Janet Yellen Warms up the Helicopters
Look, up in the sky! It’s a bird! It’s a plane! No, it’s… it’s… Janet Yellen in a helicopter with bags of cash. No kidding. That’s the Fed’s plan when the next recession hits. The Fed’s Dear Leader coming to the rescue with airdrops of free cash for everyone. What could possibly go wrong?
At a recent press conference, Federal Reserve Chairwoman Yellen admitted that the Fed would consider using “helicopter money” in an extreme downturn. What’s “helicopter money”?
It’s a phrase used to describe when governments print massive sums of money and then “drop” them on the economy… hoping for the best. Sound insane? It is. But they’re just trying to help by “stimulating” the economy… or what you could call their “Friends and Family Plan.” But doesn’t economic growth come from savings and investment? Silence. Today, you can supposedly create real economic growth right out of thin air.
Just print the money and start giving it away for free. It’s fake money of course, but we pretend it’s real. See how easy it is to hoodwink the masses? To comfort the proletariat, Yellen said that “helicopter money” would only happen in “abnormal” circumstances. Kind of like the “abnormal” zero interest rates (soon to be negative) that we’ve had for an “abnormally” six-plus years. Abnormal is clearly the norm now. In other words, count on it. Helicopter money is coming the moment the S&P 500 takes a serious downturn.
S&P cuts EU credit rating after Brexit
Ratings agency Standard and Poor's cut the credit rating for the European Union by one notch on Thursday (Jun 30), saying that the bloc had grown more uncertain after Brexit.
"After the decision by the UK electorate to leave the EU as a consequence of the Jun 23 consultative referendum, we have reassessed our opinion of cohesion within the EU, which we now consider to be a neutral rather than positive rating factor," the agency said in a statement.
According to the statement, S&P cut the EU's rating to AA, still the third highest possible level, from AA+ with a stable outlook, which signifies that the agency believes no further cut would be necessary in the medium-term.
On Monday, both S&P and Fitch downgraded Britain's rating citing last week's referendum that decided an exit from the EU. S&P cut the country's rating from the top AAA to AA, while Fitch lowered its rating from AA+ to AA.
Micron Technology Plans Layoffs After Disappointing Quarter
Memory-chip maker Micron Technology reported third-quarter revenue below analysts’ estimates, forecast a surprise loss for the current quarter and said it is implementing a plan to lower costs, including by focusing on fewer projects and cutting jobs.
The company’s shares tumbled 9.3% to $12.46 in extended trading on Thursday. Micron, which faces stiff competition from rivals such as Samsung, has been suffering as weak demand for personal computers pulled down the prices of its chips in the last few quarters.
The company’s net sales fell 24.8% to $2.9 billion in the quarter ended June 2, missing analysts average estimate of $2.96 billion, according to Thomson Reuters I/B/E/S.
Micron forecast fourth-quarter adjusted loss of 16-24 cents per share, while analysts were expecting a profit of 3 cents. The company did not specify how many jobs it was cutting, but said the cost savings program would save about $80 million per quarter from the next fiscal year.
Saudi Arabia's Gigantic Oil Problem, Explained in 2 Minutes
Commerzbank to cut over 100 jobs in New York
German bank Commerzbank (CBKG.DE) is to cut more than 100 jobs in its New York office as it streamlines certain operations in order to focus more on investment banking, an executive said.
"The planned realignment of our U.S. business will result in respective headcount reductions," Michael Reuther, head of capital markets at Commerzbank, said in an interview published on the company's intranet and seen by Reuters.
The bank will outsource clearing of dollar-denominated business transactions made outside of the United States and will no longer offer structured securities lending and financial solutions.
That will result in the loss of about 100 back office jobs in New York and over 10 positions at its customer-facing front office, Reuther said.
George Soros: Brexit has 'unleashed a crisis' as bad as 2008
Hedge fund legend George Soros thinks the vote for a British exit from the European Union is bringing calamity to the world's financial markets.
"Unfortunately, Brexit has not only created an opening to reinvent the European Union — it has also aggravated two looming dangers," Soros said Thursday in a speech to the European Parliament that was obtained by ValueWalk.
"First," he said, "it unleashed a crisis in the financial markets, comparable in severity only to 2007/8. This has been unfolding in slow motion, but Brexit will accelerate it. It is likely to reinforce the deflationary trends that were already prevalent."
Soros, who is known for his massive bet against the British pound in 1992, said before the UK voted to leave the EU that a Brexit would cause serious problems. Now, he said, those problems are coming to pass. He said that all the consequences he feared leading up to the Brexit — a collapse in the pound, the possibility of Scotland leaving the UK, and economic worries — had already led to "buyer's remorse" for British voters.
Bank of England chief: Economy needs our help, fast
The Bank of England could act soon to stimulate the U.K. economy in the wake of last week's Brexit vote shock. Governor Mark Carney said the bank's forecast that there would be a significant slowdown in growth in the event of a vote to leave the European Union was likely to come true.
"Does anyone in the country think that these risks have not begun to manifest?" he told reporters on Thursday. "In my view ... the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer."
The pound fell by 1.5% to $1.32, not far above the 31-year low hit in the immediate aftermath of last Thursday's EU referendum. The total loss since last Thursday is about 12%. Many independent forecasters have already slashed their forecasts for the world's fifth biggest economy for this year and next. The U.K.'s credit rating has been cut.
Some are even predicting recession, as the uncertainty about Britain's future weighs on spending and investment by consumers and businesses. The sharp fall in the pound could help exporters, but it will push prices of imported goods and energy higher, leaving people with less money in their pockets.
Less wealth for more sovereignty as a result of Brexit
Public College Spends $158k Of Public Money To Rebut Public Study
The University of California, a public college, spent over $158,000 in an effort to improve its reputation online, all to counter a negative report put out by a separate public entity.
A March report by the California state auditor was damning for UC administrators, finding that over the past five years out-of-state enrollment had grown a whopping 82 percent, and international enrollment a staggering 214 percent, while in-state enrollment had actually declined by a small amount. The explanation for this shift, the audit argued, was the UC system’s desire to have more students paying out-of-state tuition (currently over $38,000 a year) rather than the smaller in-state figure (currently $13,400).
Not only did the UC system admit more out-of-state students, the audit found, but those students were declining in quality. While historically the expectation was that any out-of-state admission had to go to a student in the top half of the applicant pool, the audit found that UC admitted over 16,000 students who were substantially below-average for the campus they applied too, thereby denying spots at those campuses to in-state applicants of the same caliber.
UC officials didn’t deny they hiked out-of-state enrollment to improve their finances, but they have argued it was necessary to keep offering the same services and to subsidize the education of in-state residents. The audit rejected this claim, though, finding that UC kept increasing the amount it spent on staff salaries when it could have been holding steady or making cuts.
U.S. opens investigation into Tesla after fatal crash in Autopilot mode
The U.S. National Highway Traffic Safety Administration (NHTSA) said on Thursday it is opening a preliminary investigation into 25,000 Tesla Motors (TSLA.O) Model S cars after a driver of one of the vehicles was killed using the Autopilot mode.
The agency said the crash came in a 2015 Model S operating with automated driving systems engaged, and "calls for an examination of the design and performance of any driving aids in use at the time of the crash." The investigation is the first step before the agency could seek to order a recall if it finds the vehicles were unsafe.
NHTSA said in a statement the driver of the 2015 Model S was killed while operating in Autopilot mode in a crash on May 7 in Williston, Florida. NHTSA said preliminary reports indicate the vehicle crash occurred when a tractor-trailer made a left turn in front of the Tesla at an intersection.
Tesla said in a blog post that this is the first known fatality in just over 130 million miles where Autopilot was activated.
Health Insurers Are Looking For A Taxpayer Bailout
Insurers helped cheerlead the creation of Obamacare, with plenty of encouragement – and pressure – from Democrats and the Obama administration. As long as the Affordable Care Act included an individual mandate that forced Americans to buy its product, insurers offered political cover for the government takeover of the individual-plan marketplaces. With the prospect of tens of millions of new customers forced into the market for comprehensive health-insurance plans, whether they needed that coverage or not, underwriters saw potential for a massive windfall of profits.
Six years later, those dreams have failed to materialize. Now some insurers want taxpayers to provide them the profits to which they feel entitled - not through superior products and services, but through lawsuits.
Earlier this month, Blue Cross Blue Shield of North Carolina joined a growing list of insurers suing the Department of Health and Human Services for more subsidies from the risk-corridor program. Congress set up the program to indemnify insurers who took losses in the first three years of Obamacare with funds generated from taxes on “excess profits” from some insurers. The point of the program was to allow insurers to use the first few years to grasp the utilization cycle and to scale premiums accordingly.
As with most of the ACA’s plans, this soon went awry. Utilization rates went off the charts, in large part because younger and healthier consumers balked at buying comprehensive coverage with deductibles so high as to guarantee that they would see no benefit from them. The predicted large windfall from “excess profit” taxes never materialized, but the losses requiring indemnification went far beyond expectations.
Fed stress tests explained
Fed hawk Bullard calls for lower growth — but at least no recession
St. Louis Fed President James Bullard said Thursday available data does not suggest the U.S. economy will fall into recession, but he repeated his expectations for lower growth ahead.
At a speech in London, the central bank hawk reiterated comments he made earlier this month, saying the U.S. is in a new economic "regime." The long-term outcome of the U.S. economy is uncertain, he said.
The remarks reflect a similar sentiment of comments he made on June 17. Bullard forecast 2 percent gross domestic product growth and an unemployment rate of 4.7 percent through 2018.
He also said a federal funds rate of just 63 basis points will likely stay in place. The Fed's current target rate is 25 to 50 basis points.
U.S. accepts record number of Syrian refugees in June
The U.S. accepted more than 2,300 Syrian refugees in June alone, sending the fiscal year total soaring past the 5,000 mark and putting the government on track to surpass President Obama’s goal of 10,000 by the end of September, but raising questions about screening out potential terrorists.
June’s numbers set a monthly record for the Homeland Security and State departments, which committed resources received earlier this year to streamline the process — in what critics say amounted to corner-cutting — to get back on track toward Mr. Obama’s political goal.
“I believe we will make the 10,000,” Homeland Security Secretary Jeh Johnson testified to Congress on Thursday, assuaging fears of some Democrats that the administration was going to fall short.
Of those accepted in June, more than 99 percent are Sunni Muslims. Just eight identified themselves as Christian, eight identified as a non-Sunni form of Islam, and one reported having no religious affiliation. Those numbers have drawn criticism because the percentage of Sunni Muslims is far greater than that of the Syrian population as a whole, which is about 75 percent Sunni.
Here Comes $20 Silver!
After a painful downtrend, silver has embarked on an unstoppable rally. Now that its 5-year bear market is officially over, silver’s ready to make a run at $20 for the first time in nearly two years. That means double-digits gains are in the cards for one of your best performing silver mining trades.
I’ll reveal all the details in just minute. But first, let’s take a quick look at how precious metals have quickly become one of the best trades of the year…
Gold’s hogged the precious metals spotlight since it started ripping higher in February—and deservedly so. After all, gold is one of the best performing assets of 2016. It’s up nearly 25% year-to-date. To put that move in perspective, the mighty S&P 500 is just above breakeven on the year.
But silver hasn’t earned much ink from the financial press… Sure, silver kept pace with gold for the first six weeks of the year. But in mid-February gold started to outshine its less lustrous cousin. At the time, gold and other metals were making the most dramatic moves. Earlier this year, we also had the opportunity to book gains on aluminum producers and miners as other precious metals surged. Meanwhile, silver consolidated.
Obama signs law to rescue Puerto Rico’s economy
President Obama signed into law on Thursday a bill designed to rescue Puerto Rico’s economy and restructure its staggering debt burden.
Nonetheless, Puerto Rico’s government is expected to default on all, or nearly all, of its roughly $1 billion of debt payments coming due Friday in what would be one of the largest municipal bond defaults ever.
Meanwhile, the island’s state-owned electric utility said it had reached a deal with its biggest creditors to avert a default for the time being — though it would mean as much as 24 percent hikes in electricity rates by early next year.
Although the Senate on Wednesday approved legislation to set up a federally appointed oversight board designed to bring balance to Puerto Rico’s budget and manage its debts, the island still faced about $2 billion of debt payments due July 1 and more in the months ahead while the oversight board gets up and running.
Gold expert: 'I don't think anyone has missed the boat at this point'
Gold investing pro George Milling-Stanley, head of gold investment strategy at State Street Global Advisors, says investors haven’t missed the boat on investing in gold.
Following the stunning Brexit vote last week, investors piled into gold, which is considered a “safe-haven” asset, pushing the precious metal’s price to a two-year high.
SPDR Gold Shares (GLD) has attracted over $11 billion of inflows year-to-date making it the most popular ETF in 2016. A number of hedge fund managers, including George Soros and Stanley Druckenmiller, held GLD as one of their top long positions, securities filings from the first quarter show.
“I don’t think anybody has missed the boat at this point,” Milling-Stanley, who served on the World Gold Council, told Yahoo Finance.
A Middle-Class Stronghold’s Uncertain Future
There is still a sizable middle class in this county of 115,000 on the shores of Lake Michigan, a pleasant hour’s drive from Milwaukee. You can see it in the cars that pour in and out of the parking lots of local factories, in the restaurants packed with older couples on weeknights, and in the bars that seem to be on every single corner. You can see it in the local parks, including one called Field of Dreams, where kids play soccer and baseball and their parents sit and watch.
About 63 percent of adults in Sheboygan make between $41,641 and $124,924, meaning the area has one of the highest shares of middle-class households in the country, according to a report from the Pew Research Center. Nationally, only 51 percent of adults are middle-class.
Wisconsin is, for the middle class, the promised land. Four out of the top 10 metropolitan areas with the highest share of middle-income families are in Wisconsin, including Wausau, Janesville, Eau Claire, and Sheboygan. Those areas have what other parts of America once had in spades: a big manufacturing sector, strong unions, good schools, and a low cost of living.
Business is so good in Sheboygan that some companies are bringing workers from inner-city Milwaukee to fill open positions. According to the Sheboygan County Economic Development Corporation, there are at least 3,000 job openings in the county now, one-third of which require just a high-school degree, one-third of which require a technical degree from a two-year college, one-third of which require a college degree.
Is London’s Gold Hub Status At Risk Post-Brexit?
Will Housing Overcome Economic Slowdowns?
The pace of sales of existing homes slowed down in June, but are sill up from May and from last year, according to early projections from Thursday’s Ten-X Residential Real Estate Nowcast. The company expects June’s existing-home sales will fall between seasonally adjusted annual rates of 5.38 and 5.74 million, with a targeted number of 5.56 million. That’s an increase of 0.5 percent increase from May and a 1.4 percent year-over-year gain.
Last month’s Nowcast also called for an increase in May sales between 5.47 and 5.83 million units, with a target of 5.65.
Ten-X’s outlook was based on May figures on existing-home sales issued by the National Association of Realtors (NAR), which recently reported a 4.5 percent year-over-year increase in sales to 5.53 million units in May. That increase over April marked the highest annual sales rate since February of 2007.
The NAR also reported a 4.7 percent year-over-year increase in median existing-home prices to $239,700 for May, marking the 51st consecutive month of year-over-year gains and nearly matching the prediction of $238,418 that Ten-X made in last month’s Nowcast. Findings from the Nowcast suggest that sales prices for existing homes will fall between $231,642 and $256,025 in June, with a targeted price of $243,833. This represents a 1.7 percent month-over-month gain and a 3.1 percent year-over-year gain.
Even Goldman Sachs thinks monopolies are pillaging American consumers
If there's one thing politicians from Donald Trump to Hillary Clinton to Bernie Sanders can agree on, it's that the American economy could stand some serious improvement. Wages are stagnant, growth is weak, poverty is high, and we badly need a huge increase in social insurance.
However, most traditional methods by which these problems might be attacked are politically out of the question, at the moment. Given the Republican handicap in the House — and the fact that the Democratic Party elite is weak at best on these issues — huge new legislation for, say, $1 trillion in infrastructure spending or a robust child allowance is extremely unlikely.
But there's another tool on the policy table with enormous untapped potential: anti-trust enforcement. An endless spree of business consolidation has left many marketplaces dominated by a few gigantic corporate behemoths. The results are atrocious — but at any time, the government could simply change how it enforces anti-trust law, and force American businesses to compete. It might just be the cheapest and easiest way to help the average American.
A Center for American Progress report by Marc Jarsulic, Ethan Gurwitz, Kate Bahn, and Andy Green recently gave us a great overview of American monopolization and anti-trust. It cites strong research showing consolidation leads to higher prices, a decrease in research, innovation, and corporate investment, and poor service quality.