The economy shows 'evidence for an imminent recession'
Recessions don't come on a schedule, but most times there are some warning signs one is on the horizon.
By looking at current macroeconomic trends, Savita Subramanian at Bank of America Merrill Lynch extrapolated an estimate of the timing of the next recession.
"But in examining some of some of our favorite indicators’ recent trends, we did find evidence for an imminent recession," wrote the BAML equity strategist in a note to clients on Wednesday. "While the range of signals is wide, in aggregate they do suggest that, if data were to continue to weaken in line with the recent pace, history would point to a recession in the second half of 2017."
Subramanian looked at five main macro factors to determine what they are saying about a recession: The 2-year Treasury yield vs. the 10-year yield, the ISM manufacturing index, building permits, temporary help job growth, and commercial and industrial loan growth.
Credit Suisse to Pay $90 Million for Padding Private Assets
Credit Suisse Group AG agreed to pay a $90 million penalty to settle U.S. Securities and Exchange Commission claims that the bank misrepresented how much money it attracted to its private bank.
Employees inflated new client assets managed from the fourth quarter of 2011 to 2012 to meet sales targets, which painted a rosier picture of the bank for investors, according to a statement from the regulator Wednesday. The Zurich-based lender admitted that pressure from managers led to the securities violations. Former Chief Operating Officer Rolf Boegli, who didn’t admit or deny the findings, agreed to pay an $80,000 penalty for allegedly pushing employees to misrepresent the assets despite their concerns.
“Credit Suisse conveyed to the investing community that it followed a structured process for recognizing net new assets when, in fact, the process was reverse-engineered to meet targets,” Andrew J. Ceresney, head of the SEC’s enforcement division, said in a statement.
More than $1 billion of a private wealth client’s assets were reclassified in the fourth quarter of 2011 as being managed by the bank, which generally generates higher fees, than just custodied at the bank, according to the SEC. Another customer had more than $4 billion reclassified as managed assets in the first quarter of 2012, which constituted more than 75 percent of net new money reported by Credit Suisse’s wealth management business that quarter.
Heavy Truck Orders Plunge, Worst September since 2009
Orders for Class 8 trucks – the rigs crisscrossing the US highway system that keep the nation supplied – plunged 27% in September to 13,791, according to FTR Transportation Intelligence. It was the worst September since 2009.
The year 2014 had been great. Nearly 300,000 Class 8 trucks were built. 2015 started out even stronger, and the industry anticipated – in what has become a series of false hopes inspired by QE-nurtured optimism about capital expenditures – that 327,000 heavy trucks would be ordered, which would have been a record.
But then the trucking industry began to sputter as the goods producing economy was swooning, and soon trucking companies, beset by overcapacity, began to curtail their purchases from heavy-truck dealers, and dealers with inventories piling up, began to cut orders to manufacturers. As 2015 wore on, orders continued to fall. Despite the strong beginning, orders ended the year down 5.3% from 2014, to 284,000 trucks.
This year has turned out to be outright ugly. So far, manufacturers have received only 130,305 orders, according to FTR, a 39% collapse from the same period in 2015.
Why You Shouldn’t Write Off Silver Just Yet - Veteran Trader
Fed's Lacker says there are signs inflation is heating up
Inflation appears to be heating up in the United States, part of a strong case for the Federal Reserve to raise interest rates more quickly, Richmond Fed President Jeffrey Lacker said on Wednesday.
Consumer price increases have been below the Fed's 2 percent target for more than four years but some policymakers have argued the jobless rate at 4.9 percent is low enough to pressure wages higher, which could in turn lead to faster price gains.
Lacker, who does not have a vote on Fed interest rate policy this year but has argued interest rates need to rise significantly to ward off future inflation, said price gains might now be accelerating.
"There are signs that inflation is heating up," Lacker told students at Marshall University in Huntington, West Virginia.
Working class white men make less than they did in 1996
Working class white men saw their income drop 9% between 1996 and 2014, according to a new report from Sentier Research. This group, who Sentier defines as having only a high school diploma, earned only $36,787, on average, in 2014, down from $40,362 in 1996.
Meanwhile, college educated white men saw their income soar nearly 23% over the same period, from $77,209 to $94,601.
Published by two former Census Bureau officials, the Sentier report shines yet another light on the fortunes of the white working class. This group has become a force in the 2016 presidential election, serving as the backbone of Donald Trump's support. And the Republican candidate's campaign has tailored much of his campaign to the working class, with promises that he will bring back the manufacturing jobs that once allowed them to support their families.
The study first looked at the 1996 incomes earned by 10 groups of men in two-year cohorts ranging in age from 25 to 26 to 43 to 44. Sentier then looked at what men earned 18 years later, when the youngest cohort were 43 to 44 and the oldest were 61 to 62. The results varied greatly by age. The youngest group of working class white men, who were 25 to 26 in 1996, saw their incomes rise by 19%, from $32,677 to $38,803, over the 18-year period. However, their college educated peers enjoyed a 133% explosion in their incomes, from $40,487 to $94,252.
IMF warns of financial stability risks
The International Monetary Fund (IMF) has warned that risks to financial stability are growing. It warns about what it calls "medium-term" dangers in both emerging and developed economies, in its twice-yearly report. It expresses particular concerns about Europe, Japan and China.
On a more positive note, the fund does say that short-term risks have abated since its previous assessment of global financial stability in April.
Pressures on emerging markets have eased, the report says. Rising commodity prices (though they are still relatively low) have helped and so has the reduced uncertainty about China's prospects in the near term.
The report says investors were taken by surprise by the result of the British referendum on the European Union, but the political shock was absorbed by markets. They passed what it calls "this severe stress test". But looking further ahead, the IMF sees growing risks. A key factor is bank profits.
Pfizer Workers Prepare for Hundreds of Layoffs in North Carolina Factory
Pfizer Inc. workers are bracing for hundreds of layoffs at the drug giant’s factory in Rocky Mount, North Carolina. About 2,000 people work at the plant, which was acquired from Hospira Inc. as part of a $17 billion deal last year. Pfizer has been selling off Hospira assets since the acquisition closed.
A Pfizer spokesperson declined to confirm that 400 people will be cut, in response to reporter questions, according to WRAL TechWire.
"Based on current information, we expect the production level changes will impact a few hundred full time roles in the second half of 2016," a Pfizer spokesperson said in a statement.
Pfizer in August cut 151 workers from a factory in Pearl River, New York, according to The Journal News.
"It Cannot Be Allowed To Fail": Germany Pursuing "Discrete Talks" With The US Over Deutsche Bank
So much for last week's rumor of an imminent reduction in the DOJ $14 billion settlement, which sent the price of DB soaring, and propelled the global stock market higher. Moments ago, Reuters reported that the German government is pursuing "discreet talks" with U.S. authorities to help Deutsche Bank secure a swift settlement over the sale of toxic mortgage bonds.
German officials have, until now, played down their role in the standoff, saying it is up to Deutsche to work out a deal with the DOJ, which is demanding $14 billion to settle RMBS misselling claims. But now it has been confirmed that Berlin government officials are hoping to "facilitate a quick deal that would buy Deutsche Bank time to regain its footing."
One senior government official told Reuters there was "contact at all levels" between German and American officials. Another source said Finance Minister Wolfgang Schaeuble was not planning to meet DOJ officials during a trip to Washington this week for International Monetary Fund meetings, but added: "You can hold talks. It doesn't have to be the minister."
Admitting also that, as has been widely known, Germany would not let DB sink, Reuters adds that "officials recognise that Germany's biggest bank, which employs around 100,000 people, cannot be allowed to fail." However, there is a time constrain as the resolution of the crisis through a prompt - and reduced - settlement is crucial for Chancellor Angela Merkel, who faces a federal election next year. It could be "political poison" for her government to rescue a bank that got into trouble through speculating. Which is why Berlin has been hoping that the US will endorse a near-term settlement, somewhere well below the original $14 billion ask.
The Government Spends $1.5 Billion Per Year on Public Relations, Ads, Watchdog Finds
A government watchdog found that over the last decade, annual government spending on public relations and advertising activities averages $1.5 billion. The Government Accountability Office publicly released a report Wednesday examining how much the federal government spent on public relations and advertising contracts, as well as on salaries for federal public relations employees, from 2006 to 2015.
Senate Budget Committee Chairman Mike Enzi, R-Wyo., asked the nonpartisan agency to determine how much the government spends on public relations activities.
“With increasing pressures on limited federal resources, it is crucial to know how much is spent across the federal government on public relations activities and which federal agencies are spending the most,” Enzi said in a statement. “It is important to understand the primary purposes and reported benefits from the investments of tax dollars paid by America’s hardworking families,” he continued.
Each year, the government spends $1 billion on public relations and advertising contracts, the GAO found. The agency also determined that nearly $500 million is spent on the salaries of federal public relations employees. The median salary of those employees in fiscal year 2014 was $90,000, and the GAO said there were 5,086 public relations workers employed by the federal government that year.
Catherine Austin Fitts-Chances of Slow Burn Continuing Radically Diminished
NYC Pension Fund Loses $41M Since Wells Fargo Fallout
The New York City pension fund is Wells Fargo’s (WFC) latest victim in the wake of the phony accounts scandal. The fund, which provides benefits to the city’s teachers and fire and police departments, has $160B in assets in investment funds.
New York City comptroller Scott Stringer reached out to Wells Fargo three weeks ago, demanding the return of $41 million to the fund’s shareholders.
“Years ago the New York City pension fund actually put in place claw backs so that we can actually go after the CEO, chair of the board if they’re not doing the right thing. So we sent a letter demanding $41 million in pay to come back to the share owners, and I’m glad to say they’re doing that. We’ve also looked at one of the vice presidents [Carrie Tolstedt] we want $19 million back—they’re doing that,” Stringer said during an interview on the FOX Business Network’s Countdown to the Closing Bell.
Stringer described the Wells Fargo scandal as an “entire scam perpetuated on the people of this country” and called for a complete investigation of the third largest bank in the U.S. “[New York City] Mayor de Blasio and I have also sent another letter saying, ‘look, if you don’t complete an investigation and clean this up, then our pension fund may decide not to do business with you.’ We are not playing around.”
Banks Revise Their “Living Wills”
The Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) recently posted the public portions of the required "targeted submissions" for the eight systemically important, domestic banking institutions in order to better increase transparency.
In April of this year, the agencies jointly determined that each of the 2015 resolution plans, or “living wills,” of Bank of America, Bank of New York Mellon, JPMorgan Chase, State Street, and Wells Fargo were not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code. As such, the agencies issued joint letters to these firms detailing the deficiencies in their plans and the actions the firms must take to address them, basically saying the banks were required to prove to the government they are not “too big to fail.” If a firm has not remediated the identified deficiencies, it may be subject to more stringent prudential requirements.
Additionally, the agencies identified weaknesses in the 2015 resolution plans of Goldman Sachs, Morgan Stanley, and Citigroup that the firms must address in their 2017 plans. These firms were also required to file a targeted submission by October 1, 2016, detailing the efforts taken to improve their weaknesses.
The Dodd-Frank Act requires bank holding companies with total consolidated assets of $50 billion or more and nonbank financial companies designated by the Financial Stability Oversight Council (FSOC) for supervision by the Federal Reserve to periodically submit resolution plans to the Federal Reserve and FDIC. Each plan must describe the company's strategy for rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure of the company.
China’s Hidden Plan to Accumulate Gold
China wants to do what the U.S. has done, which is to remain on a paper currency standard but make that currency important enough in world finance and trade to give China leverage over the behavior of other countries.
The best way to do that is to increase its voting power at the IMF and have the yuan included in the IMF basket for determining the value of the special drawing right. Getting those two things required the approval of the United States because the U.S. has veto power over important changes at the IMF. The U.S. can stand in the way of Chinese ambitions.
China accomplished that last November when the IMF agreed to include the yuan in its basket of currencies. That officially happened just a few days ago, Sept. 30. The rules of the game also say you need a lot of gold to play, but you don’t recognize the gold or discuss it publicly. Above all, you do not treat gold as money, even though gold has always been money.
The members of the club keep their gold handy just in case, but otherwise, they publicly disparage it and pretend it has no role in the international monetary system. China is expected to do the same. It’s important to note that China will not act in the best interests of gold investors; it will act in the best interests of China. Right now, China officially does not have enough gold to have a “seat at the table” with other world leaders. Think of global politics as a game of Texas Hold’em.
Nearly 70% of American Young Adults Living With Parents
Since the Great Recession of 2008, there have been significant shifts worldwide in the number of young adults living at home. But in some countries, the change has been more long-lasting and severe than in others.
From 2007 to 2014, the number of youth living at home across the countries belonging to the Organization for Economic Cooperation and Development increased only slightly, by 1.2 percent, according to a report released by the organization on Wednesday. And in some nations, the percentage of youth living parents actually decreased.
Italy, Slovenia and Greece had the highest percentage of youth living at home – with more than 70 percent of 15- to 29 year-olds cohabitating with their parents. But that's not too surprising, experts say, since countries like Greece and Italy were particularly hard hit by the recession, and have a culture of young adults living longer at home.
Canada had the lowest percentage of youth living with parents – about 30 percent of the country's youth still live at home. The Nordic countries, including Denmark, Sweden, Finland and Norway, also had low numbers of young adults living at home. France experienced the largest increase, with a 12.5 percentage point rise in the share of youth living with their parents over the seven-year time period. Report authors attribute the increase in part to the high numbers of young adults in France who are not in the workforce or in education. In France, nearly 17 percent of youth were not in a job or education institution in 2015 – an increase over the previous few years.
For your retirement planning, count on living until age 95
If you knew your date of death, retirement planning would be a breeze. Unfortunately — or maybe fortunately? — you don't. And that can make planning for retirement extremely difficult. Does your nest egg need to last 20 years? 30 years? 40 years? And what about couples? How should couples go about planning for the likelihood that one spouse — usually the husband — predeceases the other?
Well, if you’re like most people, you’re guessing at this, and guessing quite wrong. “Many people do not understand longevity well, and those people who plan often do not plan for long enough,” says Anna Rappaport, president of a retirement consulting firm bearing her name and chair of the Society of Actuaries (SOA) Committee on Post-Retirement Needs and Risks.
Becoming familiar with current life-expectancy statistics is the first order of business. “There are two aspects to addressing longevity,” says Noel Abkemeier, the founder of Abkemeier Actuarial and chair of the American Academy of Actuaries Lifetime Income Task Force. “First, understanding it, and then planning an income that will last throughout life.”
You may live much longer than you think. "There have been significant improvements in how long people survive in retirement, especially for wealthier Americans,” says David Blanchett, head of retirement research at Morningstar Investment Management. Consider: Someone born in 1950 was expected to live to age 68.2. By contrast, someone born in 2014 was expected to live to age 78.8, according to the Centers for Disease Control and Prevention. In other words, someone born today will need to fund an extra 10 years of retirement vs. someone born 66 years ago.
Fed Losing Control; Bond Market Will Blow Up
European Banks Shed 20,000 Jobs as Worries Grow Over Deutsche Bank
Banks across Europe have announced over 20,000 job cuts in recent days as they struggle to make profits. The focus is on German giant Deutsche Bank, whose share price has hit 30-year-lows after U.S. regulators announced they are seeking a $14 billion fine over a misselling scandal.
The U.S. Department of Justice accuses Deutsche Bank of misselling mortgage securities, residential loans repackaged as bonds and sold to investors, dating back to 2005.
Regulators have put the initial fine at $14 billion; Deutsche Bank insists that is just an "opening position." The final figure is likely to be negotiated down, says senior Europe analyst at London's Capital Economics, Jennifer McKeown.
“The big question is by how much, just how big it will end up being," said McKeown. "Deutsche Bank has suggested that it envisages a fine of between $3 billion and $5 billion, which would be just about affordable for Deutsche Bank. But in fact it seems it is likely to be quite a lot higher.” If it is much higher, analysts say Deutsche Bank would have to raise fresh funds by tapping shareholders for cash.
Why Would A Hospital Charge You For Holding Your Newborn Baby?
Though there are many kinds of surprises you might find on your bill after a trip to the hospital, some seem too strange to be true. For example, a new father in Utah who was amused to find a charge for the moment his wife held their newborn baby against her chest. What in the world?
The new dad posted his bill on Reddit with the $39.35 charge for “Skin to Skin after C-Sec,” telling PIX-11 he thought it was “funny and a bit ridiculous,” but that overall they had a good experience at the hospital.
“The nurse let me hold the baby on my wife’s neck/chest,” he wrote on Reddit. “Even borrowed my camera to take a few pictures for us. Everyone involved in the process was great, and we had a positive experience. We just got a chuckle out of seeing that on the bill.”
Although the charge disgusted many commenters, as one redditor who claims to be a labor and delivery nurse pointed out, it’s not about charging for access to your kid: in fact, holding the baby in the operating room “requires an additional staff member to be present just to watch the baby,” and that staffer’s services cost money.
Confirmed: NFL Losing Millions Of TV Viewers Because of National Anthem Protests
A headline for a story in the Sporting News this morning: “Shock poll: A third of NFL TV viewers boycotting games because of Colin Kaepernick-led protests.” Shock? Why?
The Sporting News article says “Nearly one-third (32 percent) of adults say they’re less likely to watch NFL game telecasts because of the Kaepernick-led player protests against racial injustice, according to Rasmussen’s telephone/online survey of 1,000 American adults conducted Oct. 2-3. Only 13 percent said they were more likely to watch an NFL game because of continuing protests by Kaepernick and supporters such as Antonio Cromartie of the Colts (who was cut only two days after raising a fist during the playing of “The Star-Spangled Banner” in London on Sunday).”
This was very predictable. Three weeks ago I wrote that the national anthem protests that began with San Francisco 49ers QB Colin Kaepernick and has since been copied by other players have angered many fans. And that anger may be one reason why the television ratings for the first week of NFL games were bad. As my colleague, Brandon Katz wrote: “Both CBS’ Sunday afternoon game and NBC’s Sunday Night Football saw their lowest ratings in seven years. Throw in last night’s lackluster debut and the 2016 NFL season is off to its slowest start in recent memory in terms of TV ratings.”
Two weeks ago I wrote it is starting to look like disrespecting the country during the national anthem is accomplishing what the concussions, domestic violence and deflategate could not do–drive down television ratings for the National Football League. Through two weeks of football the NFL’s television ratings are down across the board. The drop in ratings and viewership is unprecedented in recent years and has occurred during the protest of the national anthem, started by San Francisco 49ers backup QB Colin Kaepernick. Just last year some opined that the league’s ratings had no ceiling. That appears to be false.