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Monday 09.05.2016

A cashless society? Some retailers turn noses up at currency

Stroll into the airy Kit and Ace store on Woodward Avenue in Detroit and you're struck by the minimalist style that highlights the brand's comfortable, street-smart clothing line. But if you wanted to buy a scarf, maybe one that's on sale for about $50, don't bother paying with cash. The store won't take your Benjamins — or Hamiltons, Jacksons or Grants.

It's nothing personal. It's a no-cash policy that has been adopted at other Kit and Ace stores, too. I don't imagine anyone who favors don't-look-like-you're-trying-too-hard fashion is going to care too much if they can't spend actual cash. But the oddity of a no-cash policy does make you think. How much closer, really, are we to a cashless society? Are we looking at the beginning of a more minimalist approach to money?

Why you'll always need cash, despite PayPal, Apple Pay, etc. "I think we are sort of on the edge of seeing more and more businesses that don't take cash," said Jay Zagorsky, economist and research scientist at Ohio State University.

Zagorsky has been talking about a transition to a cashless society for some time. He points out that some parking lots on university campuses and elsewhere no longer take cash. Many airlines no longer let you pull out cash to buy snacks or drinks because it's too difficult to make change. Zagorsky sees a time, maybe in a few years, where more retailers do not accept cash, which could make it harder on poor families who do not have bank accounts.

Keep dreaming if you think you’re retiring in your 60s

Within this economy and its superficially healthy 4.9 percent unemployment numbers lies a double-edged crisis. It’s a crisis within a crisis.

Historically, 5 percent to 6 percent unemployment was considered “full-employment” in America. But today’s workforce isn’t exactly your grandparents’ workforce. Then again, it may be.

Some 24 percent of seniors over 65 years old are now in the US workforce. Yes, one quarter of our seniors must now work to get by. The Silver Tsunami has struck America’s workforce, and it isn’t pretty.

In America, the dream of retiring in your 60s is quickly becoming more of a fantasy than a realistic goal. And it’s astonishing how the quality of jobs here has diminished over the past 10 years. Gone is upward mobility. For every tiny tech startup that employs 20 to 100 people, there’s a Walmart, which announced a 7,000 person headcount reduction on Thursday. And Walmart is cutting its “highest-paid hourly workers in accounting and invoicing” and jobs that are mostly held by “long-term employees,” the company said.

Why Is US Economic Growth So Sluggish?

The U.S. economy has been pedaling along in the slow lane for almost 10 years now. Real GDP growth, well below the historic 3-plus percent, always seems to be heading south. Growth for 2016’s first half came in at just 1 percent. And productivity, the amount of GDP stuff produced on average by U.S. workers, is headed south, too.

Why can’t Washington, the Fed, the next president, or somebody do something about this? Presidential candidate Hillary Clinton argues that America’s prosperity can be improved by imposing higher taxes on the more prosperous 1 percent and shifting the proceeds to the more deserving middle class. Unfortunately, such trickle-over tactics just don’t work out too well. Taxing Peter to pay Paul always gets Paul’s vote, but Peter has a way of avoiding the tax haircuts, and the politicians that write the tax code make sure that’s the case.

There is no such thing as free environmental quality, improved workplaces, and deeper documentation of loans.Candidate Donald Trump says trade and immigration are the chief problems. If we wall out people who want to come work in America and wall in manufacturers who want to find happier hunting grounds elsewhere — he contends — we can wall in higher prosperity. But centuries of experience tell us that people overall are enriched by gains from trade and that people who are willing to work should be encouraged to stick around. Besides, a free society has difficulty finding ways to force investors to hold investment portfolios of failing firms. If firms seeking gains elsewhere cannot migrate, their capital will.

While how we tax, spend and participate in the global economy surely matters, we know that future GDP growth, wages, salaries, improved healthcare and even paying college tuition depend on improvements in labor productivity. Let’s face it: If all of us hope to get more stuff, we will just have to produce more stuff.

History Will Recognize These Times as a Great Depression - Peter Schiff

Caterpillar cutting 300 jobs

Hundreds of mostly office employees received layoff notices at one of the largest Caterpillar Inc. facilities in the Peoria area this week, just as the company announced plans to close overseas production plants and eliminate thousands more positions. A total of 300 support and management employees at Building AC and the Tech Center in Mossville this week received job-loss notifications that included severance packages, 60 days' notice and mandated Illinois Worker Adjustment and Retraining Notification (WARN) Act letters.

The WARN Act letters are required under certain conditions, including plant closures and mass layoffs of at least 250 people, and must be filed with agencies such as the Illinois Department of Commerce and Economic Opportunity.

"We issued out WARN letters to the appropriate agencies and employees," Caterpillar spokeswoman Rachel Potts said Friday. "The letter does not reflect other reductions at our facilities in the area."

The company did not disclose the number of layoffs this week at other locations in the region. The layoffs generally take effect by Oct. 31, and Caterpillar announced it would work to place some of those employees in new positions within the company while helping others find work elsewhere.

EU will not release more bailout money for Greece this month: paper

The euro zone will not release additional bailout money for Greece at a meeting in Bratislava this month, Germany's Handelsblatt Global reported on Sunday, citing European Union diplomats. The online edition of the German business daily quoted the diplomats as saying that Athens had only implemented two of 15 political reforms that are conditions for the bailout money. Above all, they said, Greece had been slow to privatize state assets.

Under a deal signed last year with euro zone countries, the European Central Bank and the International Monetary Fund, the ESM will provide financial assistance of up to 86 billion euros to Greece by 2018 in return for the agreed reforms.

The debt relief is due to be granted in tranches, including short-term measures to extend Greece's debt, with a further reduction due after 2018 including interest deferrals and interest rate caps.

Handelsblatt Global said the Eurogroup had approved a tranche of 10.3 billion euros for Greece in May from the overall package. An initial 7.5 billion euros of that sum had been transferred to Athens with the rest scheduled to arrive in the fall. The diplomats said the Eurogroup will only discuss a progress report on Greece at the Bratislava meeting.

Goldman Sachs boldly strays from the herd with a contrarian Fed call

On September 21, the Fed is gonna do it. They’re gonna hike rates, say a few bold economists. The US economy is adding jobs at a rate that’s “just enough” for most members of the Fed’s Federal Open Market Committee (FOMC) to vote for a rate hike this month, Goldman Sachs’ Jan Hatzius argued.

During the global financial crisis, the Federal Reserve loosened monetary policy and lowered interest rates aggressively in its effort to stimulate the tumbling economy. By December 2008, the Fed had cut its benchmark rate to a target range of 0-0.25%, effectively lending money for free. After watching the economy grow for seven years, the Fed lifted its target range to 0.25%-0.50% in December 2015.

Since December, the Fed has been on hold. And the world of policymakers, economists and investors have been left to speculate what the Fed may or may not be thinking.

For most traders and economists, the odds of a September rate hike actually fell after Friday’s disappointing US jobs report. According to futures market data tracked by Bloomberg, the probability of the Fed hiking rates at its Sept. 21 meeting fell to just 22% from 34% before the jobs report.

Bloomberg: Abolish Cash to Create a Freer Market

Want a Free Market? Abolish Cash … If you believe that government meddling in financial markets was responsible for the last recession and the lackluster recovery, you might be right. But probably not in the way you think. – Bloomberg

Some Bloomberg editorials are stranger than others. This one is especially strange because it argues that banning cash will create a stronger, freer market. How does a government ban on certain items make anything freer? We don’t understand.

Here’s Bloomberg’s logic: Two government mechanisms prevent real interest rates from getting too negative. The first is cash: As long as people can hold currency, which loses its value only at the rate of inflation, they won’t buy safe assets that yield even less.

The second is the central bank’s promise to keep the inflation rate low and stable — at about 2 percent in most developed nations. As a result, people have little reason to hold any asset that yields less than negative 2 percent (perhaps negative 3 percent, considering that cash is bulky and hard to store). In other words, governments — by issuing cash and managing inflation — put a floor on how low interest rates can go and how high asset prices can rise. That’s hardly a free market.

The Fed Fiddles While Free Markets Burn

We’ve all heard the story of how the emperor Nero fiddled as Rome burned. Today, we use it an as analogy, whenever fitting, to show the callousness of either a person or entity when they are obviously engaged in wreaking havoc or utter devastation; all while caring none-the-least.

Nobody seems to fit that bill today more than central bankers. And to show just how Nero-esque they can be, it was none other than our own Stanley Fischer, current V.C. of the Fed. who displayed in an interview with Tom Keene of Bloomberg™ what can only be deemed as the most infuriating lack of compassion, as well as sheer imperialist intoned advice. Here’s a few “gems” from that interview. When it comes to negative rates? To wit:

While the Fed isn’t “planning to do anything in that direction,” the central banks using them “basically think they’re quite successful,” Fischer said Tuesday on Bloomberg Television with Tom Keene in Washington. “We’re in a world where they seem to work,” Fischer said, noting that while negative rates are “difficult to deal with” for savers, they typically “go along with quite decent equity prices.”

So what is one to infer? Easy: Fed too savers and the prudent: Screw you – buy stocks. You don’t need to take my word for it. If you’re a saver, a retiree, an entrepreneur who just sold your business, a pension fund recipient, an insurance policy recipient, __________(fill in the blank) You know all too well the harsh reality of what the Fed. and others have wrought to these markets and their once stable products.

Why This $1.6 Billion Hedge Fund Is 50% In Cash

"The whole world is wrongly positioned," warns Norwegian hedge fund firm Sector Asset Management's founder Peter Andersland, "the common denominator for everything is the long duration -- real estate, stocks, bonds. Everything is much more rate sensitive now."

As Bloomberg reports, Andersland's $1.6 billion holds as much as 50 percent in cash in one of its funds, because holding cash is the best protection against bond and stock markets inflated by record monetary stimulus.

“What can kill us now?,” Peter Andersland, the 55-year-old founder of Sector, said in an interview on Tuesday at his office overlooking the Oslo fjord. “It’s the correlation between stocks and bonds that will be induced by higher rates. That’s the biggest risk in the capital markets today, not geopolitics or Trump.”

Massive central bank stimulus with below zero rates and quantitative easing has led to increasingly dysfunctional markets, with even the negative correlation between stocks and bonds breaking down. As we have noted previously, they are now largely moving in the same direction as markets have become more driven by central banks, leaving investors with no place to hide.

Keiser Report: Mega Week in News

RBC: Expect Oil Markets To "Be Sloppy Until Year-End"

Despite oil clawing its way up by 3 percent on Friday with Brent and West Texas Intermediary settling at $46.83 and $44.44 per barrel respectively, crude prices still ended the week lower based on oversupply concerns.

Carl Larry Director, director of business development for oil & gas at Frost & Sullivan, said, "It's quite likely oil will hold at mid-$40 levels; more telling of how oil performs will be the rig count in coming weeks and OPEC gestures to support prices" – a reference to rising U.S. oil rig counts and the Organization of the Petroleum Exporting Countries freeze talks in Algeria.

In assessing the factors that have contributed to oil's wild ride for the past month, Helima Croft, global head of commodity strategy for RBC Capital Markets, said that even if OPEC members reach a deal, crude prices will "be sloppy until year-end."

Pointing out that a deal would do little to affect oil supply, she told CNBC's Worldwide Exchange, "This is all a sentiment game at this point; I think sentiment has been driving the market, and so I think if you have the sense that OPEC could do something, it does firm a floor and potentially moves us four or five bucks higher on the day."

Delta’s Recent System Outage Cost The Airline $100M In Lost Revenue

Remember that major systems outage that hit Delta last month, prompting the airline to ground all flights worldwide? In addition to majorly ticking off customers who had their travel plans disrupted and grabbing the attention of lawmakers who have since demanded an explanation for these kinds of outages, Delta lost a whole lot of money.

Four days of canceled and delayed flights comes out to a $100 million loss of revenue, Delta said on Friday, or about 1% of its quarterly revenue, notes the Minneapolis Star Tribune. All told, Delta had to cancel about 2,300 flights after a power failure brought down the company’s systems.

The financial impact of the outage doesn’t just affect revenue: Delta likely had to shell out a big chunk of change to cover travel vouchers, hotel accommodations for stranded travelers, worker overtime pay, and other things. Those expenses will probably be reported during Delta’s third-quarter results in October.

On a brighter note, at least where Delta is concerned, the airline completed 98% of its scheduled flights last month (not including regional affiliates).

Economic Slowing—– Jobs Now, Autos Next

If the labor market were slowing as the wider perspective of the payroll reports suggest, then it would make sense to find increasing difficulties even among the few bright spots in this otherwise anemic economy. Yesterday and earlier it was reported increasing signs of slowing in real estate, both construction and resales of homes (particularly dwindling inventory). In the past few months, that possible consumer strain was also observed in auto sales, the one part of the manufacturing economy that had appeared immune from depressionary forces plaguing much of the rest.

The word “plateau” has been used recently in describing predictions for consumer spending on autos the rest of this year, given to us by Ford officials who remain in their position that sideways is the worst we can expect – at least for now. August auto sales further raise the possible that the plateau may instead be the best case.

U.S. auto sales fell 4.2 percent in August as some major automakers said a long-expected decline due to softer consumer demand had begun, possibly sparking a shift to juicer customer incentives and slower production.

Still, Ford’s management manages to use that word: “We think sales have reached a plateau, and at that plateau we’ll see some month-to-month volatility,” Ford senior economist Bryan Bezold said. Ford sales fell nearly 9% in August, which isn’t so much of a “plateau” after falling “just” 3% in July. Overall sales at other carmakers were not as dismal but concerning nonetheless: GM -5.2%; Toyota -5.0%; BMW -7.2%; Honda -3.8%; Nissan -6.5%. The only major manufacturer to manage a gain was Fiat Chrysler, +3.1%.

Merkel Party Suffers First Defeat by Anti-Immigration Populists

Chancellor Angela Merkel’s party was beaten by the populist Alternative for Germany for the first time in a state election, showing the persistence of the backlash against her open-border refugee policy.

Merkel’s Christian Democrats took 19 percent in the Baltic coast state of Mecklenburg-Western Pomerania on Sunday, while Alternative for Germany, or AfD, had about 22 percent, according to ARD projections based on partial returns. The Social Democrats, who have governed the eastern state since 1998, won the election with an estimated 30.3 percent, dropping Merkel’s party to third place in her political homeland.

“This result is bitter for everybody in our party,” CDU General Secretary Peter Tauber told reporters in Berlin. “There are people who have fears and concerns -- and we didn’t manage to quell these fears.”

A year before national elections in which Merkel may seek a fourth term, the defeat underscores the surge in public anxiety in Germany that’s put the chancellor on the defensive after more than 1 million asylum seekers arrived last year. The AfD, which blames the influx on Merkel’s refusal to close the borders, campaigned against immigration as well as opposing her renewable-energy strategy and arguing against sanctions on Russia. “Merkel’s catastrophic refugee policy always plays a role,” AfD’s co-chairwoman Frauke Petry told broadcaster ZDF.

US Twilight Zone of Pre-Collapse Just like Rome

Online Retail Trend Forces U.S. Real Estate Developers to Pursue Mall Tenants with No Internet Competition

At a time when many traditional retailers are shrinking store sizes or closing locations, real estate developers are trying to fill malls and shopping centers with businesses that are "Internet proof."

So real estate developers are looking for new tenants not directly competitive with Amazon. They're filling shopping plazas with urgent care centers and dentist offices, hair salons, gyms and restaurants instead of more brick-and-mortar stores, said Ron Wheeler, CEO of Sembler Co., a St. Petersburg real estate developer. "What's in high demand is Internet proof," said Wheeler, whose company specializes in developing Publix-anchored shopping plazas. "It's all experiences you can't get online."

One indication of that is the emergence of grocery stores such as Whole Foods Market moving into Westfield Countryside mall where half of a Sears department store used to be. Or a brand-new housing development incorporating something different, such as a food hall, in the Heights development of the old Armature Works building just north of downtown Tampa.

International Plaza filled the former Robb & Stucky space with an upscale gym and spa. University Mall's renovation plans call for adding a gym, too. Gone are the days when shopping malls need to rely on a big anchoring brand name to draw customers. Restaurants are quickly filling that void, retail experts said at the International Council of Shopping Centers Florida Conference in Orlando this past week. "Shopping centers want Internet-resistant businesses now that offer services that can't be replicated online," said Mike Milano, managing director of retail services for Colliers International in Tampa. "They're willing to drive farther and stay longer if they can touch and feel something in a new way in a store."

Self-Driving Ubers Appear in San Francisco

SFist has spotted Uber’s self-driving cars on the streets of San Francisco, bearing their trademark menacing sensor array and the logo of Uber ATC, the ride-hailing behemoth’s research arm. An SFist reporter captured video of one of the vehicles in motion–barely–through SF traffic.

It’s unclear whether the cars are actually operating autonomously as part of a live road test, or if they’re just in transit and being driven by humans. Uber hasn’t announced a test program in San Francisco as it did earlier this year for Pittsburgh, where they’re now publicly testing the vehicles.

California also has some of the stricter autonomy regulations in the country, and the California DMV does not list Uber as having a testing permit in the state.

On the other hand, the video shows the car’s LIDAR imaging array spinning, indicating that at least part of the autonomy system is active.

NEWS to Disturb the Comfortable...

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