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Monday 10.03.2016

German economy minister slams 'irresponsible' Deutsche Bank

German Economy Minister Sigmar Gabriel on Sunday (Oct 2) lashed out at Deutsche Bank's handling of its troubles, saying "irresponsible" managers had put thousands of jobs at risk.

"I don't know whether to laugh or cry that the bank, which turned speculation into a business model, is now calling itself a victim of it," Gabriel told reporters, after CEO John Cryan this week blamed speculators for pushing the embattled lender's share price to a record low.

Speaking to reporters on his way to Tehran for a trade visit, Gabriel said Deutsche's woes could be traced back to past mistakes made by the management. "The scenario is that thousands of people will lose their jobs. They now have to bear the responsibility for the madness carried out by irresponsible managers," said Gabriel, who is also Germany's vice-chancellor and leader of the Social Democrats, the junior partner in the coalition government.

Deutsche Bank has found itself at the centre of a storm ever since the US Department of Justice last month demanded an unaffordable US$14 billion fine over the bank's role in the sub-prime mortgage crisis. Fears over Deutsche's financial health and speculation that it might need a bailout sent its shares plummeting this week. Its stock recovered on Friday on a report that the bank was close to a settlement with US authorities to lower the fine to US$5.4 billion.

Restaurant Industry, Leading Indicator of US Economy Sours, Bankruptcies Pile up

On Friday, September 30, Restaurants Acquisitions, the operator of Black-eyed Pea and Dixie House restaurant chains, converted its Chapter 11 filing to Chapter 7 liquidation. The bankruptcy court order noted the company had shuttered its restaurants and management had resigned.

The day before, Cosi Inc., a fast-casual chain with 1,100 employees filed for bankruptcy. It closed 29 of its 74 company-owned restaurants and laid off 450 people. The 31 independently owned franchise operations continue operating.

Also last week, Logan’s Roadhouse, a casual steakhouse with over 200 locations, closed more than 10 restaurants, on top of the locations it had already closed in August when it filed for Chapter 11 bankruptcy. Eight restaurant companies representing 12 chains have filed for bankruptcy since December: Restaurants Acquisitions, Cosi, Logan’s Roadhouse, Fox & Hound, Champps, Bailey’s, Old Country Buffet, HomeTown Buffet, Ryan’s, Johnny Carino’s, Quaker Steak & Lube, and Zio’s Italian Kitchen.

Restaurants are precarious creatures. They lease costly space and have to invest in equipment and furnishings. It’s a competitive environment, with high expenses and little pricing power. To expand, they load up on debts. Some, like Cosi, always lose money. Customers are finicky and fickle. When new competitors come along, or when the economy tightens, customers thin out and creditors begin to fret and turn off the money spigot.

Pensioners Beware - Brits Considering First Step Toward Slashing Pension Benefits

Pensioners around the world should take note of the controversial new legislation being considered by the UK Parliament's Work and Pensions Select Committee that would allow private businesses to cut pension costs by suspending contractual inflation-linked benefit increases. Of course, this could be just a crucial first step in the long journey toward cutting pension benefits and finally admitting that many defined benefit pension plans around the globe are nothing more than insolvent, ponzi schemes.

Committee Chairman Frank Field told the Financial Times that the goal of the proposed legislation is to simply create an environment that helps insure the "survival" of defined benefit pension plans for now "which gives you flexibility in the longer run."

“We should make clear our aim, with any policy changes, is the primary goal of safeguarding, in the best possible form, DB pension schemes,” Mr Field said ahead of the launch of the inquiry into defined benefit schemes. “The aim is survival now, which gives you flexibility in the longer run,” he said.

Mr Field said his committee would look at what is required to “help create a climate of opinion so scheme trustees would naturally think about introducing flexibility on benefits”, primarily on inflation-matching increases. The veteran Labour MP said that while it might be difficult for trustees to negotiate flexibility, they should insist they have the right to reverse any agreement on reducing inflation rises “if and when better times come”. “That might be the price for survival now,” said Mr Field.

Why This Lithium CEO Is 'Heavily' Invested In Gold

Professionals Dismayed by Fed Decision

With its decision to stay the course and once again postpone a hike in interest rates, the Federal Reserve has unleashed a firestorm of reaction from professionals. One economist and an asset manager can only manage to express their displeasure in metaphor. And one famous bond salesman finds himself hard put for any words at all.

The essence of their criticism, bordering on outrage, boils down to the sheer impotence of central bankers worldwide. In the last several years, every time they’ve tried to jump-start their respective economies, they’ve failed. The noted outspoken economist Marc Faber likens them to alchemists, who, no matter how they try to make gold, fall flat on their faces. According to Faber, while even alchemists put something of value in their concoctions, “[C]entral banks are just mixing water, in other words, paper money, and the results cannot be a favourable outcome in the long run.”

Meanwhile, Steven Scott, of Longboard Asset Management, thinks the course the Fed has charted is nothing short of catastrophic, warning of the more than $230 trillion in global debt he likens to “a massive star exploding into a supernova.”

The monetary tampering of central banks has ignited this debt explosion. They’ve indulged their respective economies in unprecedented levels of quantitative easing, zero interest rate policies, and the implementation of once-unthinkable negative interest rates. The U.S. alone is strapped with more than $63 trillion in combined public and private debt. Compare that with just over $3.5 trillion currently circulating. When you consider these particular dollars have been lent and borrowed more than sixteen times, you realize how the leverage stimulated by this debt has continued to skyrocket.

Would Sears Bankruptcy Cost Tens Of Thousands Of Jobs?

The numbers are brutal. Sears Holdings (NASDAQ: SHLD), parent of Sears and K-mart, has lost almost $4 billion over the last 3 years. In the most recent quarter, it lost another $900 million. Its shares are down 80% in the last five years. Fitch Ratings recently tagged it as a likely retail bankruptcy.

Sear Holdings has 178,000 employees, and at the latest count 781 Sears locations, and 981 Kart locations. The parent has already closed stores, but with the massive bleeding of money, many of the stores left must lose money, which puts them at risk of closing in a bankruptcy.

Sharon Bonelli, Senior Director, Leveraged Finance at Fitch recently wrote, about Sears and six other retailers it examined, in “Retail Bankruptcy Enterprise Value and Creditor Recoveries: Fitch Bankruptcy Case Studies – 10th Edition.”

“Brand degradation and competitive pressures to either price or experience can be real threats to the survival of struggling retailers.As a result, many retailers move into the bankruptcy process without a real reason to exist and ultimately end up in liquidation more often than bankrupt companies in other sectors.” Liquidation, in Sears case, would mean breaking hundreds of leases, selling off inventory, and a wholesales dismissal of workers.

China's Yuan Just Joined An Elite Club Of International Monetary Fund Reserve Currencies

China’s yuan joins the International Monetary Fund’s basket of reserve currencies on Saturday in a milestone for the government’s campaign for recognition as a global economic power.

The yuan joins the U.S. dollar, the euro, the yen and British pound in the IMF’s special drawing rights (SDR) basket, which determines currencies that countries can receive as part of IMF loans. It marks the first time a new currency has been added since the euro was launched in 1999.The IMF is adding the yuan, also known as the renminbi, or “people’s money”, on the same day that the Communist Party celebrates the founding of the People’s Republic of China in 1949.

“The inclusion into the SDR is a milestone in the internationalization of the renminbi, and is an affirmation of the success of China’s economic development and results of the reform and opening up of the financial sector,” the People’s Bank of China said in a statement.

China will use this opportunity to further deepen economic reforms and open up the sector to promote global growth, the central bank added. The IMF announced last year that it would add the yuan to the basket, so actual inclusion is not expected to impact financial markets. But it puts Beijing’s often opaque economic and foreign exchange policy in the international spotlight as some central banks add yuan assets to their official reserves.

Delinquency rates rise on the riskiest auto loans

The delinquency rate on subprime auto loans rose in August, and the trend will likely will continue through the rest of 2016, a big rating agency says. The delinquency rate has been trending upward throughout 2016 and now approaches peak levels seen in late 2008 and early 2009.

The percentage of people who qualified for subprime (FICO score of 600 or lower) auto loans, but are 60 days or more behind on payments, reached 4.86% in August, a 22% increase from a year earlier, according to Fitch Ratings. Auto delinquencies have risen every month since February.

Delinquencies among prime auto loan borrowers also rose, but remain at a manageable 0.41%, or 17% higher than a year ago. These loans are packaged into bundles, which are sold to investors much like mortgages were packaged into bundles a decade ago before rising interest rates caused many of them to default. For those bundles of auto loans made up of subprime loans, the annualized net loss rate — the percentage of those loan bundles regarded as likely to default — was 8.89% in August, up 27% from August, 2015, according to the Fitch research.

For historical perspective, that loss rate peaked at 13% in January, 2009. The 60-days-plus delinquency rate for subprime borrowers peaked at 5.04% in December, 2008. “The important thing is that those losses are trending higher on loans made between 2013 and 2015," said Hylton Heard, senior director in Fitch’s U.S. asset-backed securities group.

Alex Jones: How You Can Hijack The Media

Bubble Watch: Experts Sound Alarm on Chinese Real Estate

When China’s richest man and its most successful real estate developer calls the country’s overheating property market “the biggest bubble in history,” it’s probably not a good sign.

But that’s exactly what Wang Jianlin, billionaire owner of Dalian Wanda Group and Communist Party insider, said in an interview with CNN last week. “The government has come up with all sorts of measures—limiting purchase or credit—but none have worked,” he told CNN.

Average new housing prices across China increased 1.3 percent in August from July, according to state data, which was the 17th consecutive monthly jump. September was also the biggest one month increase since early 2011.

The Shanghai Composite Index has declined 15 percent since Jan. 1. If the trend continues, 2016 would be the biggest drop in five years. But volume on the exchange is also down—to the lowest level in two years—signaling that investors are pouring their money elsewhere after the scare of last year’s market crash.

US Hands Over Control Of The Internet To Global Non-Profit Organization For Oversight

The United States government has crossed off one item on its endless to-do list. On Saturday the government ceded its oversight responsibilities of the internet to the Internet Corporation for Assigned Names and Numbers (ICANN), a global non-profit organization. ICANN will now have control over the internet’s “root zone” where new online domains and addresses are born.

The United States government contract with ICANN expired after nearly twenty years. The expiration is part of the government’s plan to “privatize” the internet. Stephen Crocker, ICANN's board chairman, remarked, “This transition was envisioned 18 years ago, yet it was the tireless work of the global internet community, which drafted the final proposal, that made this a reality.”

The United States’ “control” of the internet was largely symbolic. The internet is not technically owned by a single entity and was originally designed to function without a central authority. The government mostly approved technical updates to the domain-name system, but not much else.

Many critics have insisted that the United States is simply “giving away” the internet. They fear that authoritarian regimes may try to take over the Internet Assigned Numbers Authority or IANA. Texas senator Ted Cruz insisted, “President Obama intends to give increased control of the internet to authoritarian regimes like China, Russia, and Iran. Like Jimmy Carter gave away the Panama Canal, Obama is giving away the internet.”

Thief steals 5-gallon bucket of gold worth $1.5M in Manhattan after guard's slip

A man tasked with guarding a 5-gallon bucket of gold worth $1.5 million didn’t exactly have the Midas touch — and now a mistake that led to the theft of the precious metal could cost him his job.

Joseph Morel, who works for the armored car service Loomis International, was one of two guards protecting the 86 pounds of gold in the Diamond District on Thursday afternoon.

The 54-year-old dad was using the bucket as a footstool. At one point, he went to rest his feet and that’s when he noticed the gold was missing from the back of the truck. Monel fears there’s no pot of gold — just a pink slip at the end of his rainbow.

“I cried because I’m afraid to lose my job,” the Haitian immigrant told the Daily News Saturday from his home in Queens. “I got my mortgage to pay, my wife, my son, my car insurance. Yeah. I’m scared. But if it’s coming, what I can do? I made a mistake.”

October Surprise Coming-Gerald Celente

A Yahoo insider believes the hackers could really have stolen over 1 billion accounts

The actual tally of stolen user accounts from the hack Yahoo experienced could be much larger than 500 million, according to a former Yahoo executive familiar with its security practices.

The former Yahoo insider says the architecture of Yahoo's back-end systems is organized in such a way that the type of breach that was reported would have exposed a much larger group of user account information.

"I believe it to be bigger than what’s being reported," the executive, who no longer works for the company but claims to be in frequent contact with employees still there, including those investigating the breach, told Business Insider. "How they came up with 500 is a mystery."

To be sure, Yahoo has said that the breach affected at least 500 million users. But the former Yahoo exec estimated the number of accounts that could have potentially been stolen could be anywhere between 1 billion and 3 billion.

Over 1,000 Illegal Voters in Eight Virginia Localities

More than 1,000 aliens, or residents who are not U.S. citizens, have been free to vote illegally in Virginia. The bombshell disclosure was made in a report released by the Virginia Voters Alliance based on findings from the Public Interest Legal Foundation.

The 1,046 Virginia voters may just be the tip of the iceberg, as it’s only the number found in eight Virginia localities, the report reads. The report found that the most illegal votes were cast in 2012, followed by 2008, the year President Obama was elected to his first term. In both years, Obama won Virginia.

It’s a felony for non-citizens to vote in Virginia. But in Virginia, no proof of citizenship is required when voters register.

In some cases, aliens and permanent residents will register to vote and either admit on the form they are not citizens, or they will mislead, according to Christian Adams, general counsel for the foundation. Local officials can check each voter later by matching data from the Virginia driver’s license bureaus, where the aliens in question are usually likely not to mislead authorities on their status.

Invasion of Debt Snatchers

How Obamacare Execs Broke the Law and Cost Taxpayers Billions

Just how far did the Obama administration go to keep its failing signature program afloat? According to a new report from the Government Accountability Office, its Health and Human Services Department broke the law to bail out insurers participating in the health-insurance exchanges established by the Affordable Care Act. In doing so, it took funds meant to protect taxpayers and instead used them to pay off larger-than-expected losses under Obamacare.

At issue is the Transitional Reinsurance Program, designed to allow insurers a space of three years to find effective calculations for risk and to stabilize premium prices. The ACA statute authorized HHS to collect $10 billion from insurers in 2014 to fund the reinsurance program using a method of its own devising to calculate “proportionate” contributions from each insurer, plus another $2 billion to pass to the Treasury.

Those figures diminish to $6 billion in 2015 with another $2 billion for Treasury, and then to $4 billion and $1 billion in the final year of 2016. The HHS share would be used to subsidize insurers based on the extent of losses, while taxpayers would be guaranteed a return on the program.

That’s what was supposed to happen. Republicans in Congress found out that HHS didn’t competently calculate the insurer contributions to the program – and decided to keep all of the money instead. They demanded an investigation by the GAO, which confirmed that HHS had violated the law by keeping the funds without Congressional authorization. That amounts to $5 billion that HHS took from the general fund, and kept without specific Congressional appropriation.

Deutsche Bank defended by German firms

Executives from Siemens, Daimler, Munich Re and BASF told German newspaper Frankfurter Allgemeine Sonntagszeitung they backed the bank. "We stand with Deutsche Bank," BASF chairman Juergen Hambrecht said. Deutsche Bank is facing a $14bn ($11bn) fine in the US for mis-selling mortgage-backed bonds before the financial crisis of 2008.

Its shares fell sharply last week on fears the fine could cripple the bank, at one point dropping to their lowest level in 30 years. Reinsurance giant Munich Re's chief executive, Nikolaus von Bomhard, told the Frankfurter Allgemeine Sonntagszeitung that he had followed the news, but saw no need to "reduce our business volume" with Deutsche Bank.

Dieter Zetsche, the chief executive of luxury car firm Daimler, also backed the bank, saying: "Deutsche Bank has a great tradition, a solid foundation and beyond that, a good future ahead. Of that I am convinced." Siemens boss Joe Kaeser said that the bank's management "is pursuing the right goals and has our fullest confidence".

On Friday, Deutsche chief executive John Cryan insisted the bank's finances were strong, telling staff in an email that the lender had become the object of "hefty speculation" and that "new rumours" were causing the share price to fall. Reports have also suggested the bank could be close to reaching a deal over a much lower fine of $5.4bn, boosting the shares.

Is a pizza chain run by robots the future of the industry?

Are robots the future of pizza? One chain seems to think so. Zume Pizza, based out of Mountain View, Calif., has replaced human chefs with robotic ones, creating what its owners call a "co-bot situation."

The restaurant, which opened its doors in April, reflects to a more extreme extent the gradual shift that many fast food and fast casual restaurants are making toward more in-restaurant automation, as technology advances and demands for higher minimum wage spread across the country. But while Zume and other restaurants have been able to save money by hiring more robots and fewer workers, some experts say we shouldn't expect robots to fully replace us anytime soon.

Zume has fewer employees than a typical pizza chain, but the sous chefs, software engineers, and other workers that it does employ receive full benefits, education subsidies, and shares in the business. The company, which began hiring in September of 2015, has never had an employee quit, said Julia Collins, Zume's co-founder and co-chief executive officer.

Furthermore, by replacing most of its chef positions with intelligent machines, the company has been able to cut its labor costs in half, allowing for a bigger budget for higher-quality ingredients.

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