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Monday 07.04.2016

Americans will spend $800 million on fireworks this Fourth of July

Drive through most US cities right now and you’ll see fireworks stands on the side of the road and people lining up, eager to show their patriotism through pyrotechnics. Fireworks are how we celebrate the Fourth of July – and they also translate into big money.

The American Pyrotechnic Association (APA) estimates that firework revenues could exceed $800 million for the 2016 season. That’s up from last year, when Americans spent $755 million on fireworks, the APA estimates, and 180% more than the $284 million we spent in 1998.

Part of the reason revenues have increased is because more states are doing away with restrictions that limit the sale of fireworks within their borders. Since 2011, Kentucky, Utah, New Hampshire, Michigan, New York, Georgia and West Virginia have all legalized at least some fireworks to cash in. Currently, 47 states allow the sale of some kind of consumer firework.

For example, big fireworks (bottle rockets, roman candles and artillery shells) are still illegal in New York State, but a law passed in 2015 allowed for the sale of sparklers and other small ground fireworks in dozens of counties outside of New York City. With this change, New York expects to collect $2 million in tax revenues from fireworks this year.

Coal producer Murray Energy seeks to layoff thousands in 6 states

Giant coal producer Murray Energy has issued notices that it could lay off up to 4,400 coal mine workers in six states come September.

A news release from the St. Clairsville, Ohio, company says it issued the notices for its operations in Ohio, West Virginia, Illinois, Kentucky, Utah and Pennsylvania.

The release blamed the possible job losses on President Barack Obama's administration's environmental policies regarding coal. The company also laid blame on increased use of low-price natural gas for electricity.

Murray and other coal operators are involved in contract negotiations with the United Mine Workers of America. Earlier this week the union's members rejected a proposed contract.

Gold’s Shimmer Is Sign Of Dark Days Ahead

Market watchers around the world are struggling to figure out what is happening in our global economy. We are swimming in news of Brexit opinions and terrorist attacks all in hopes of making sense of it all and keeping our heads above water, if not our investment portfolios. Drowning in an ocean of information, it is easy to miss the signal for the noise and a possible indicator of dark economic days ahead.

The U.S. dollar and the price of gold rarely play nice and move in the same direction. Some background to understand why the correlation coefficient of gold and the U.S. dollar is negative, meaning they move in opposite directions is needed. The Gold Standard is where the currency or paper money of a country is directly linked to gold. A country using the Gold Standard sets a fixed price for gold and uses that fixed price to determine the value of the currency. As an example, if the United States set the price of gold at $100 per ounce, then the value of a dollar is 1/100th of an ounce of gold. The United States last used the Gold Standard in 1971. This effectively changed the dollar to fiat money, meaning the currency has a value based on government regulation and not backed by a physical commodity like gold.

The move freed gold from the dollar and vice versa. After 1971, gold transitioned to floating exchange rates making it susceptible to fluctuations of the external value of the dollar. The International Monetary Fund estimated that up to half of the changes in the gold prices from 2002-2008 were based on changes to the dollar. In short, a 1% change in the external value of the dollar led to more than a 1% change in the price of gold. The price of gold and the trade-weighted dollar are inversely related because when the value of the dollar falls compared to currencies of other countries, the demand for commodities like gold increases and therefore increases the price. Gold is also viewed as an investment alternative that can be utilized to store wealth when the dollar begins to lose its value.

The inverse relationship between the dollar and gold is how the two have interacted historically. Very few times have both the value of the U.S. dollar and the price of gold increased at the same time. A crisis in another country or region would cause investors to view the dollar and gold concurrently as safe havens. After the Brexit vote last week, investor interest in the U.S. dollar and gold rose significantly. This simultaneous rally of the dollar and gold should not be seen as a positive. According to Grant Williams of Real Vision Television, “It doesn’t happen often, but when it does it’s a sure sign people are nervous-saw it in 2008, saw it in the 30s. It’s a sign we are at a point of critical stress.” Raoul Pal, a former macro fund manager believes, “it is a big deal...it’s a dark sign.”

Michael Krieger-Complete Collapse of Everything

The 'New' DNC Platform Includes $15 Minimum Wage & Free College

If the Democrats plan to defeat Donald Trump in the general election, Hillary Clinton needs to win over all of those voters who supported Bernie Sanders throughout the Democratic campaign. As we noted just weeks ago, the Vermont Senator - and by extension his supporters - wasn't sold on Hillary's ability to move in the direction that was necessary.

Recall, below is what Sanders had to say about wanting his 12 million supporters to be heard:

"Look we got 12 million votes during our campaign. We received the lion's share of young people who are prepared to stand up and fight for real change in this country, that's what we are bringing in to the Democratic convention. What do we want in return, we want our 12 million supporters to be heard."

The Democratic National Committee unveiled a draft of its party platform on Friday, it is evident that the DNC is focused on convincing those millions of Sanders supporters that it is serious about addressing their concerns. As Politico reports, the draft, which was approved by 13 of the 15 members on the drafting committee, calls for a $15 minimum wage, free community college and abolition of the death penalty.

Venezuela’s Economic Collapse Becomes Humanitarian Crisis

The combination of political mismanagement, corruption and plunging commodity prices have dealt a near fatal blow to the Venezuelan economy, as the country’s economic decline has quickly devolved into a humanitarian crisis.

Weak commodity prices over the past two years have accelerated Venezuela’s decline. Once known as “Venezuela Saudita,” or Saudi Venezuela, the Latin American economy has fallen into the throes of recession amid the halving of oil prices since 2014. Oil accounts for 95% of the country’s exports, making it especially vulnerable to price swings in the commodity markets. According to the World Bank, Venezuela’s economic downturn has yet to bottom out, sign that more pain may be on the way.

One of the biggest pain points is the relentless surge in inflation, which according to the International Monetary Fund (IMF) will rocket above 700% this year alone. A 6,000% rise in petroleum pump prizes and further monetizing of the public deficit are expected to feed into the inflationary spiral, further denting consumption and economic output.

President Nicolas Maduro has attributed the deepening crisis to an “economic war” led by private businesses and foreigners, who are hoarding food supplies to undermine the government. Maduro’s government has tasked local citizen committees with distributing scarce food supplies in a country experiencing severe shortages of basic goods and services. This has created optimal conditions for the black market to fill the void.

Druckenmiller, Soros, Spitznagel, Gross Warn Of Crisis

Brexit referendum pushed financial markets into turmoil. Even if this is only the beginning of tough times the main reason behind this is definitely not the result of the UK referendum. What we see today is merely a result of financial markets being disconnected from the real condition of the global economy. The red flags signalling overpriced markets (especially in the case of the US) now are raised not only from statistical data but also from experienced investors having a good forecasting record.

From the start, I would like to focus on aforementioned statistical data. They can give us clear picture of the US economy and what happened after previous crisis until now. The financial situation of the US is crucial because it is the American stock exchange that delivers 44% of the global capitalisation of financial markets. American financial sector is responsible for setting trends and today those trends are pointing south. Developing markets are falling right behind the trendsetter. One of the best indicator showing how healthy is the economy is the velocity of circulation of money. The better the economy, the more money people and other participants of the economy spend – this increases money circulation.

At first glance, you can see that after 2008-09 crisis situation worsened. During official ‘post-crisis recovery’ velocity was slightly above 1.7 while during the first quarter of 20016 it fell below 1.5 (for comparison – before the crisis it around 2.0). The above chart is not the only data point. Low money velocity means also less consumption – this is visible in higher inventory-to-sales ratio. Below you can see a record of it:

There's about to be huge upheaval in the financial world

The UK has voted to leave the EU, and there is much still to be resolved. One thing is certain, however: The investment-banking industry, and international finance more broadly, is likely going to change in a profound way.

The vote to leave the EU will not just affect where business is done, but what business is done and by who. First, international banks are likely to move staff out of London and do less business in the UK. Long before the vote, rival financial centers like Paris began campaigns to woo those bankers.

JPMorgan chief Jamie Dimon told an audience of bank employees in Bournemouth, one of many regional financial centers in the UK, that as many as 4,000 jobs may be affected by a Brexit before the vote.

He then sent a memo to staff after the vote, saying that the bank may need to make changes to its European legal-entity structure and the location of some roles. And Jes Staley, CEO of Barclays, sought to reassure foreign nationals working for the bank in the UK after the vote, but had to admit that he doesn't know what will happen.

Paris just banned all cars made before 1997

In an effort to curb pollution that some days makes the city as smoggy as Beijing, Paris began on Friday to ban cars built before 1997 from coming within city limits. Vehicles registered before then — and motorcycles before 1999 — will now face modest, phased-in fines during weekday traffic between 8 a.m. and 8 p.m., though they can drive freely into the city on weekends.

Eventually, the restrictions will grow even tighter: By 2020, the ban will cover cars registered before 2010 (if you're wondering how cops will identify the scofflaws, vehicles will now use window stickers classifying them by their pollution levels).

The ban is estimated to cover about 10 percent of cars currently registered in Paris, or roughly 30,000 vehicles. And it marks one of the most drastic attempts to restrict cars in a European city. It probably will disproportionately affect lower-income drivers more likely to drive old, cheaper models, as critics have pointed out. And classic car owners have been miffed, too. Ride-hailing companies such as Uber, on the other hand, stand to win in the change.

The French have tried nudges, incentives and emergency measures in the past to combat air quality that, on its worst days, can render the Eiffel Tower nearly invisible. On high-pollution days, Paris has previously made public transit and residential parking free to get people out of their cars, and it has lowered speed limits. Last March, the city temporarily allowed only half of cars — those with even-numbered license plates — on the road for a day. And France has offered hefty subsidies to anyone trading in a diesel car for an electric one.

Brexit Proved It’s All A Central Bank Funded Mirage

I keep hearing that the “Chicken Little’s” are once again being proved wrong. We keep being shown chart, after chart, after chart, after chart how the market recovers from perilous sell-offs. This is expressed as “proof” the “market” doesn’t want to go down, and has legs to vault ever higher.

Cause for concern is being dismissed by the hordes of next in rotation fund managers, economists, Ivory Tower academics, or Nobel Laureates as they themselves stampede to any available cameras, microphones, or keyboards that will quote them as saying “See…all that worrying is for naught. And expressing anything other is strictly for the gloom and doom crowd.” Which they then will triumphantly state: “Which has been wrong over, and over, and over again.”

My response is this: Then why is nobody buying it? (e.g., the market) Figuratively, as well as literally. If one looks at any credible volume report, the participation rate as to those “buying” into these rallies, which by the way, are the result of a previous fall instilling (once again) a near death experience. It rivals that of a BLS report. i.e., great headlines – just don’t look at how many people are actually “participating.”

I have another question: Why can’t the markets proceed any higher than when QE ended in Oct/Nov of 2014? You know, if this is truly: a fundamentally based bull market that is. Or, is it that – its fundamentally full of bull? I believe it’s a big-ole-pile of the latter, and little to none of the former.

American economy still hurting from the recession

A report issued by the Federal Reserve Board in May found that 46 per cent of Americans said they did not have enough money to cover a $400 emergency expense.

Instead, they would have to put it on a credit card and pay it off over time, borrow from friends or family, or simply not cover it at all.

The U.S. economy is becoming lethal to the less fortunate, according to the National Centre for Health Statistics, which reported recently that death rates in the country have risen for the first time in a decade.

The death rate rose to 729.5 deaths per 100,000 people in 2015, up from 723.2 in 2014. Especially noticeable is the rising mortality among working-class whites, particularly those with no more than a high school education. Some of this is due to drug use and suicide. Carol Graham, a researcher at the Brookings Institution, recently analyzed data on life satisfaction and found that when it comes to their outlook on the future, the most desperate groups are poor and near-poor whites.

Keiser Report: Debt Balance Sheet

New Low ‘Proud to be American’ At End of Obama Era

This newest Gallup poll suggests we may not be seeing as many red, white and blue flags flying this Fourth of July weekend. Fewer Americans than ever are “proud” to be American, a new Gallup poll finds – a 16-year record.

Here’s the not-so-patriotic news. As the nation prepares to celebrate Independence Day, 52% of U.S. adults say they are "extremely proud" to be Americans, a new low in Gallup's 16-year trend. Americans' patriotism spiked after 9/11, peaking at 70% in 2003, but has declined since, including an eight-percentage-point drop in early 2005 and a five-point drop since 2013.

It’s hard not to connect this grim trend with President Obama’s White House tenure. While the trend did drop significantly in the years between 2004 and 2006, when President George W. Bush was still in office, Obama did little to inspire Americans. Even after his whole “Hope and Change” campaign, the numbers didn’t budge.

Our stagnant economy, tendency to place correctness over national security, and fading international image thanks to our capitulating to extremist regimes may help explain why Americans are not wild about their country right now.

Goldilocks jobs report for June would be ‘just right’

If there was ever a time for a Goldilocks-style U.S. jobs report, now is it.

Investors and Federal Reserve honchos would like to see a rebound in job creation in June, but after the unsettling U.K. vote to leave the European Union, they’d prefer a employment report that’s not too hot and not too cold. In other words, just right.

For June, “just right” looks to be around 175,000 to 200,000 new jobs. Such a gain would reflect a marked improvement upon tepid employment gains of 38,000 in May and 123,000 in April. The U.S. added an average of 81,000 jobs a month from March to May, the weakest three-month stretch since 2010.

A just-right jobs report would offer more evidence that the economy has recovered from an early-year swoon, but it would not be so strong as to put more pressure on the Fed to raise U.S. interest rates so soon after the “Brexit” vote.

Retailers are closing faster than you think

Retail store closings are at their highest level since 2010 — and the hemorrhaging has only just begun. Just last week, The Post reported that Japanese fast-fashion darling Uniqlo had quietly shuttered five of its US locations since January.

Uniqlo’s closures follow a slew of announcements so far this year by fashion stalwarts, from Ralph Lauren to Macy’s, that they’re shuttering dozens of stores. Department stores and national chains like Target that sell a lot of apparel got creamed in the first quarter — and continue to face heavy threats from all sides.

Customers are flocking to Amazon and off-price stores for convenience and bargains, or spending their scarce discretionary income on experiences rather than apparel. The ease of online comparison shopping makes it hard for stores to raise prices, while weak wage growth means many shoppers can’t splurge.

It all adds up to too many brick-and-mortar fashion stores. “So many retailers are struggling,” said Garrick Brown, vice president of retail research, Americas, at Cushman & Wakefield. “You are going to hear, by end of summer, a whole lot more closure announcements.”

Obama spouts “progressive fantasy” in Parliament: Praises Notley for “promoting growth”?

National debt jumps nearly $100 billion in one day to record high

The U.S. national debt is creeping up again, after holding steady for the last few months thanks to the annual flood of individual and corporate tax receipts.

Total government debt hit a record $19.38 trillion on Thursday, up nearly $98 billion from the day before. It's the first time it has ever exceeded $19.3 trillion.

The debt will soar higher still in the coming months, and is expected to approach $20 trillion by the time President Obama leaves office.

The total debt had been essentially flat since March, when it hit $19.2 trillion. Growth in the national debt often slows or plateaus in the spring and early summer, as tax receipts in April help balance out federal spending that's on a current pace to exceed receipts by $500 billion.

Predictions of a Chinese banking system bailout are going mainstream

What was once the fringe view of permabears and short sellers is now increasingly being adopted by economists at some of the world’s biggest banks and brokerages. Nine of 15 respondents in a Bloomberg survey at the end of last month, including Standard Chartered Plc and Commonwealth Bank of Australia, predicted a government-funded recapitalization will take place within two years. Among those who provided estimates of the cost, a majority said it will exceed $500 billion.

While a bailout of that size would be a far cry from the $10 trillion forecast of U.S. hedge fund manager Kyle Bass in February, the responses reflect widespread concern that Chinese lenders will struggle to cope as bad loans surge. Even as some analysts said a state recapitalization would put the banking system on a stronger footing, 80 percent of respondents predicted news of a rescue would weigh on Chinese markets -- dragging down bank stocks and the yuan while pushing up government borrowing costs and credit risk.

“A recapitalization will happen after the Chinese government comes clean with the true nonperforming loan figure,” said Kevin Lai, the Hong Kong-based chief economist for Asia ex-Japan at Daiwa Capital Markets. “That will require a lot of money creation.”

At CBA in Sydney, analyst Li Wei said the Bloomberg survey was the first time he’d estimated the timing and cost of a recapitalization. The topic became more prominent after an article calling for the nation to tackle leverage and bad debt appeared in the People’s Daily, the mouthpiece of China’s ruling Communist Party, in May. That same month, Societe Generale SA issued a 48-page report wargaming restructuring options for China’s state-owned enterprises and banks.

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