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Thursday 08.04.2016

'A Perfect Storm' Is Making Gold One Of The Hottest Sssets On The Planet

"A perfect storm" in markets has left investors scrambling to add gold to their portfolios for protection, according to the World Gold Council.

Investors have another prime and relatively safe choice in the government bonds of developed markets, but that has been compromised by "unconventional monetary policy," the council said in its market update for August.

The yields on developed-market government bonds have trended lower as demand has risen. Sovereign authorities like the European Central Bank are stoking this demand through their bond purchases, which are pushing down yields.

As bond prices rise, their yields fall. And this policy approach by central banks has left investors questioning its effectiveness as they scramble for better yield elsewhere, like in gold. Gold prices have surged 27% this year, outperforming many other commodities and the S&P 500. The council used the Bank of Japan's weak bond auction as an example of what it believes investors think of central banks. On Tuesday, a Japanese 10-year bond auction drew the weakest demand in five months. That was after Japan announced a stimulus package worth over 28 trillion yen — $275 billion — but smaller than markets had expected.

Two Phoenix Black Lives Matter Protests Cost Taxpayers $250K

City officials in Phoenix, Ariz., announced Tuesday exactly how much money two Black Lives Matter protests in July cost their tax-paying citizens. Combined, the two protests sucked up nearly $250,000 in city funds.

“This shows a complete disrespect for the taxpayer and our great police department,” said councilman Sal DiCiccio in statement. “This disrespect can be easily added up. Add up the loss of taxpayer monies, the cost to local small business owners, [and] the waste of limited police resources.”

“To be clear, I am a fierce proponent of free speech and people's right to protest, but the way the protesters exercised their right squandered critical resources away from the serial killer investigation and our community,” added DiCiccio.

The two protests, held on July 9 and July 15, drew a total of roughly 1,100 protesters. The first rally, which was attended by about 1,000 activists, quickly got out of hand as protesters tried to enter a major interstate highway before being dispersed with tear gas and pepper spray. Six people were injured and three were arrested. Despite their varying size, both protests used up more than 1,500 of the police department's man hours to a tune of about $124,000 per event.

Chicago plans utility-tax hike to fund pensions

Soon after passing a massive property­tax hike, City Hall sources told the Chicago Sun­Times that Mayor Rahm Emanuel plans to hike utility taxes on city residents.

The proceeds of the hike will not go to improve schools, services or roads. The tax revenues will bypass residents and be dumped directly into the city’s largest pension fund, which is effectively bankrupt. The municipal workers’ pension fund is set to run out of money within the next decade

But the Illinois Supreme Court has ruled that taxpayers are on the hook for the full amount of all pension promises granted to government employees, no matter how outlandish or impossible those promises may be. Enter endless tax hikes.

Utility taxes are one of the largest sources of city revenue, bringing in more than $562 million in 2015. Only property taxes and sales taxes raise more money for city coffers. Officials declined to say how much they’re seeking to raise by hiking utility taxes

Office Depot Is Closing 300 More Stores

Office Depot, which scrapped a plan to merge with larger rival Staples in May on antitrust concerns, said it would close about 300 more stores in the next three years to help cut annual costs by $250 million by the end of 2018.

The company’s shares were up about 1.2% at $3.33 in premarket trading on Wednesday.

Office Depot, which closed 400 U.S. stores by the end of the second quarter, said its sales fell 6.5% to $3.22 billion in the quarter ended June 25, roughly in line with the average analyst estimate, according to Thomson Reuters I/B/E/S.

It was the company’s seventh straight drop in quarterly sales. Both Staples and Office Depot have been hit by competition from online retailers such as Amazon.com that have been discounting school and office supplies. Besides store closures, Office Depot is also planning to cut costs by reducing procurement and general and administrative costs.

US Tech Companies Urge Lawmakers to Ease Immigration Laws

US tech companies are continuing to press lawmakers into relaxing immigration laws, even as Republican presidential nominee Donald Trump is threatening raise the minimum wage for foreign workers.

During a panel discussion at the Democratic National Convention in Philadelphia, representatives of top U.S. technology companies, including Microsoft and Facebook, urged leaders to put an end to the widespread skill shortage in the U.S. tech industry.

“This is no longer a Microsoft, Facebook, or Amazon issue. Companies are only as good as the people we hire,” said Brad Smith, Microsoft’s chief legal officer, during the discussion, according to a report on CNET.

Investing in STEM (science, technology, engineering and mathematics) education is one of the solutions, but some analysts say this is a long-term dream. Donald Trump has often stated that he believes the STEM shortage is a myth. “We graduate two times more Americans with STEM degrees each year than find STEM jobs, yet as much as two-thirds of entry-level hiring for IT jobs is accomplished through the H-1B program,” reads an excerpt from Trump’s immigration plan.

Fed's Evans says one rate hike may be 'appropriate' this year

Chicago Federal Reserve Bank President Charles Evans on Wednesday offered a lukewarm endorsement of an interest rate increase later this year, despite his worry that inflation is still undershooting the U.S. central bank's 2 percent target.

"I think the real economy is doing quite well in the U.S., especially given all the headwinds we are facing," including slower growth in Europe and China, Evans told reporters in a group interview in Chicago.

"I do think that perhaps one rate increase could be appropriate this year," he said, adding later in an aside, "even if I would prefer none until we saw inflation much more strongly."

The Fed, encouraged by falling U.S. unemployment, raised its benchmark overnight lending rate last December for the first time in a decade, but a stronger dollar, slower growth abroad and uncertainty over the domestic economic outlook has kept it from making any further increases. With the near-term risks to the U.S. economy receding, according to the Fed's latest policy statement last week, policymakers appear split on the best course ahead.

Should The IMF Director Be Fired...And Does It Matter?

Reagan Vs. Obama Recovery: 5.9% Annual Household Income Growth Versus 1.1%

The ADP jobs report is out and we saw an additional 179K jobs added in July. But is this a strong recovery as some think?

A natural comparison of the Obama/Fed recovery is to compare it to the Reagan recovery. Much like Mickey Mantle versus Willie Mays and Cassius Clay versus Sonny Liston. Probably more like Clay (aka. Ali) versus Liston.

First, let’s take a look an unemployment and median household income. Both Reagan and Obama inherited deteriorating economies and rising unemployment rates. Reagan’s unemployment rate peaked at 10.8% in November 1982 while Obama’s unemployment rate peaked at 10.0% in October 2009. Both Presidents saw U-3 unemployment rates fall in half over their terms in office.

The BIG difference came in the form of median family income. Reagan’s economy grew at an average rate of 5.85% from 1981 to 1989. Obama;s economy grew at an average rate of 1.10% from 2009 to 2015 (2016 hasn’t ended yet, but it looks like that average of 1.10% will be lowered by the end of 2016). The Reagan economy generated an average REAL growth in median household income of 1.0% while the Obama economy generated an average growth rate of -0.5%. And as I have said many times, real median household income is lower in 2014 (the last year RMINC was measured) than it was in 2007.

Only in China: Companies Become Banks to Solve Financial Difficulties

China is desperate to solve several problems it has due to its debt to GDP ratio being north of 300 percent. It may have found a pretty unconventional one by letting companies become banks, according to a report by the Wall Street Journal.

With profits headed south, heavily indebted Chinese heavy-machinery giant Sany Heavy Industries said this week it won approval to set up a bank in the Hunan Province city of Changsha. With 3 billion yuan ($450 million) of registered capital, it will be a relatively large institution as Chinese city-based banks go. Sany plans to join forces with a pharmaceutical company and an aluminum company.

Sany already operates an insurance and finance division with the goal of internal financing and insurance services for clients. One problem is that companies are defaulting on bond payments and there is no adequate resolution mechanism for bad debts, at least according to Goldman Sachs.

“A clearer debt resolution process (for example, how debt restructuring on public bonds can be achieved, how valuation and recovery on defaulted bonds are arrived at, the timely disclosure of information and clarity on court-sanctioned processes) would help to pave the way for more defaults, which in our view are needed if policymakers are to deliver on structural reforms,” the investment bank writes in a note. By becoming or owning banks, the companies can just shift debt around different balance sheets to avoid a default, although this is probably not the resolution that Goldman Sachs had in mind when talking about structural reforms.

More than 100 people laid off at Time Inc.

Time Inc. will lay off roughly 110 members of its staff this week as part of an ongoing reorganization of its advertising sales strategy, a source there told CNNMoney.

The layoffs will be across the company, but will focus on the sales and marketing team. The cuts represent about 1.5% of Time Inc.'s overall staff.

Time Inc. declined to confirm the total number of layoffs, but did issue a statement acknowledging "some job eliminations."

"Over the last couple of weeks, we have been realigning our organizational structure to better leverage our content creation, sales and marketing and brand development operations," the statement read, in part. "As a result, there will be some job eliminations. That is always painful but an unfortunate reality in today's business climate."

What hackers do to get your personal data, Wray on US data

HSBC Profit Down 40% in ‘Difficult’ Environment

HSBC said on Wednesday that its profit fell 40 percent in the second quarter as the bank navigated the tumult surrounding Britain’s vote to leave the European Union in June.

The lender, which is based in Britain but generates much of its earnings in Asia, also said it would buy back $2.5 billion in shares in the second half of the year after having completed the sale of the bulk of its Brazilian business in July.

HSBC is significantly reshaping its business. It announced plans last year to shed tens of thousands of jobs, to sell underperforming businesses and to shrink its global investment banking business.

The quarterly results included a gain of $584 million on the sale of its holdings in Visa Europe, as well as charges of $677 million related to its overhaul, an $800 million good-will write-down associated with its private bank and $723 million in provisions for potential settlements and other legal matters. For the three months that ended June 30, HSBC reported a profit of $2.61 billion, compared with a profit of $4.36 billion in the second quarter of 2015. The 2015 results included a gain of $1 billion on a partial sale of its holdings in Industrial Bank of China.

How Governments Can Kill Cash

The global elites are using negative interest rates to do the same thing as inflation — make your money disappear. One way to avoid negative interest rates is to go to physical cash. In order to prevent that option, the elites have launched a war on cash.

The war on cash has two main thrusts. The first is to make it difficult to obtain cash in the first place. U.S. banks will report anyone taking more than $3,000 in cash as engaging in a “suspicious activity” using Treasury Form SAR (Suspicious Activity Report).

The second thrust is to eliminate large-denomination banknotes. The U.S. got rid of its $500 note in 1969, and the $100 note has lost 85% of its purchasing power since then. With a little more inflation, the $100 bill will be reduced to chump change.

The war on cash is old news, but there are new developments. This May, the European Central Bank announced that they were discontinuing the production of new 500 euro notes (worth about $575 at current exchange rates). Existing 500 euro notes will still be legal tender, but new ones will not be produced. This means that over time, the notes will be in short supply and individuals in need of large denominations may actually bid up the price above face value paying, say, 502 euros in smaller bills for a 500 euro note. The 2 euro premium in this example is like a negative interest rate on cash.

Timing of Iran cash payment casts suspicions

Student Debt Correlates With 'Negative Wealth'

High levels of student debt are contributing to negative wealth -- when a household's debt is greater than its total assets -- and inequality, according to an analysis of household finance data by the Federal Reserve Bank of New York.

Student loans make up nearly half (47 percent) of the total debt of households with between $47,500 and $52,000 in negative wealth. For households with between $12,500 and $46,300 in negative wealth, college loans made up about 40 percent of total debt. In households with the smallest amounts of negative wealth, most debt was held in credit cards. The analysis is based on a 2015 special module on household finance from the Survey of Consumer Expectations, which includes data on respondents’ assets, debt and expectations from 1,300 respondents. About 15 percent of U.S. households have total wealth at or below zero, according to a blog post describing the findings.

Demographic data on negative wealth households show that they are younger, predominantly female, more likely to be minority, own homes at lower rates and have lower average annual incomes than households with nonnegative wealth.

The authors of the analysis found that students or college graduates with negative wealth used debt to finance human capital investment and expected their financial status to be temporary as they attained higher incomes and paid off their loans. But households with negative wealth spend less and have more restricted credit.

Something Strange Is Afoot, U.S. Sees Massive Gold Inflows

Something incredibly strange is afoot. What exactly is happening is the million dollar question. Regardless of what it is, a shift has occurred that has shocked many in the precious metals community and has others scratching their heads in confusion.

Everyone knows that the West has been bleeding gold for decades, especially the United States, which has systematically been selling their citizen’s true wealth and hollowing out the foundation of their financial system. Yet, a massive and dramatic shift has occurred. A massive amount of gold is flowing BACK towards the United States.

Switzerland, which typically exports a minor 0.5 metric tonnes per month to the United States, has just completely gone into full gear and exported a monster amount of gold in the month of May 2016. How much gold you ask? A whopping 20.7 metric tonnes! This is a complete reversal of what we have been seeing in the past, where typically the United States is the one exporting gold to Switzerland and the UK.

This amount huge and is fifty times more than Switzerland’s typical gold export average. It’s more than the total exported since the year 2000! So what in the world is going on? Why this drastic shift and why is it occurring now? This is exactly what many in the precious metals community are now trying to figure out. The tin foil hats have been taken out of the closet, dusted off, and for good reason. This should be ringing alarm bells for anyone that is truly “awake”. Many times before, those of us in the precious metals community, who have been deemed “conspiracy theorists”, have been vindicated. We hope, though, that this is one of those times that hopefully it doesn’t occur.

Obama issues largest one-day grant of commutations since 1789.

President Obama commuted the sentences of 214 more federal inmates Wednesday, the largest single-day grant of commutations in the nation's history.

Obama has now used his constitutional clemency power to shorten the sentences of more federal inmates than any president since Calvin Coolidge.

The early release of the 214 prisoners — most convicted of low-level drug offenses — is part of Obama's effort to correct what he views as unreasonably long mandatory minimum sentences. The longest: Richard L. Reser of Sedgwick, Kan., who was given a 40-year sentence for dealing methamphatamine and firearm possession. He'll be released Dec. 1.

"The more we understand the human stories behind this problem, the sooner we can start making real changes that keep our streets safe, break the cycle of incarceration in this country, and save taxpayers like you money," Obama said in a Facebook post. Political scientist P.S. Ruckman Jr., who tracks pardon and commutation data, said it's the "The more we understand the human stories behind this problem, the sooner we can start making real changes that keep our streets safe, break the cycle of incarceration in this country, and save taxpayers like you money," Obama said in a Facebook post. Political scientist P.S. Ruckman Jr., who tracks pardon and commutation data, said it's the largest one-day grant of commutations since 1789..

Mortgage applications drop again

While the drop isn't as severe as the prior week, mortgage applications still posted a 3.5% drop from one week earlier, the latest data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending July 29 found.

Split up, the Refinance Index decreased 4% from the previous week, as the seasonally adjusted Purchase Index decreased 2% from one week earlier to the lowest level since February 2016.

This is compared to the previous report, which posted that the Refinance Index and Purchase Index decreased 15% and 3%, respectively, from the previous week. The refinance share of mortgage activity dipped to 60.7% of total applications from 61.1% the previous week. The adjustable-rate mortgage share of activity remained unchanged at 4.7% of total applications.

The Federal Housing Administration’s share of total applications declined to 9.4% from 10.1% last week, as the Veteran Affairs’ share of total applications ticked higher to 12.1% from 11.9% the week prior. The United States Department of Agriculture’s share of total applications slightly increased to 0.7% from 0.6% the week prior.

Hackers steal $US65m worth of bitcoin

Bitcoin plunged, then erased losses as one of the largest exchanges halted trading because hackers stole about $US65 million of the digital currency. Bitcoin was little changed against the dollar as of 10.03am on Wednesday in New York, after sinking as much as 15 per cent. Prices dropped 7.8 per cent on Tuesday after declining 6.2 per cent Monday.

Hong Kong-based exchange Bitfinex said Tuesday it halted trading, withdrawals and deposits after discovering the security breach. The exchange said it was still investigating details and cooperating with law enforcement, but acknowledged some bitcoins were stolen from its users.

"Yes - it is a large breach," Fred Ehrsam, co-founder of Coinbase, a cryptocurrency wallet and trading platform, wrote in an email. "Bitfinex is a large exchange, so it is a significant short-term event, although Bitcoin has shown its resiliency to these sorts of events in the past."

Bitfinex confirmed in a message to Bloomberg News on Wednesday that the hackers took 119,756 bitcoin, or about $US65 million. While trading was halted in all digital currencies, including ethereum, the exchange said losses were limited only to bitcoin. It also said US dollar deposits were not impacted.

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