the US Fed should even consider tightening. Yes, I do know that auto sales have been strong; but the US economy is a lot more than just auto sales.

Some of the recent negative US economic data are below:
  • Factory Orders for August 2015 were down -1.7%.
  • The Chicago PMI for September 2015 was only 48.7.
  • The ISM Index for September 2015 was an anemic 50.2.
  • Consumer Credit for August 2015 was down from $18.9B (in July) to $16.0B.
  • Export Prices ex. Agriculture for September 2015 were down -0.6%.
  • Import Prices ex. Oil for September 2015 were down -0.3%.
  • The PPI for September 2015 was down -0.5%.
  • The Core PPI for September was down -0.3%.
  • Retail Sales ex. Autos for September 2015 were down -0.3%.
  • The CPI for September was down -0.2%.
  • Empire Manufacturing for October 2015 was -11.4.
  • The Philly Fed Index for October 2015 was -4.5.
  • Industrial Production for September 2015 was -0.2%.
  • Leading Economic Indicators for September 2015 were -0.2%.
  • Durable Goods Orders for September 2015 were -1.2%.
  • Durable Goods Orders ex. Transportation for September 2015 were -0.4%.
  • The Q3 GDP was +1.5%, which was far down from the Q2 2015 GDP Growth Rate of +3.9%. It greatly missed the expectation of +2.9%.
  • Both Consumer Confidence and Michigan Sentiment were down in October 2015 from the prior month.
  • The Core PCE Prices for September 2015 were only +0.1%.
  • Factory Orders for September 2015 were down -1.0%.
  • The ISM Index for October 2015 was an anemic 50.1.
  • Year to date Exports decreased -$66.3B (-3.8%) and Imports decreased -$51.3B (-2.4%) for a net increase in the US Trade Deficit of +$14.9B (+3.9%).
Balanced against all of the above were the October jobs number of 271,000 and a few other pieces of generally good economic data. In total the above slowing does not add up to a situation in which the Fed should want to tighten at all, even if they desire to get off of the 0% Fed Funds rates.

The chart below from the US Census Bureau of the Total Business Inventories To Sales Ratio shows a strong trend upward. This is extremely worrisome.

(click to enlarge)

Readers should remember the result the last time this ratio journeyed upward (the Great Recession).

The above ratio doesn't appear to be at a critical level yet; but it keeps inching closer; and that is a bad sign.

The charts below from the Bureau of Labor Statistics summarize the October 2015 Non-Farm Payrolls data.

(click to enlarge)

First many areas above are still showing negative jobs growth. Second all of the big gainers among the various industries are service industries. Since Retail Sales growth has been anemic of late, one is inclined to think that the growth in that area is just seasonal. Notable of late has been the poor performance of apparel retailers. Failure to spend on clothes is usually a signal that people are wary of the economy going forward.

The growth in Health Services is probably significantly due to the still growing ObamaCare enrollment. However, I have been reading about the increasing dissatisfaction with how much this cost for the benefit it gives. Plus the ObamaCare Silver Plan premium is set to rise 7.5% in 2016 for the 37 states using the Federal Exchange. An increasing number of participants may become disenchanted. The growth in this area is expected to fall dramatically, if not reverse, in 2016. This should cut services growth in this area.

The other big gainer is the Professional and Business Services category. I didn't delve into this deeply enough to attempt a truly valid explanation. However, readers should remember that this category is very dependent on the economy. The Fed has said they expect US economic growth to be anemic in 2016. If that is the case, there doesn't seem likely to be continued great growth in this area going forward. Remember that a lot of pundits are now predicting a good chance of a US recession in the next 1-2 years. Some famous ones include Mohamed El-Erian and Jim Paulsen. These guys are not known to claim "the sky is falling". Their worries are real worries; and their concerns probably mean anemic growth at best for the US in 2016.

Much is also being made of the move down to 5.0% unemployment. However, this disguises the fact that the Labor Participation Rate was only 62.4%. The chart below shows the Labor Participation Rate in recent years.

(click to enlarge)

In 2008 before the crash, it was typically over 66.0%. If you factor this into your calculations, the unemployment rate becomes roughly 5.8% higher (or 10.8%). This doesn't sound like the US has returned to full employment. If the US Fed wants to try to fool people into believing that 5.0% is the real unemployment rate, they are being deceitful; and I don't think that benefits the US people. The U6 unemployment number for October 2015 was 9.8%. That more closely agrees with the 10.8% figure above; but it too probably underestimates unemployment in the US. The US has not come close to returning to pre-recession employment levels.

Readers will also want to note the net increase in the US Trade Deficit of $14.9B (+3.9%) year to date. Exports have decreased far more than Imports. That means Americans have been losing the jobs that had been producing those Export Goods. A good part of the reason for the decrease in Exports year to date of $66.3B has been the strength of the US dollar. As an example the euro has fallen from 1.2544 USDs late in 2014 to 1.0741 USDs as of this writing November 6, 2015 (-14.37%). US goods are more expensive now; and Europeans are consequently less eager to buy them. A good part of the reason for euro plunge versus the USD has been the ECB's QE program, which amounts to negative interest rates of -3%+ for the euro. If the US raises its interest rate that will further exacerbate the situation (cause the USD to appreciate further against the euro). It will cause more US job losses.

One can perhaps make an argument that the US should allow the EU economy to recover by allowing them for a short time to practice Mercantilism against the US (after all we did it to them not long ago). However, one cannot make a good argument that the US should increase the negative effects of that Mercantilism by raising its own interest rates. One is reminded of the old adage about being so eager to get your gun out of your holster that you shoot yourself in the foot. According to any reasonable kind of economic theory, the US should be waiting until after its big trade partners have stopped their easing activities before considering raising its interest rates.

The counter argument to that is that you have to worry about inflation. However, the statistics cited above show that there is no inflation yet. In fact there may be deflation. There may be credit contraction. There may be economic slowing. This is not the environment in which a good economist would want to raise rates. I hope the Fed does not. Yet when I see comments that indicate that the Fed may be trying to use raising rates to achieve its inflation targets, I get very worried about STAGFLATION. Yes, inflation will occur if you raise rates, but normally raising rates will also slow the economy. It is not currently growing fast enough that the Fed should want to slow it. If the Obama Administration is pressuring the Fed to raise rates, they are doing all Americans a disservice. So far there is no indication of inflation in the US. Plus major trade partners such as Japan, China, and the EU have all been easing tremendously. That is more likely to lead to deflation, as their products will consequently be cheaper in the US.

Of course, there is the theory that the Fed is keeping the "raise option" alive in order to prevent a US stock market (and other) bubble by continually scaring market participants. I hope this is it. I hope they are not egotistical enough to raise rates in this environment. The Fed has to pay attention to the rest of the world's economies. Former Fed presidents have not done that to the detriment of the US economy and US jobs. Paul Volcker's extremely high rate policy and strong USD policy led to a huge exodus of US jobs. This might have happened at a slower rate in any case; but his policies definitely sped things up. The US does not need any more of that short sighted egotism. The US does not need to unfairly lose more jobs to its trade partners as they practice mercantilism against the US.

If the above were not reason enough, a lot of smaller countries use the USD as a secondary currency. If the US makes the USD rise against other currencies by increasing the interest rates, that will automatically decrease those countries' GDPs, which are calculated in USDs. It will cause all of their imports to be more expensive. It will cause their exports to be less expensive.

This will hurt the economies of virtually all of those countries. It will mean they will buy fewer US products; and they will try to sell more of their products to the US more cheaply. Both of these actions will cause the US economy to slow a bit more. In other words, by hurting these other countries' economies, the US will end up hurting its own economy. That sounds moronic.

Doesn't it? It is; and the Fed should consider that diligently before they take any rate raising actions.

NOTE: Some of the above fundamental fiscal data (especially the list of economic data at the top of the page) is from Yahoo Finance.

Good Luck Trading/Investing.


Has the World Lost Faith in Capitalism?

A new survey suggests that restoring confidence in free enterprise will mean ensuring that the same rules apply to everyone

By Tim Montgomerie

A look at contemporary views of capitalism
A look at contemporary views of capitalism Photo: Thomas Fuchs


If you want to find people who still believe in “the American dream”—the magnetic idea that anyone can build a better life for themselves and their families, regardless of circumstance—you might be best advised to travel to Mumbai. Half of the Indians in a recent poll agreed that “the next generation will probably be richer, safer and healthier than the last.”

The Indians are the most sanguine of the more than 1,000 adults in each of seven nations surveyed in early September by the market-research firm YouGov for the London-based Legatum Institute (with which I am affiliated). The percentage of optimists drops to 42 in Thailand, 39 in Indonesia, 29 in Brazil, 19 in the U.K. and 15 in Germany. But it isn’t old-world Britain or Germany that is gloomiest about the future. It is new-world America, where only 14% of those surveyed think that life will be better for their children, and 52% disagree.

The trajectory of the world doesn’t justify this pessimism. People are living longer on every continent. They’re doing less arduous, backbreaking work. Natural disasters are killing fewer people. Fewer crops are failing. Some 100,000 people are being lifted out of poverty every day, according to World Bank data.

Life is also getting better in the U.S., on multiple measures, but the survey found that 55% of Americans think the “rich get richer” and the “poor get poorer” under capitalism. Sixty-five percent agree that most big businesses have “dodged taxes, damaged the environment or bought special favors from politicians,” and 58% want restrictions on the import of manufactured goods.

These findings don’t mean that Americans are necessarily ready to give up on free enterprise. To paraphrase Winston Churchill, they think that capitalism is absolutely the worst economic system—except for all of the others that have been tried from time to time. Forty-nine percent still agree that free enterprise is the best system for lifting people out of poverty; only 18% disagree. And by 61% to 12%, Americans agree that unemployment is a bigger social problem than the existence of a “superrich” elite.

Friends of capitalism cannot be complacent, however. The findings of the survey underline the extent to which people think that wealth creation is a dirty business. When big majorities in so many major nations think that big corporations behave unethically and even illegally, it is a system that is always vulnerable to attack from populist politicians.

John Mackey, founder and co-CEO of Whole Foods Markets, has written ‘Conscious Capitalism,’ with Bentley University marketing professor Raj Sisodia.

John Mackey, founder and co-CEO of Whole Foods Markets, has written ‘Conscious Capitalism,’ with Bentley University marketing professor Raj Sisodia. Photo: Jay Janner/TNS/ZUMA PRESS
 
John Mackey, the CEO of Whole Foods, WFM 3.32 % has long worried about the sustainability of the free enterprise system if large numbers of voters come to think of businesses as “basically a bunch of psychopaths running around trying to line their own pockets.” If the public doesn’t think business is fundamentally good, he has argued, then business is inviting destructive regulation. If, by contrast, business shows responsibility to all its stakeholders—customers, employees, investors, suppliers and the wider community—“the impulse to regulate and control would be lessened.”
 
Mr. Mackey wants businesses to focus on maximizing purpose as much as profit. He highlights how, for Southwest Airlines, LUV 0.39 % the mission is to give more Americans the ability to see the world. That aim is communicated from the top to the bottom of the company. Google’s mission is to organize the world’s information so that it is universally accessible. For his Whole Foods chain, it is about helping people lead longer, healthier lives through better food choices.
 
Of course, many big businesses see close connections with government as part of their purpose and as a blessing rather than a curse. In his recent book, “The Great Divide,” the economist Joseph Stiglitz identifies those capitalists who have found innovative ways of persuading the government to protect their market status. He calls this phenomenon “socialism for the rich.”
 
Michael Gove, a minister in Britain’s Tory government who represents a different brand of politics from Prof. Stiglitz’s, has reached similar conclusions. He makes a distinction between the “deserving rich” who work hard and creatively, adding value to society, and an “undeserving rich” who feast on government interventions, rig rules and sit on each other’s remuneration committees.
 
Banks are uppermost in the minds of most people when we think of crony capitalism. We remember how some banks quickly punished small-business people or private households when they fell into financial distress. But when those same banks and financial institutions got into trouble seven years ago, they were bailed out by the taxpayer, and a different set of rules seemed to apply.
 
For today’s pessimism about capitalism to be overturned, people must think that the same rules apply to everyone. For capitalism to enjoy the public’s confidence, we need a system where the rich can get poorer as well as the poor richer. There must be snakes as well as ladders in the boardroom board game.
 
Which capitalists are still popular? Another global survey conducted by YouGov seeks to identify the world’s most popular person each year. The winner for the past two years hasn’t been a celebrity or sports star. It hasn’t been Barack Obama or even the pope. It has been Bill Gates, the founder of Microsoft MSFT 0.99 % and a transformational philanthropist.
 
Those who are determined to restore faith in capitalism won’t just champion figures like Bill Gates and John Mackey. They will be tough on the crony capitalists who cheat emissions regulators or fix financial markets. When capitalism is seen to be both fair and effective, it can be popular again.
 
 
Mr. Montgomerie is a columnist for the Times of London and a senior fellow of the Legatum Institute, whose new report can be read at Prosperity-for-All.com.  
 


What To Do About Debt

Richard Kozul-Wright
. Stack of coins.

 

GENEVA Over the last few months, a great deal of attention has been devoted to financial-market volatility. But as frightening as the ups and downs of stock prices can be, they are mere froth on the waves compared to the real threat to the global economy: the enormous tsunami of debt bearing down on households, businesses, banks, and governments. If the US Federal Reserve follows through on raising interest rates at the end of this year, as has been suggested, the global economy – and especially emerging markets – could be in serious trouble.
 
Global debt has grown some $57 trillion since the collapse of Lehman Brothers in 2008, reaching a back-breaking $199 trillion in 2014, more than 2.5 times global GDP, according to the McKinsey Global Institute. Servicing these debts will most likely become increasingly difficult over the coming years, especially if growth continues to stagnate, interest rates begin to rise, export opportunities remain subdued, and the collapse in commodity prices persists.
 
Much of the concern about debt has been focused on the potential for defaults in the eurozone.

But heavily indebted companies in emerging markets may be an even greater danger.

Corporate debt in the developing world is estimated to have reached more than $18 trillion dollars, with as much as $2 trillion of it in foreign currencies. The risk is that – as in Latin America in the 1980s and Asia in the 1990s – private-sector defaults will infect public-sector balance sheets.
 
That possibility is, if anything, greater today than it has been in the past. Increasingly open financial markets allow foreign banks and asset managers to dump debts rapidly, often for reasons that have little to do with economic fundamentals. When accompanied by currency depreciation, the results can be brutal – as Ukraine is learning the hard way. In such cases, private losses inevitably become a costly public concern, with market jitters rapidly spreading across borders as governments bail out creditors in order to prevent economic collapse.
 
It is important to note that indebted governments are both more and less vulnerable than private debtors. Sovereign borrowers cannot seek the protection of bankruptcy laws to delay and restructure payments; at the same time, their creditors cannot seize non-commercial public assets in compensation for unpaid debts. When a government is unable to pay, the only solution is direct negotiations. But the existing system of debt restructuring is inefficient, fragmented, and unfair.
 
Sovereign borrowers’ inability to service their debt tends to be addressed too late and ineffectively.
 
Governments are reluctant to acknowledge solvency problems for fear of triggering capital outflows, financial panics, and economic crises. Meanwhile, private creditors, anxious to avoid a haircut, will often postpone resolution in the hope that the situation will turn around. When the problem is finally acknowledged, it is usually already an emergency, and rescue efforts all too often focus on propping up irresponsible lenders rather than on facilitating economic recovery.
 
To make matters worse, when a compromise is reached, the burden falls disproportionately on the debtor, in the form of enforced austerity and structural reforms that make the residual debt even less sustainable. Furthermore, the recent strengthening of creditor rights and the growth of bond financing has made sovereign-debt restructuring enormously complex and open to abuse by highly speculative holdout investors, including so-called vulture funds.
 
As consensus grows regarding the need for better ways to restructure debt, three options have emerged. The first would strengthen bond markets’ legal underpinnings, by introducing strong collective-action clauses in contracts and clarifying the pari passu (equal treatment) provision, as well as promoting the use of GDP-indexed or contingent-convertible bonds. This approach would be voluntary and consensual, but it would miss large parts of the debt market and do little to support economic recovery or a return to sustainable growth.
 
A second approach would focus on building a consensus around soft-law principles to guide restructuring efforts. The core principles – those under discussion include sovereignty, legitimacy, impartiality, transparency, good faith, and sustainability principles – currently would apply to all debt instruments and could provide greater coordination than market-based approaches. But, although this effort has the advantage of familiarity, it would be non-binding, with no guarantee that a critical mass of parties would adhere to it.
 
The third option would attempt to resolve this coordination problem through a set of rules and norms agreed in advance as part of an international debt-workout mechanism that would be similar to bankruptcy laws at the national level. Its purpose would be to prevent financial meltdowns in countries facing difficulties servicing their external debt and to guide their economies back toward sustainable growth.
 
The mechanism would include provisions allowing for a temporary standstill on all payments due, whether private or public; an automatic stay on creditor litigation; temporary exchange-rate and capital controls; the provision of debtor-in-possession and interim financing for vital current-account transactions; and, eventually, debt restructuring and relief.
 
Evidence from Ghana, Greece, Puerto Rico, Ukraine, and many other countries shows the economic and social damage that unsustainable debts can cause when they are improperly managed. In September, the United Nations General Assembly adopted a set of principles to guide sovereign-debt restructuring. This is an important step forward, but much remains to be done to prevent much from coming undone as the global economy confronts the looming wall of debt.
 


Op-Ed Contributor

When Gold Isn’t Worth the Price

By MICHAEL J. KOWALSKI




 

THERE are few places in the world more beautiful than the landscape of salmon-rich rivers that flow into Bristol Bay, Alaska. I arrived there seven years ago not as a sportsman or ecotourist, as most visitors do, but as a chief executive fearful that the company I led would be seen as complicit in the destruction of this remarkable place.

My colleagues and I traveled to Bristol Bay in 2008 to encounter firsthand the land and people put in harm’s way by the proposed Pebble Mine. This vast open-pit gold and copper mine and its toxic waste would obliterate miles of pristine streams and thousands of wilderness acres that sustainthe world’s largest sockeye salmon fishery, which supports thousands of jobs. All in pursuit of the gold from which Tiffany & Company made jewelry.

The conclusion we reached was inescapable: No amount of corporate profit or share price value could justify our participation, however indirectly, in the degradation of such indescribable beauty. Beyond pledging not to use gold produced by the Pebble Mine, we became vocal opponents of mine development there.

Even now, however, the future of Bristol Bay remains uncertain. For the time being, global mining giants have abandoned the Pebble project, and local opposition to the mine is strong and growing. The Environmental Protection Agency has invoked its powers under the Clean Water Act to review the project’s potential impact, but mine proponents are challenging the agency’s actions in court.

The threat to Bristol Bay exemplifies a far larger issue: the enormous human and environmental cost of irresponsible mining. I am saddened to realize how little progress the jewelry industry has made in ensuring that the precious metals and gemstones on which it relies are extracted and processed in ways that are socially and environmentally responsible.

The industry has a better record on conflict diamonds, and we can take comfort that some of the worst abuses are behind us. But the extraction of diamonds is still associated with human rights violations and economic exploitation.

But diamonds are not the only problem. Few meaningful standards exist for the responsible mining of other types of gemstones. Precious-metal mining too often leaves a legacy of poisoned lands and waters. New mine development threatens to destroy valuable cultural resources and some of the world’s most extraordinary landscapes.

A few global brands (including Tiffany & Company) have developed policies of responsible sourcing, charting a more sustainable course. But the whole jewelry industry must come together if it is to win acceptance from its customers for its global social and environmental footprint.

Having led a company that for the past 20 years has been an ardent advocate for higher standards of conduct, I am convinced that the only way forward for the jewelry business in particular, and for extractive industries in general, is through third-party certification mechanisms that establish rigorous standards for the mining of precious metals and gemstones.

This needs to be a system that involves all stakeholders, including community organizations, and not just industry representatives in its conception and governance. It must set standards that go far beyond today’s lowest-common-denominator regulations. Good intentions are not enough; these standards must be transparent, auditable and mine-specific, with on-the-ground performance metrics.

The certification system of the Forest Stewardship Council, which counts hundreds of environmental groups, industry representatives and labor organizations among its members and has promotedsustainable forestry management for more than 20 years, offers a credible model. The standards must enforce respect for human rights and require the informed consent of host communities before mine development. They should also prevent the location of mines in protected areas, or areas of ecological or cultural value.

These standards would prohibit the pollution of land, water or air and the release of toxic materials — specifically, the dumping of mine tailings in rivers, lakes or oceans. And they would require, in advance, full financial provision to cover the costs of mine closure and reclamation.

Jewelry and watch retailers, as well as brand owners, must cooperate to make the mining sector that supplies the materials on which they depend more transparent and responsible. Consumer sentiment is changing on these issues, and the point of sale is where our industry feels most sharply the new public awareness. For their own self-interest and for their customers, retailers and brand owners must insist that the entire supply chain of mining companies, manufacturers and traders recognize the market demand for a more sustainable, responsible industry.

Since my retirement as chief executive, I have been back to Bristol Bay to fish in its waters, observe its magnificent wildlife and marvel at its grandeur. But the scale and majesty of the Alaskan wilderness also remind me that few industries in the world have a larger environmental and social footprint than mining.

We’ve heard the message from customers. Now brand owners and jewelry retailers must come together to establish a certification system that will assure responsible behavior.


Michael J. Kowalski, the chief executive of Tiffany & Company from 1999 to 2015, is the chairman of its board.


Planning for El Niño

Disaster foretold

The world’s biggest climatic weather phenomenon is easier to predict than many calamities. But it shows the importance of preparing for other disasters, too

NORTH WOLLO
.   


JUMPING a fence of prickly pears, Gumat Hussain, a local chief in the driest district of North Wollo, Ethiopia’s most drought-prone province, walks gloomily through his sorghum. “The crops have not produced grain. They are useless even for the animals,” he sighs. El Niño, the world’s largest climatic weather phenomenon, is keeping the rains away across swathes of Africa this year. Ethiopian officials say that the harvest is failing as completely as in a series of droughts that together killed more than 1m of the country’s people between 1965 and 1985, and made Ethiopia a byword for hopeless famine.

More than 8m Ethiopians are now going hungry. But a decade-old food-security programme is keeping the poorest from starvation—and showing how preparation for extreme weather events can mitigate the worst effects. In Africa’s largest social-protection scheme, 6m Ethiopians spend five days each month for the lean half of the year on public works such as digging water-holes for animals and building terraces for crops. In return they get 13kg of cereal and 4kg of pulses a month, or the cash equivalent. Another million who are unable to work get the handout, too.

El Niño was named after the Christ-child by Peruvian fishermen who noticed that the global weather pattern, which happens every two to seven years, cut their hauls around Christmas. El Niño sees warm water, collected over several years in the western tropical Pacific, slosh back eastwards when winds that normally blow westwards weaken, or sometimes reverse. America’s National Oceanic and Atmospheric Administration says this year’s Niño could be the strongest since records began in 1950.

The weather effects, both good and bad, are felt in many places (see map). Rich countries gain more from mighty Niños, on balance, than they lose. Their largely temperate climes mean that extra deaths during heatwaves are more than offset by fewer during cold snaps. A study from the IMF and Cambridge University found that a strong Niño in 1997-98 boosted America’s economy by $15 billion, partly because of higher agricultural yields: farmers in the Midwest gained from extra rain.

The total rise in agricultural incomes in rich countries is greater than the fall in poor ones, says Solomon Hsiang of the University of California, Berkeley. One knock-on effect of El Niño—fewer Atlantic hurricanes—particularly benefits America. (Storm activity in the Pacific, by contrast, increases.)
.

But in Indonesia tinder-dry forests are in flames (see next article). A multi-year drought in south-east Brazil is intensifying. Though parched California may gain relief if El Niño sweeps away a “blocking” ridge of high pressure that has diverted winter storms for the past four years, heavy rains on bone-dry land are likely to cause surface flooding and mudslides. In any case, what the Golden State most needs is snow in the Sierras to replenish its water supplies—unlikely in the heat of a Niño year.

The most recent mighty Niño, in 1997-98, killed around 21,000 people and caused damage to infrastructure worth $36 billion around the globe. But such Niños come with months of warning, and so much is known about how they play out that governments can prepare—if they are sufficiently farsighted. According to the Overseas Development Institute (ODI), a British think-tank, and the Global Facility for Disaster Reduction and Recovery, however, just 12% of disaster-relief funding in the past two decades has gone on reducing risks in advance, rather than recovery and reconstruction afterwards. That is despite evidence that a dollar spent on risk-reduction saves at least two on mopping up.

Simple improvements to infrastructure, such as those carried out by Ethiopia’s public-works programme, can reduce the spread of disease. Better sewers make it less likely that heavy rain is followed by an outbreak of diarrhoea. Stronger bridges mean villages are less likely to be left without food and medicine after floods. According to a paper in 2011 by Mr Hsiang and co-authors, civil conflict is correlated with El Niño’s malign effects—and the poorer the country, the stronger the link.

Though the relationship may not be causal, helping divided communities to prepare for disasters would at least lessen the risk that those disasters are followed by bloodshed.

Stitches in time
 
Mexico has already reaped the benefits of astute planning. Hurricane Patricia, which hit its coast last month, was the strongest Pacific hurricane to reach land on record, probably because El Niño added to its oomph. It caused far less harm than expected. That was partly because it moved too fast to whip up a big storm surge at sea, and also because it passed only through rural areas of south-western Mexico. But it was also thanks to government readiness. More than 3,000 homes were damaged in the state of Jalisco, but no one was killed because residents had been moved to shelters built for just such an emergency. Almost a quarter of Mexico’s territory is vulnerable to tropical cyclones and the country suffers from around 500 floods a year. Consequently, at least 0.4% of the federal budget is used for disaster preparation—a decent chunk in a country where government spending is low.

Disaster insurance can be too costly for poor governments and individuals: uncertain demand, weak regulation and local corruption all put insurers off, too. But by making the cost of risks explicit, insurance can encourage their mitigation. Collective schemes, such as the Caribbean Catastrophe Risk Insurance Facility, can make insurance more affordable, and disseminate information that helps governments, citizens and those running ports and airports to prepare. Since the poorest are least likely to recoup their losses from disasters linked to El Niño, minimising their losses needs to be the priority.


The Fed Says Negative Interest Rates are “On the Table”

Justin Spittler


The Federal Reserve is considering its most reckless policy ever…

At a Congressional hearing earlier this week, Fed chair Janet Yellen said negative interest rates are “on the table...if the economic outlook were to deteriorate in a significant way.”

It would be the first time in history the Fed has used negative rates.

The idea of negative interest rates sounds bizarre to most people. And it should. The whole point of lending money is to earn interest…

With negative interest rates, the lender pays the borrower. If you lend $100,000 at negative 1%, you only get $99,000 back.

• Negative rates are a telltale sign of an unhealthy economy…

Interest rates are the price of borrowing money. The past seven years of near-zero interest rates have already made borrowing absurdly cheap. They’ve also made it painfully clear that people borrow a lot when borrowing costs next to nothing...

Over the last seven years, Americans have borrowed trillions of dollars to buy stocks, cars, houses, commercial property, and college degrees. When borrowing money is laughably cheap, no business idea is too dumb to fund...no $120,000 car goes unsold to someone who can’t afford it…and no overpriced house sits on the market for more than a month.

Few people ask, “Does it make sense to borrow this much money?”

Instead they think, “How much can I get?”

• Yet zero percent rates have done little for the U.S. economy…

The real median annual income in the United States has fallen from $57,795 in 2008 to $55,218 today. There are now twice as many Americans on food stamps than before the financial crisis.

Instead of helping the economy, easy money policies have created an “Alice in Wonderland” world… where financial asset prices are detached from economic reality.

The S&P 500 has gained 211% since bottoming in March 2009. U.S. commercial property prices hit an all-time high in August. The global art market hit a record high of $54 billion last year.

• Negative rates would send us further into Wonderland…

That’s exactly what the Fed wants. When asked why the Fed would use negative interest rates, Yellen said it was to “spur lending.”

Yellen continued:

It would be undertaken as a measure to support the economy and to encourage additional lending…and to move down the yields on interest-bearing assets to stimulate risk taking and investment spending.

In other words, negative interest rates would be a more extreme dose of the same bad policies the Fed has been using for years.

• Stan Druckenmiller says zero percent rates have already done enough damage...

Druckenmiller is one of the world’s most successful hedge fund managers. He generated an incredible average annual return of 30% from 1986 to 2010.

Druckenmiller was also George Soros’ right-hand man at Quantum, Soros’ famed hedge fund.

Quantum’s now-legendary 1992 trade shorting the British pound was Druckenmiller’s idea. It made Quantum about $1 billion. People say the trade “broke the Bank of England.”

At an investment conference this week, Druckenmiller said the Fed is mortgaging America’s future with its easy money policies.

This is not some permanent boost you get. You're borrowing from the future. I think there's been such a misallocation of resources that this has gone on so long and unnecessarily (and) the chickens will come home to roost.

• Druckenmiller says rock-bottom rates have pushed investors “out the risk curve”…

Easy money has made it almost impossible to earn safe, decent returns. Savings accounts pay next to nothing. The yield on a 10-year Treasury is just 2.3%...less than half what it was eight years ago.

This has forced investors into stocks, junk bonds, commercial real estate, and other risky assets. Negative rates would only encourage more risky decisions.

Druckenmiller says he doesn’t know exactly how the Fed’s dangerous monetary experiment will end. Like us, he just knows it won’t end well.

This is unnecessary. You’re causing irrational behavior by governments, investors, corporations. And we’re going to pay the piper at some point.

Druckenmiller continued to explain that he’s investing very cautiously:

I'm working under the assumption that we may have started a primary bear market in July...

I can see myself getting really bearish. I can't see myself getting really bullish.

As you may recall, Druckenmiller made a $300 million bet on gold over the summer. He put 20% of his fund’s money into the bet.

• Druckenmiller’s massive bet on gold shouldn’t surprise longtime readers...

Casey readers know gold has protected wealth through every kind of financial crisis imaginable. It will protect wealth during the next crisis, too. Owning physical gold is the single most important thing you can do to protect you and your family from a financial crash.

Casey Research recently published a “crisis survival guide” that explains everything you need to know about owning gold.


Barron's Cover

Retirement: How to Live Well

Few people want to leave their home as they grow older. Smart planning about health care can make all the difference.

By Reshma Kapadia  
 

Illustration: Scott Pollack for Barron's
 
It may be the most dreaded family talk after the one about the birds and the bees. It certainly gets scant mention in the retirement ads featuring a happy couple strolling along a beach. But long-term care is the elephant in the room that can upend an otherwise meticulously crafted retirement plan.

No one wants to broach the topic of what life may be like when you or a loved one can’t live independently.

But the reality is that about 70% of people over the age of 65 will need some sort of long-term care, ranging from assistance with dressing and bathing to medication management and skilled medical help. Yet aging experts say that eldercare decisions are typically made in the midst of a crisis, often by a family member.
 
“This is the single-most important issue to discuss with your family when planning retirement.
Not having the talk could derail all the previous financial planning,” says Cyndi Hutchins, Bank of America Merrill Lynch’s director of financial gerontology. “It also allows people to maintain control in their life when they may not be able to, physically or mentally.”

THERE’S A WHOLE INDUSTRY built around protecting investors against worst-case unknown events, or tail risk. In retirement, that risk isn’t unknown—it is, for virtually everyone, longevity, and what it can cost. Of the nation’s top earners, the best- and worst-case long-term care scenarios (in terms of costs) creates a 40 percentage-point difference between the likelihood of not running out of money—from a 99% chance of having enough to only 59%, according to the Employee Benefit Research Institute, a nonprofit research firm.
        
cat
And especially with long-term care, “low cost” is relative. According to insurer Genworth’s latest cost-of-care survey, the median annual cost of a private room in a nursing home is $91,250. The median cost of a one-bedroom in an assisted-living facility is $43,200 for a year, or $3,600 a month, but upscale facilities charge more than triple that.

Planning ahead allows retirees to better evaluate costs, which differ considerably across the country. The median price for a one-bedroom apartment in an assisted living facility ranges from as little as $33,000 a year in Missouri, to $94,000 in Washington, D.C., according to Genworth. Advanced planning also gets them a spot on the waiting lists at more popular facilities—increasingly important as more baby boomers enter their 70s and 80s.

Long-term care insurance will cover some of these, and other, costs but before you buy a policy, you need to know what the various options of care entail because planning for long-term care goes beyond just how to pay for it. “It’s a decision with big ramifications on your quality of life, as well as your longevity,” says Rodney Harrell, director of Livable Communities at the AARP Public Policy Institute.

In the past, the continuum of care was short. Most people went into a hospital and ended up in a nursing home. Today, the nursing-home industry is in flux, with the number of occupied beds steadily falling. Many who can afford other options simply use nursing homes for short-term rehab after a hospital stay.

Many seniors are staying at home longer, helped by technology, such as telehealth, which lets doctors and loved ones monitor them remotely, and services like Uber that let them get around after they stop driving. When they do move out of their homes, there are myriad options—many that feel like five-star hotels with gourmet restaurants, concierge services, and a long list of daily activities, rather than institutionalized convalescence homes.

With the increase in options comes complexity. Perhaps just as difficult as starting the talk is evaluating the choices, each with an array of pricing models and fine print—all in a lightly regulated industry that varies from state to state. To make it even harder, the industry itself is in flux, with business models and services still evolving.
.
cat
While financial advisors are often the go-to for all things retirement, navigating the ins and outs of long-term care frequently falls beyond their realm of expertise. A recent survey by Lincoln Financial showed that only 40% of respondents had discussed long-term care planning with their financial advisors, and just 10% of advisors are using a long-term care solution, such as insurance, for the majority of their clients. Many advisors refer clients to elder-law attorneys to help with the due diligence on contracts, and turn to geriatric-care managers, who charge $90 to $225 an hour, to consult with doctors to assess a retiree’s needs, coordinate care, and help families make long-term care decisions.

The intricacy begs for the type of early planning that is the norm for other aspects of retirement. Here’s what you need to know:
Aging in Place
Some 90% of those 65 and over want to stay in their homes as long as possible; this is known as aging in place. Analysis begins with whether it is truly feasible. Stairs spell trouble later in life, especially if they’re necessary to reach the bedroom, bathroom, or laundry. Houses can be retrofitted to accommodate a wheelchair, while harsh winters, proximity to board-certified hospitals, or access to public transportation can’t be changed. “Most people will have temporary periods of incapacitation from an illness or injury. Why not choose housing appropriate for those periods?” says Catherine Anne Seal, an elder-law attorney in Colorado Springs, Colo. “If you want to live independently, think not just about whether it is the right house, but also the right place.” Moving to a new area that’s warmer, nearer to family, or otherwise more suitable is easier when you’re younger and better able to acclimate and enjoy your new community.

Not only is it more comfortable, but aging in one’s home and using community-based services for long-term care can also cost a third of what’s charged in an institutional setting. There’s a movement toward trying to make this work for more people, according to AARP’s Harrell. For example, there are villages started by grass-roots movements in areas such as Beacon Hill in Boston and Chevy Chase, Md. Some charge an annual membership fee that covers activities such as walking groups and lecture series, escorts from doctors’ offices, access to volunteers who can run simple errands or come by to chat, and a network of discounted service providers to help seniors stay at home. While these environments seem promising, they’re new enough that they haven’t yet been tested. “We haven’t seen a lot of heavy-duty service intervention needed in the villages yet. The jury is still out on how that membership business model will work when the residents get more disabled,” says Robyn Stone, senior vice president of research for LeadingAge, an association of nonprofit aging-services providers.

THE KEY TO AGING AT HOME is getting help there—skilled medical care, as well as companionship, and someone to do light housework and run errands. There is less variability in pricing than in other types of long-term care options, with the average cost of $20 an hour.

However, quality is erratic because it’s not regulated, says Bob Bua, head of Genworth’s CareScout service, which focuses on long-term assistance.

Given the lack of oversight, eldercare experts recommend using an agency to hire a certified health-care aide. Agencies provide background checks and backup care, and handle the logistics around workers’ compensation insurance and taxes.

Technology is also helping people stay put longer—a trend likely to accelerate as today’s tech-savvy baby boomers move through retirement. Already, technology can remotely monitor blood pressure and blood-sugar levels, or even when someone is out of bed. Skype-like services can help doctors monitor patients with chronic conditions like congestive heart failure without visiting them. Transportation is often a concern for seniors, but services such as Uber allow them to get around easily.

Home health care can be cheaper than a nursing home, but there’s less financial assistance: Medicare covers only some skilled in-home medical care, and long-term care insurance typically only covers unskilled care once a retiree can’t dress, bathe, or accomplish other such tasks themselves. Costs can also rise quickly once someone needs 24-hour care. For those who prefer a live-out, rather than live-in, aide, this means someone for the day shift and night shift.

Two aides at a time are often required for people who need assistance getting in and out of bed.

Around-the-clock care can quickly mount to $400 or more a day. “Once you go beyond needing six hours of care, you are getting to the point that assisted living may be less expensive,” says Catherine Collinson, president of Transamerica Center for Retirement Studies.

There are ways to offset the costs, using family caregivers—who often provide a large majority of care—and using unfortunately named adult day-care centers. These facilities are a relatively new addition to the continuum of care and use models similar to those of day care for children, allowing seniors to use them for a half or whole day and providing a social outlet for seniors who otherwise would be isolated. It also is a way to give caregivers a reprieve, and can be useful in cobbling together care.

The national daily median average for centers that offer structured activities and some medical services is $69, or almost $18,000a year if you go five days a week, according to Genworth. The median cost is as low as $9,100 in Texas and as high as $32,000 in Alaska, in part because some facilities rely on government subsidies or donations. “If a facility serves someone for many hours, the daily rates start to look quite reasonable,” says Genworth’s Bua.
Assisted Living
A variety of facilities fall under the broad moniker of assisted living, with more-upscale ones focusing on hospitality. Some offer a host of activities, such as cultural outings and art classes, as well as amenities such as concierge services, fitness centers with on-staff trainers, and multiple restaurants.
 
The time to switch from aging in place to assisted living may be when assistance is needed for daily tasks like bathing and dressing, but not around-the-clock skilled medical care. Personality plays a big role in finding the right facility—a center with scheduled group dining may be a poor fit for a fiercely independent person who values time to be alone. “You want to make sure it’s the right place. Older adults don’t want to move again, and doing so can be detrimental to their health,” observes Sandy Adams, a financial advisor at the Detroit-area Center for Financial Planning, who has taken gerontology classes to better serve aging clients.

Unlike nursing homes, assisted-living facilities aren’t regulated uniformly. As a result, they vary a good deal, based on the states in which they are licensed. Eldercare experts recommend unplanned visits, and spending several hours or even overnight to get a true sense of the community and staff.

WHAT ASSISTED LIVING doesn’t offer is nursing care. Some facilities don’t even have a nurse on duty.

Look for a facility that has some sort of medical care, and ask how long it takes to get medical assistance if something goes wrong. Staff-to-resident ratios are another factor, and arguably more important than amenities. Also ask: Under what circumstances will the facility push someone out for needing too much care?

In the past, people with cognitive impairment were sent to nursing homes because they needed constant oversight, even though they didn’t require skilled medical care. With about half of those over 85 developing dementia, more assisted-living facilities are offering a hybrid, with memory-care wings that aren’t as restrictive, but that offer more services than a nursing home.

The fees are complex: Some charge monthly for a set of services; others use a tiered approach, pushing residents into the next tier as they require more services. Some just charge for room and board, and medical care is pay as you go.

Read the fine print: Better yet, hire a lawyer to do it. Many centers try to pressure residents into agreeing to not make big financial gifts to their family once they have entered the facility. Sometimes, elder-law attorneys say they find provisions in the fine print that don’t make much sense and can be negotiated or struck, such as clauses that require payment for daily care, even after the resident no longer lives there.
One-Stop Senior Living
Continuing-care retirement communities, or CCRCs, offer the entire continuum of care—from independent living in an apartment to assisted living to skilled nursing care—all at one location. The highest-end facilities have beautifully manicured, expansive campuses, with perks such as acting classes and volunteering opportunities. Some have wellness programs that include medical clinics, gerontologists, or social workers who can help residents get into better shape than they were when they arrived.

These facilities often appeal to couples who might not need the same level of care at the same time, or for seniors looking for more social interaction. Most will not take anyone with a chronic illness, however, says Linda Fodrini-Johnson, a geriatric-care manager and founder of Eldercare Services near San Francisco.

About 40% of the contracts LeadingAge has seen are “life care” agreements that require a sizable one-time fee—at least $100,000, but sometimes up to seven figures. Atop that, monthly fees cover accommodations and services, assisted living, and nursing care. Long-term care insurance usually won’t cover the entrance fee, and typically only covers part of the monthly fee once a certain level of assistance is needed.

These models have raised red flags for the U.S. Government Accountability Office. A GAO report warned that as older Americans stay in their homes longer, people may spend less time in independent-living units at CCRCs, potentially hurting their long-term finances, because residents in the independent-living part of the facility help subsidize those in assisted living or nursing care.

As the industry evolves, so do the financial arrangements. Some facilities offer modified contracts that charge a lower entrance fee, but with monthly fees that cover only a limited amount of nursing or medical care before you need to pony up more. Other centers have an a la carte model, in which skilled medical care costs extra, but residents gain priority admission to the facility’s assisted-living and nursing services.

AND THEN THERE ARE contracts that can differ quite a bit year to year, even at the same center.

Beware provisions that try to make residents’ children liable for their parents’ bills. The same goes for those requiring arbitration. These terms often can be negotiated away, says Shirley Whitenack, an elder-law attorney at Schenck, Price, Smith & King, who works with financial advisors and wealthy clients. Another area that can be negotiated: refunds of the entrance fee once a resident dies or leaves.

Because these contracts are essentially for the resident’s life, they require careful financial scrutiny, as well. That’s no easy task because states, which usually oversee these centers through their insurance agencies, require different, and sometimes minimal, disclosure.

California, New York, and Texas are among the handful of states that look beyond financial statements into actuarial reports that can be more telling about a center’s long-term viability.
Debt covenants and information on how a center’s reserves are invested are a better indication of a facility’s future financial health than past financial statements. “The contracts are expected to cover a much longer period of time than a nursing home, where average stays are typically just a year,” says Alicia Puente Cackley, GAO’s director of financial markets and community investment. “And the contracts encompass not just housing, but the care you receive, the meals, and facility. The risks are not necessarily just financial, but related to the quality of care and around who decides when you move from independent living to assisted living.”

That decision is sometimes made by a board or other residents, or is based on certain conditions—ask the facility how it decides. Some centers, for example, won’t allow a health-care aide or hospice worker to come into an independent-living situation, which could negate the reason a resident chose the facility in the first place.

Ultimately, though: “The biggest pitfall,” Adams says, “is waiting too long.”


Fossil crisis deepens as Exxon probed on climate cover-up

Exxon's scientists believed CO2 would cause harmful global warming. "They knew the truth and lied at the expense of the planet," said Bernie Sanders

By Ambrose Evans-Pritchard

the Exxon Mobil refinery in Baytown, Texas in this file photo from September 15, 2008.

The accusation is that Exxon Mobil withheld information from investors on the financial risks of climate change and conspired to manipulate the public debate on greenhouse gases. Photo: Reuters
 
 
New York prosecutors have subpoenaed emails and company documents from America’s oil giant Exxon Mobil in a test case over alleged climate crimes, the most dramatic step to date in an escalating legal assault against the fossil fuel industry.


The state is investigating whether the $360bn petroleum group, the world’s biggest traded oil company, withheld information from investors on the financial risks of climate change and conspired to manipulate the public debate on greenhouse gases.
 
It has demanded documents going back forty years, when Exxon’s own scientists first warned that C02 emissions were likely to drive up temperatures and “destroy” agriculture in vulnerable parts of the world.

 New York State Attorney General Eric Schneiderman speaks at a press conference announcing new guidelines and testing standards that GNC will adhere to for their herbal supplements and extracts on March 30, 2015 in New York City New York State Attorney General Eric Schneiderman   Photo: Getty



Exxon officials said they received the subpoena on Wednesday from the New York attorney-general, Eric Schneiderman, a Left-leaning crusader with a taste for quixotic cases. “We unequivocally reject allegations that Exxon Mobil suppressed climate change research,” said the company’s spokesman Scott Silvestri.

Exxon said it had worked closely with the US energy department and the UN climate panel (IPCC) over the years, and accused hostile elements in the media of cherry-picking snippets from old documents to paint a false picture.
.
Protestors gather outside the annual ExxonMobil shareholders meeting in Dallas, Wednesday, May 28, 2014.Protesters gather outside the annual ExxonMobil shareholders meeting in Dallas   Photo: AP


The probe has been running discretely for months but has clearly shifted to a higher gear after Inside Climate News revealed in September that Exxon had developed a brain trust in the early 1980s to evaluate the dire implications of climate change for the company, only to switch tack later and lobby hard to head off curbs on C02 emissions.

Bernie Sanders, the Democratic presidential candidate, has
called on the US Justice Department to launch a federal probe into possible “corporate fraud” by the company.

“Exxon Mobil knew the truth about fossil fuels and climate change and lied to protect their business model at the expense of the planet,” he said, comparing it to efforts by tobacco companies to cover up the health risk of smoking.
 
 

Chairman and CEO of US oil and gas corporation ExxonMobil, Rex Tillerson, speaks during the 2015 Oil and Money conference in central London on October 7, 2015.Chairman and CEO of US oil and gas corporation ExxonMobil, Rex Tillerson   Photo: AFP/Getty


He invoked the nuclear option of the Racketeer Influenced and Corrupt Organisations Act (RICO) used against the Mafia. Twenty top scientists have pushed this further, demanding a full RICO probe of the fossil industry for allegedly plotting to “forestall America’s response to climate change”.

The New York state investigation is retroactive. Exxon has not been in the denial camp for several years. The company includes warnings about climate risk in its shareholder reports and regulatory filings.


Rex Tillerson, the chief executive, supports a carbon tax and has publicly endorsed action to curb emissions – although this reporter heard him accuse the Obama administration of straying from “sound science” and responding to climate "noise" this April at an IHS Cera forum in Texas.




Clearly, the trail of past actions haunts the company. The Royal Society accused Exxon Mobil as recently as 2006 of propagating an “inaccurate and misleading view of climate science”.

Green activists says the company bankrolled efforts to sow doubt about the risks of greenhouse gases through the 1990s, leading the Global Climate Coalition and working through a nexus of think tanks opposed to emission limits.


This is a grey area since there are legitimate reasons for questioning the exact relationship between CO2 levels and global temperature, and whether warming is the result of human actions or natural forces such as sun spots. Where the company may be vulnerable is if internal records show a pattern of cynical deception.


The judicial onslaught comes at time when oil, gas, and coal companies are already facing massive pressure from a worldwide divestment movement, ranging from the Norwegian pension fun to Cambridge University. They risk being left with trillions of pounds of “stranded assets” if world leaders clinch a far-reaching climate deal at the COP21 summit in Paris next month.


The International Energy Agency warns that the two-thirds of the fossil fuel reserves booked by energy companies can never be burned if the world is to cap the rise in temperatures to 2 degrees above pre-industrial levels by 2100, deemed the safe limit by climate scientists.




Mark Carney, the Governor of the Bank of England, warned in September that those damaged by climate change may try to bring claims on third-party liability insurance. He drew an explicit parallel with asbestos claims in US courts that led to $85bn in awards, describing the risk as “significant, uncertain and non-linear”.

The City is increasingly alert to the risk that fossil fuel groups will be caught out by the shifting moral and legal climate. “It is setting off alarm bells that there could be these long tail risks,” said Abyd Karmali from Bank of America.


Blackrock, the world’s biggest investment manager, has issued a new report entitled the “Price of Climate Change” warning the market has yet to discount the climate risk premium.


It advised clients to tread with care. “You may or may not believe man-made climate change is real. No matter. Climate change risk has arrived as an investment issue,” said the report.


Energy companies are forecasting levels of fossil demand that cannot happen under a COP21 climate deal


Christiana Figueres, the UN’s chief climate official, told a panel in London that 155 countries have already put forward detailed plans for the COP21 summit. These cover 88pc of global emissions, with China pledging to cap carbon use by 2030 and even India coming on board.

“It is unstoppable. No amount of lobbying at this point is going to change the direction,” she said.
She predicted a series of accords leading to negative emissions within sixty years, entailing a carbon tax that ratchets higher and prices most of the global fossil industry out of the market.

The Exxon case is some respects troubling. Judicial authorities must be careful not to vilify energy companies and encourage a witchhunt.

Defenders of the fossil fuel industry protest that oil, gas, and coal have powered the world’s industrial revolutions, lifted billions out of poverty, and made the affluent society possible.

Yet however unfair it may be, the Exxon Mobil investigation will surely not be the last.