Barclays Busted; Ford Ditches Mexico for China; UPS Gives Heads Up on Holiday Shipping

Cheerio…

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Looks like 2008 is not done haunting banks that allegedly played dirty back then. Today’s banking scandal, that includes charges of conspiracy to commit fraud, is brought to us by Barclays and four of its former executives. The trouble started in 2008 when Barclays reached out to Qatar for some substantial cash that the bank was going to use to avoid a major government bailout. Barclays was inclined to hit up Qatar investors for some big money instead of getting a governmental bailout because a governmental bailout comes with major governmental oversight. And for banks, governmental oversight is a four letter word. Of course, asking help from the Qataris wasn’t exactly the problem. While there were two rounds of fundraising from Qatari investors, with one involving a $3 billion loan for Barclays, the UK bank also paid the Qataris $406 million in “fees.” It seems that last bit might not have been honestly and properly disclosed to shareholders. And that got authorities wondering if Barclays was trying to cover up the the gist of the plan because it might not necessarily have been totally legit. Besides, anytime there is suspicion of toying with shareholders, you can expect that there will be hell to pay.  These charges mark the first time that any bank in Britain got busted for questionably lawful behavior during the 2008 fiscal crisis. So congrats, Barclays. You now hold that dubious distinction. If convicted, the bank faces a nasty fine and the former execs each face up to ten years in prison if found guilty. As for the Qatari’s, they’re off the hook. Completely.

Adios…

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Ford is ditching Mexico for China, at least as far as the Ford Focus is concerned.  Rumor has it that by ending all production of the vehicle in the U.S. and moving production to China instead of Mexico,  Ford will end up saving a whopping $1 billion. Which is especially weird since it is cheaper to build and import cars from Mexico as opposed to China. But here’s where the logic enters: Ford will now spend money to revamp just one factory in China instead of two in North America. Hence, billions of dollars in savings. While no U.S. jobs are expected to be affected, the United Auto Workers remained conspicuously silent regarding the news. This latest decision is the very first major one to come from Ford’s newly installed CEO Jim Hackett. However, what analysts are finding interesting is that this move shows how Ford is putting the focus – no pun intended – on SUV’s and trucks, as opposed to smaller, more fuel efficient cars, thanks to lower fuel costs. Besides, sales of the Ford Focus are down way over 20% since low gas prices are no longer standing in the way of those coveted SUV’s. The only question now is how is this move going to sit with President Trump and what will he tweet about it.

It’s beginning to look a lot like Christmas…

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Start saving up. Christmas is just around the corner and UPS wants to let you know that it will be charging you extra to ship those holiday presents. Between November 19 and December 2, the package carrier will slap on a 27 cents surcharge and then again, from December 17 – 23. If you want your package delivered via next day air, then prepare to whip out 81 cents and 97 cents for two or three day ground delivery.  UPS typically delivers around 30 million packages a day during the holiday season and analysts are expecting that will rise even more. And who can blame UPS for charging more money to deliver your goods? After all, the holidays are the company’s peak season where not only can their internal systems become over-whelmed, but mother-nature can throw out a few unhelpful surprises as well.

 

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Uh Oh Canada: Trump Starts Up With Our Neighbors to the North; Marissa Mayer Walks Away Golden; Nasdaq Yowza!

Good Tariffs don’t make good neighbors…

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As if things weren’t awkward enough between the President and Mexico, now it’s the U.S.’s relations with Canada that are getting the Trump treatment. This time it’s Canada’s lumber industry that’s getting caught up in the import debate as the President’s plan calls for a tariff of up to 24% on Canada’s lumber products. Canadian lumber companies are pretty ticked off and Canada’s Prime Minister, Justin Trudeau, is itching to fight back. Just how remains to be seen. In case you didn’t know, Canada is the world’s largest soft-wood lumber exporter and the U.S. is its biggest customer, reportedly importing $6 billion worth of the resource just in 2016. But here’s where things get dicey, well for the U.S. anyway – shares of home-building companies took a very unwelcome dive on the soft-lumber dispute, as Wall Street realized raw materials could get a whole a lot pricier. That will likely end up leading to a very unpleasant domino effect on other related industries. If you’re looking to buy a home, take note that this Canada lumber is issue is sending home prices up as well. Incidentally, Canada is going to stop importing U.S. dairy products, as a sort of retaliatory action. Sort of. But basically, this means dairy farmers are getting screwed here too. And don’t you hate when that happens? On the flip side, U.S. lumber producers said that cheap lumber imports from Canada, which are they say are unfairly subsidized by the Canadian government, have put a major crimp in their business and these tariffs will give the domestic lumber industry a much needed reboot.

What color is your parachute?

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Yahoo might have gone bust but Marissa Mayer will be walking away from the entity with $186 million lining her pockets. That’s even after Verizon agreed to buy the  beleaguered company. She’s sitting on 4.5 million shares of the failed internet company and she’ll get that substantial wad of cash once she pays to exercise her options. That $186 million is based on Monday’s closing price, in case you were wondering, and while Mayer may not have had the best run at Yahoo, the stock still tripled during her five-year CEO stint there. And as Verizon plunks down $4.5 billion for Yahoo, Mayer will take in another $3 million as part of her golden parachute. That’s besides the fact that last year she lost out on her bonus following the massive data security breaches that affected one billion Yahoo accounts.

Making a break for it…

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The Nasdaq broke the 6000 mark with a lot of help from big corporate gains and, believe it or not, even President Donald Trump. That’s because the President has big “tax reform and reduction” plans which involve reducing the United States’ onerous corporate tax rate from a whopping 35% to a more corporation-friendly, and globally competitive, 15%. Plans like that could mean a big boost all-around on Wall Street. Companies including Apple, Microsoft and McDonald’s, to name a few, reported impressive gains, sending the Nasdaq all the way up to 6034.74. If you’re finding Trump’s contribution hard to swallow, consider that the result of France’s Presidential election also factored into that 6000 point breakthrough. French Presidential Candidate Emanuel Macron’s first-round victory helped matters, probably because of his centrist politics, which apparently Wall Street digs. It wasn’t since March 7, 2000, that the Nasdaq broke the 5,000 barrier. But alas, that remains nothing but a very distant memory.  The Nasdaq, incidentally, is up over 10% since the beginning of the year and up way over 20% in the last twelve months.

Trump-y’s Bumpy Budget Plans; McDonald’s Unknowingly Picks Fight with President; The Goose is Loose: Luxury Coats Hit Wall Street

Did you say…trillion?

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There’s nothing like a $1.1 trillion budget proposal to perk up a Thursday. The big winner in Trump’s plan is defense, which gets a $54 billion boost if the President gets his way. Losers of the $54 billion corresponding cuts include  – but are not limited to – the Department of Housing and Urban Development and the Environmental Protection Agency – which you had to have seen a mile away. The National Endowment for the Arts, legal aid for the poor and low-income heating assistance would also be history. Because why bother helping poor people pay for heat when you can spend $1.5 billion on a down payment to build a wall along the Mexican border. Wasn’t Mexico supposed to foot the bill for that one, by the way?  In any case, the outline was described as a “hard power budget” – if you have to laugh, then g’head – by Mike Mulvaney, the President’s director of the Office of Management and Budget. In case it wasn’t painfully obvious, it means that this plan caters to defense and building up the military, while foreign aid and diplomacy can go suck it. Sort of. Naturally, the Democrats are just not that into this budget and are wondering how smart it is to cut spending in areas that work with defense to facilitate diplomacy in more volatile parts of the world. On the bright side, the plan calls for slashing funds to the United Nations. If the President could find away to turn all that pricey UN real estate into affordable housing, then we’d really be onto something. But now it’s up to Paul Ryan to get that budget passed in Congress, which is not likely, though, since rumor has it that this plan is Dead On Arrival.

Speaking of greasy of food…

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For some inexplicable reason, at 9:16 this morning,  McDonald’s official Twitter account unleashed this little gem:”@realDonaldTrump You are actually a disgusting excuse of a President and we would love to have @BarackObama back, also you have tiny hands.” Sure the message was deleted 25 minutes later but not before it was retweeted more than 600 times. Interestingly enough Trump is a mega fan of McDonald’s, and even starred in a commercial for the fast-food chain a few years ago. McDonald’s was initially mum on the incident but later said Twitter notified the company to say that its account had been compromised and the situation is currently being investigated. Incidentally, Barack Obama’s former press secretary and campaign adviser, Robert Gibbs, is McDonald’s head of communication. Not that that had anything to do with this particular tweet, mind you. However, my question is, if this Tweet boosts business, will they keep tweeting more insults to the President? Hmmm.

Warm and fuzzy…

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Snapchat look out. There’s a new Wall Street darling today and its one that actually warms hearts. Literally. Luxury Canadian coat maker Canada Goose made its much anticipated New York stock market debut, with 20 million shares being unleashed to the tune of $18 a pop. Initially priced at closer to $12 a share, the apparel company came out swinging raising a very impressive $255 million and hitting a market valuation of $1.88 billion. And why shouldn’t that be the case? After all, the coat maker scored close to $300 million in revenue for 2016 with a $27 million profit, proving that people really do dig the Canadian brand. Of course, no party is complete without a few crashers and for Canada Goose it was PETA, who were there to protest Canada Goose’s use of coyote fur on some of its offerings. The animal-rights organization even purchased $4,000 worth of shares, which might seem completely at odds with its mission. However, that $4,000 investment affords PETA the opportunity to submit its own letter to shareholders and buys it admission to Canada Goose’s annual shareholder meeting, where, presumably, the organization plans to up its protest game.

 

 

Trump Tweets Threats of Big Taxes to GM Over Small Cars; Ford Rearranges Plants Much to Trump’s Delight; Trump’s Trade Pick China’s Worst Nightmare?

Small-fry…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Trump is tweeting again, this time going after General Motors. The President-elect wants to slap some big ugly taxes on the auto company because it imports Chevrolet Cruzes from Mexico instead of making them in the United States. But here’s where things get dicey: According to GM, only the hatchback version of the car is made in Mexico, and are meant for global distribution. The sedans, however, are made in Ohio. Ohio. In fact, of the 172,000 Cruzes sold last year, only 4,500 of them came from Mexico.  Even the United Auto Workers Union doesn’t care if GM does assemble those cars in Mexico since the Ohio factory isn’t equipped to make the hatchbacks. (Incidentally, over 1,000 employees at this plant are getting laid off soon.)  Besides, it’s alot of fuss to make about a car whose sales were down 18% in November.  The fact is, low gas prices are leading to higher sale of of SUV’s and trucks.  And the Chevrolet Cruze doesn’t figure in very nicely here.  Which all probably explains why this latest Trump tweet didn’t even harm the stock.  While it did lose some juice early on, it rebounded into positive territory very very quickly.

Adios…

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In the meantime, just hours after Trump used his social media account to lash out at GM, Ford announced that it is officially scrapping plans to build a $1.6 billion assembly plant in Mexico. But that doesn’t mean its ditching our neighbor to the south. Instead, Ford will continue making Ford Focus compact cars in an existing plant there while taking $700 million from that budget to upgrade a plant in Michigan for building electric cars. And bonus: 700 jobs would be added to the mix for that Michigan plant. It’s all part of a bigger $4.5 billion plan that Ford had in place to manufacture 13 new models of both electric and hybrid cars. A win-win, no?  There are plenty who think it’s just a win for Trump, who made it clear that he’s not into NAFTA and that manufacturing cars in Mexico only hurts the U.S. economy.  They also think Fields scrapped his original plans in an effort to make nice with the incoming President, not to mention, avoid tariffs. However, Fields said he was planning to make this move anyway, whether Trump was elected or not. Which doesn’t explain why construction on the new plant already started in May. But anyway, you needn’t cry for Mexico…just yet. The existing plant in Mexico will be adding 200 jobs there as well, so that country doesn’t come out a total loser either. While shares of Ford rose on the news today, can you guess what happened to the peso? It took a .9% hit against the dollar.  How do you say “ouch” in Spanish?

In other Trump business news…

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The President-elect has set his sights on his pick for the U.S. Trade Representative post. Enter Robert Lighthizer, a Reagan administration alum, who has spent the last thirty years representing major companies in anti-dumping and anti-subsidy cases. Presumably, he was incredibly successful in that aspect of his career, or else Trump might not have looked in his direction.  According to Trump,  Lighthizer has made some very effective deals that protected significant sectors and industries in the U.S. economy. Yowza. Trump’s banking that Lighthizer will do something about “failed trade policies which have robbed so many Americans of prosperity.” That’s a definite plus for working in the Trump administration. As Trump’s top trade negotiator, one of Lighthizer’s major duties will be to try and reduce that pesky trade deficit and apparently, he has a knack for making deals that do just that. Lighthizer doesn’t care for the trade policies we have in place for China, so be sure to watch the drama that unfolds as he goes after one of the world’s largest economies. You can expect some big changes in that arena and damned be the Word Trade Organization rules if it comes to that. Which it just might considering Lighthizer’s not that into the WTO.

Smackdown: Google, Facebook vs. Fake News; Controversy Over New Balance Seems Unbalanced; Ford Revs Up Tariff Debate with Trump

Just faking it…

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As the Trump controversies keep on pouring in, Google and Facebook have now decided to crusade against fake news, as widely shared, yet wholly fabricated stories about the candidates may (or may not) have adversely influenced the presidential election. Part of the problem began when Google realized that the top results for search phrases such as “final election results” and “who won the popular vote” were directing users to a fake news site. By Monday, Google started pulling AdSense from several sites that “misrepresent, misstate or conceal information” and were profiting off such bogus political news stories. As for Facebook, it plans to put the kibosh on ad money from fake sites, but it’s not entirely clear how it will achieve this objective and identify these sites. However, it seems to be a prudent move considering that, according to a Pew study, 44% of Americans get their news from the social network giant. No matter how you slice it, the internet and social media figured prominently last Tuesday and now everyone’s looking to find out what went wrong – or right.

Unbalanced…

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Privately-held company New Balance has inadvertently, and presumably unwillingly, become the unofficial “official shoes of white people.” Unlike its much more enormous rival, Nike, the 110 year old Boston-based New Balance has always been committed to manufacturing its products in the U.S. across 14 factories where it employs over 1,400 people of various races, ethnicities, genders, religions etc. Hence, the company never cared much for the Trans-Pacific Partnership Trade Agreement that gives companies – like Nike – a very humongous edge because they can manufacture a greater quantity of goods abroad, for a lot lot less money than doing it here. The TPP basically jeopardizes companies who choose to domestically produce goods by making for a very un-level playing field. Because Trump is a huge fan of domestic manufacturing and job creation, his election was welcome news for New Balance. And when New Balance said as much, social media either skewered the company and called for boycotts and mass destruction of the sneakers or had white supremacists proclaiming it as their footwear of choice.  Incidentally, New Balance supported the trade policies of Hillary Clinton and Bernie Sanders too.  A fact that both Trump haters and white supremacists seemed to have overlooked.

Have you manufactured a Ford lately?

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After congratulating Donald Trump on his election last week, Ford Motors CEO Mark Fields shared some thoughts about Trump’s proposed 35% tariffs on imports – he thinks they’re a bad idea. After reporting a 12% decline in car sales for October earlier this month, Fields said in a speech given at the L.A. Auto show, that those tariffs will have a very big bad impact on the U.S economy and trusts (or hopes) that Trump will do what’s in the best interests of the United States. However, Trump, early on in his campaign spoke about how he didn’t appreciate the fact that Fields moved Ford’s small car production to Mexico, where wages are a whopping 80% less than what they are in the U.S. If you recall, Trump thinks NAFTA is “the single worst trade deal ever approved in this country” and he’s licking his chops to put the kibosh on it. Although, to counter that last tidbit, Fields did say that Ford added 25,000 jobs since 2011. In the meantime, experts have said that Trump’s tariffs, which are on this side of punitive, in fact, violate the rules of the World Trade Organization. So it’s anybody’s guess how far those tariffs will actually go.

Peso: 1, Trump: 0; Trump Gets Shut Down – Just Not the Right One; How Nobel! Contract Theory Gets Props

Adios…

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The peso is rising and ironically, Mexico has Donald Trump to thank. Who would have thunk it? The more Donald’s chances for the presidency dwindle, the higher the peso goes.  There is an O’Henry novel in there somewhere. The peso, in fact, had hit a record low just hours before the first debate on September 26 after falling 9% against the dollar this year.  Then this weird thing happened: the Mexican currency rebounded when Hilary Clinton went into full-court debate/attack-mode; or maybe from the negative momentum spewing from Donald’s Trump’s mouth – you decide. However, the peso did lose some of its gains when Trump began attacking Clinton’s use of her private e-mail server and all of her own shifty activities. But over the weekend the peso has been enjoying some new impressive gains and even surged to a one-month high, at least in part owing to Trump’s 2005 “Locker Room Talk” video which viscerally offended…everyone. Of course, we mustn’t rule out his performance at Sunday night’s debate. His showmanship seemed to just about clinch the demise of his presidential aspirations and also presumably helped the peso gain some much needed mojo. I guess that’s what they call karma. After all, he did say that if he wins, he’s going to slap some hard-core tariffs on Mexican imports and that’s a scary thought for a country who sees 80% of its exports going to the U.S. Trump wants to chuck NAFTA, or at the very least, renegotiate the terms so that they are more favorable to the U.S. That’s besides having our neighbor to the south foot the bill for a wall to keep out immigrants.

Loser…

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In other Trump news, the Trump Taj Mahal closed its doors…for good. Wish you could say the same of the candidate with the same name, huh? Trump opened the Trump Taj Mahal in 1990, and billed it as “The eighth wonder of the world.” Try not to throw up in your mouth. It was one of the largest casinos in the world and held the dubious distinction of having gone through multiple bankruptcies. Talk about the Trump theme song. In case you were hoping this closure puts a ding in Trump’s armor, don’t bother. He hasn’t owned it for years. He lost his share to bondholders and then resigned as chairmen. The property belongs to activist-investor Carl Icahn, and after massive losses and a breakdown in negotiations with unions, 3,000 employees now find themselves out of work.  Not that the news came as any great shock seeing as how the closure was announced in July. A thousand union members went on strike back then, in part angered that they only saw 80 cents per hour in raises for the last twelve years. Believe it or not Trump hadn’t even owned the casino for much of that time. So we don’t get to completely blame him. Meanwhile, the cost of living in the A.C. went up 25% for the same period so things weren’t adding up for all the casino’s employees. Union members wanted healthcare and pension benefits. Icahn said his last bid offered medical benefits, though the union still didn’t bite. Keeping the casino open would have meant more than $100 million in losses, that would have been in addition to the $350 million that the casino lost in the last few years. And nobody I know likes to lose money. Especially when there are so many commas involved.

Winner winner…

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Now let’s move on to two people who actually make the world a better place. Too bad neither one of them is running for President. Oh well. But I guess winning the Nobel Economics Prize probably means you’re over-qualified for the position anyway. In any case, congrats are in order for MIT’s Bengt Holmstrom and Harvard University’s Oliver Hart. Their work on “contract theory” is so impressive that it seems only fair to hand them the prestigious award, which also comes with a $928,000 cash prize. As for contract theory, it deals with how to best design contracts, taking into consideration human behaviors in business. Whether you like it or not, contract theory has played a big part in executive pay. It helps out in all kinds of situations like how to effectively run corporations, dole out corporate compensation and even formulate bankruptcy legislation. It also studies the implications of workplace pay, like whether managers should get bonuses or stock options, or if teachers and healthcare workers should be paid a fixed rate or a salary that is performance-based. Contract theory also examines whether certain institutions, like schools hospitals and prisons, would fare better if they were privatized. Although, I find it somewhat disconcerting that prisons were lumped with hospitals and schools. Just saying.

McDonald’s European Tax McMess; OPEC Member Smackdown; Unemployment Ups and Downs

Did the Hamburglar do it?

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Hold on to your McMuffins because the Golden Arches are under investigation by European regulators. Apparently McDonald’s neglected to pay taxes on its franchise profits earned in Europe and Russia since 2009. The EU says that 250 million euros made just in 2013 wasn’t  even taxed and McDonald’s had an unfair advantage over its competitors. Gasp. McDonald’s European franchise office is based in the teeny tiny country of Luxembourg. The trouble seems to have started when authorities in Luxembourg decided that McD’s was exempt from paying taxes on its profits because the U.S. was also taxing them on those profits.  McDonald’s, however, says the allegations are false and that it paid over $2 billion in corporate in taxes, besides other taxes, between 2010 and 2014. Starbucks, Fiat and Apple also faced similar investigations and Starbucks and Fiat ultimately found themselves forking over $34 million each in back taxes and penalties.

Can’t we all just get along?

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OPEC members just can’t seem to get along these days which is a bit unsettling considering they control a trillion dollar oil supply. Because of the oil glut and the fact that oil prices are so low –   a barrel closed at $42.49, the lowest price since 2009 – Venezuela is finding itself cash-strapped as oil is a big chunk of the country’s bread and butter. Together with a few other cash-strapped countries, including Ecuador and Algeria (don’t laugh), they want Saudi Arabia to cut back on its oil production output to help bring prices back up and make them less cash-strapped. Saudi Arabia doesn’t want to, but might consider doing so if Russia and Mexico do the same. Saudia Arabia, by the way, is the world’s largest oil exporter and is not cash-strapped so they don’t really feel the need to cut back. Saudi Arabia also said it would listen to what the other countries have to say. Which is nice and all. But it still intends to do what it wants. Like it always does. Russia also has no plans to cut back since it does not see a point in doing so. And besides, who tells Russia what to do? Iran wants OPEC to reduce output just so that it can make room for its re-entry into the wonderful lucrative world of petroleum production. But to be clear, Iran has no intention of capping its own output to help out with the current oil glut. Maybe, just maybe, Iran will agree to cap its oil production once it reaches its pre-sanction levels. After all, its gotta make up for lost times, you know?  OPEC pumped over 32 million barrels a day in November. Once Iran and Indonesia (yes, that country’s back, too) return, expect that number to be much much higher. While annual revenue for OPEC was $550 billion last year, in the five years prior, the organization was pulling down $1 trillion annually.

You say that’s a good thing?

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Applications for unemployment benefits rose to 269,000 applicants, gaining 9,000 newbies from last week and apparently that’s good news. Well, maybe not to the 269,000 applicants, but we won’t go there just yet. And even though that means that there are now approximately 2.16 million Americans right now collecting unemployment benefits – is that term an oxymoron? – unemployment is still considered to be at historically low levels. Believe it or not, this report actually points to a healthy job market. And why shouldn’t it? The number of unemployment benefit recipients is 9.3% less than it was a year ago. An average of 206,000 jobs have been added per month in the last year with a whopping 270,000 jobs added just in October. Even average hourly earnings are up 2.5% in the last twelve months. You can be sure the Fed will be considering this latest report as it mulls its decision to raise interest rates, which by the way, is more than likely to happen in about two weeks.