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Monday 11.07.2016

How “Big Brother” Is Tracking Your Spending Habits

When you hold cash in your hands or store it safely at home, you have physical custody of it. You can spend it, give it away to charity… heck, you can even burn it. All without leaving a trail. But when that cash becomes a digitally stored value, every purchase becomes part of a data stream that ultimately draws a detailed picture of who you are.

In this new cashless society, financial and governmental institutions — not you — have custody of your cash. Every purchase you make, and where and when you make them, draws a profile over time of your preferences, habits, needs and interests. In a cashless society, you are your data — from how you spend your leisure time to an endless spate of personal habits.

And for those few remaining who steadfastly refuse to ever give up cash, forget about it: A global cashless society is fast becoming a reality.

In Fact, my colleague Greg Guenthner wrote to you about it last week. Mobile payment apps like Paypal and Venmo are seeing transaction activity in the billions of dollars. “Folks are using the app for everything from buying a cup of coffee to paying rent.” Greg wrote. “Venmo me” is becoming a common turn of phrase among Millennials. The evidence against cash couldn’t be clearer…

The U.S. Election Puts Central Banks in Hot Seat

Central banks across the developed world are facing a tough stretch: Months of political events -- chief among them Tuesday's U.S. election -- that will put their loose policies and their independence in the crosshairs.

If monetary policy becomes politicized, investors worry, financial-market turmoil could follow. "Stuff will come to pass if central bankers are seen to be too political, " said Paul Griffiths, chief investor at London-based First State Investments. "That can be quite damaging."

With economic figures coming in strong, markets price in a 72% probability that the U.S. Federal Reserve will nudge up interest rates in December. But some warn that a presidential victory by Donald Trump could upset such expectations, because of his repeated accusations that Fed Chairwoman Janet Yellen is keeping borrowing costs "artificially low" to benefit Democratic nominee Hillary Clinton.

"With his election campaign tirades, Trump undermines the Fed's standing, " said Ulrich Leuchtmann, currency analyst at German lender Commerzbank AG. "It would therefore be quite understandable if in case of a Trump election victory it postponed a rate hike that was actually due." While Ms. Yellen has denied any influence of "partisan politics" in the Fed's decisions, many analysts think attacks on central bankers could resonate.

Dallas "Pension Fund Panic" As Mayor Warns Of 130% Property Tax Hike To Avoid Collapse

Over the past year, the biggest casualty to emerge as a result of global NIRP (or close to it) monetary policy have been pension funds, which have had two choices: either suffer losses as yields on new fixed income investments barely cover (and in some case don't), or scramble for duration (or outright risky investments like junk bonds and high beta stocks).

In August, we created the chart below as a simplistic illustration of the pension "duration dilemma." The chart graphs how a pension liability grows in a declining interest rate environment versus the value of 5-year and 30-year treasury bonds. As you can see, a $1BN pension that is fully funded at prevailing interest rates would be nearly $700mm underfunded if interest rates declined 300bps and all of their assets were invested in 30-year treasury bonds. The result is obviously even worse if the fund's assets are invested in shorter duration 5-year treasuries.

So what do pension fund managers do when perpetually declining interest rates continue to drive their funded status lower and lower despite one's return profile? Well, there is little choice: one has to move further and further out the yield curve in an attempt to match asset duration with that of one's liabilities. That, or reach for the skies by buying the riskiest assets possible, and pray for a home run.

Unfortunately, most pension fund managers better known as "dumb money", are hardly star stockpickers. One such example is the fast imploding Dallas Police & Fire Pension (DPFP), which covers nearly 10,000 police and firefighters, and whose troubles we first covered back in August, is on the verge of collapse as its board and the City of Dallas struggle to pitch benefit cuts to save the plan from complete failure. According the the National Real Estate Investor, DPFP was once applauded for it's "diverse investment portfolio" but turns out it may have all been a fraud as the pension's former real estate investment manager, CDK Realy Advisors, was raided by the FBI in April 2016 and the fund was subsequently forced to mark down their entire real estate book by 32%, thereby exposing just how great the risk truly is when pension funds swing for the fence... and miss.

Trump: 'Now it's up to the American people to deliver justice'

Donald Trump urged voters Sunday to "deliver justice at the ballot box" on Election Day, hours after the FBI announced that its review of newly discovered emails did not change its earlier conclusion to not recommend charges against Hillary Clinton.

Trump, speaking at a rally here, did not directly refer to FBI Director James Comey's announcement. But his remarks amounted to his first public response to the decision, and the Republican nominee argued that Clinton is "guilty" of federal crimes and said a "rigged" system was protecting Clinton.

"Hillary Clinton is guilty. She knows it, the FBI knows it, the people know it, and now it's up to the American people to deliver justice at the ballot box on November 8," Trump said. "Unbelievable. Unbelievable how she gets away with it."

Trump also cast doubt on Comey's conclusions, just over a week after the Republican nominee praised the FBI director for announcing the review of the emails, which were discovered as part of the bureau's investigation into Anthony Weiner's sexting.

Should Comey resign?

Blockchain is not just for banking… insurance wants it too

There has been a tremendous amount of discussion, white papers, excitement and debate over the past few years about the potential of blockchain technology to transform the financial services industry and beyond. The World Economic Forum has identified blockchain as one of its six megatrends.

But the only thing that is clear at the moment is that there is still a lot of work to be done to implement wide scale use cases, clear up any regulatory uncertainly or barriers and educate institutions and employees about the technology and its potential. Until recently, most of the discussion and pilots have been focused on banking.

Perhaps somewhat unfairly characterised as always arriving late to the tech party, insurers are now starting to take a serious look at blockchain technology and how it could improve the performance of the industry in some key areas. Recent announcements about the Blockchain Insurance Industry Initiative (B3i) and from the London Market Group indicate that research and exploration around the use of the technology is accelerating across the insurance industry and across the insurance value chain.

Crucially, start-ups are the leveraging the technology to build the products and services that will deliver blockchain based solutions to the insurance/re-insurance industries. Smart contracts, for example, have the potential to reshape systems and could underpin the automation of the claim processes; resulting in both cost savings to the insurer and, crucially, better experiences for customers. I

As Election Nears, Searches For Jobs In Canada Jump 58%

The presidential election has the country a bit frazzled. In a New York Times / CBS News poll conducted a week ago, more than 80% of registered voters say they’ve been repulsed by the election, rather than excited. If you’re like me, you’ve heard more than one person say they’ll move to Canada if Trump or Clinton gets elected. New data shows some Americans are thinking about acting on those urges and moving north of the border.

The number of Americans searching for jobs in Canada has increased 58% this year compared with all of last year, according to job search engine Monster Worldwide. About 30,000 searches have included the keyword “Canada” thus far in 2016, while only about 20,000 such queries were conducted in all of 2015.

Although Monster can’t directly connect these trends to election jitters, earlier this year Google search data told a similar story. During the week of Super Tuesday in March, twelve states held their presidential primaries. Donald Trump and Hillary Clinton won a majority of the races, and there was a spike in searches for the term “move to Canada.”

The largest bump that week came in Wyoming, the most Republican U.S. state. Wyoming residents were much bigger fans of Ted Cruz than Trump. A month after Super Tuesday, Trump lost the Wyoming primary to Cruz by almost 60 percentage points. The second-highest jump in “move to Canada” queries came in Vermont, where Bernie Sanders beat Hillary Clinton in the primary by more than 70 points.

China's Gift for the Next President

Back in 2008, incoming President Barack Obama inherited a U.S. financial crisis that was to some degree made in China. The next U.S. president may well confront a Chinese financial crunch with its origins in the U.S., as China unwinds the credit imbalances built up over the last eight years to defend against that global slump.

The causes of the 2008 crisis were many and varied. U.S. policymakers and regulators, as well as rule-bending behavior in real estate and banking, are largely to blame. But China’s mercantile trade strategy played a crucial role, too. Maintaining the yuan's peg to the dollar -- which kept its value artificially low in a deliberate effort to supercharge exports -- created a giant Chinese trade surplus that had to be recycled into U.S. Treasuries. That in turn contributed to keeping U.S. rates too low for too long -- fertile ground in which the seeds of the real estate crisis were planted.

The crisis, of course, plunged the U.S. into recession and pushed the global financial system to the brink of collapse. Since then, as policymakers in Beijing have loosened the currency's unofficial peg and U.S. consumers chopped up their credit cards, China’s external imbalances have dissipated. The current account surplus has shrunk from a peak of more than 10 percent of GDP in 2007 to about 2.5 percent in 2016. The People’s Bank of China is spending down its foreign exchange reserves in an effort to fend off yuan depreciation pressures.

What hasn't changed is the remarkably high savings rates that lie behind those imbalances. China continues to stash away some 47 percent of national income. As any economist will tell you, the risk with such a high savings rate is that it leaves a gap in demand.

Obamacare Victims Revolt: ‘We Don’t have that Kind of Money’

Some users of Obamacare are finding the medical care they need to be too expensive to use due to high deductibles and high out-of-pocket costs.

Michelle Harris is one of those people. Harris, a 61-year-old retired waitress in northwest Montana, has arthritis in both shoulders but is doing everything she can to avoid seeing a doctor due to the $4,500 deductible and $338 a month in premiums under her Blue Cross Blue Shield plan.

“It hurts, but we don’t have that kind of money,” Harris said to Bloomberg Politics. “So I deal with it.” Some insurance plans under Obamacare are designed not to kick in until patients have spent thousands of dollars in out-of-pocket costs, which put many healthcare services out of reach for patients.

Even though the uninsured rate in America is at a record low, a study from the Commonwealth Fund found that four out of 10 adults in Obamacare plans aren’t confident that they can pay their medical bills if they got sick, Bloomberg Politics reported.

Jim Rickards: They’re Going To Lock Down The System

Jim Rickards warns of a coming confidence boundary in central bank omnipotence. Once breached, trust and belief in the central banking cartel quickly vaporizes. Rickards predicts that boundary will be crossed by 2018 or sooner; and when it is, the entire financial system will go into lockdown, freezing access to our money:

Here’s the point. In 1998, Wall Street bailed out a hedge fund (LTCM). In 2008, the central banks bailed out Wall Street. In 2018, if not sooner, who’s going to bail out the central banks? The central banks are at the point where they don’t have any dry powder left.

By way of example, the Fed took their balance from $800 billion to $4.2 trillion and cut interest rates to 0%. Now, if they had normalized things in the meantime, so let’s say they got their balance sheet back down to $800 billion or maybe one trillion dollars and raised interest rates up to 2 or 3%, I’d be the first one to congratulate them. I’d say, “Hey, nice going. You saved the world and you normalized your balance sheet and normalized interest rates.” But, that didn’t happen. The balance sheet is still at $4 trillion, interest rates are still close to 0%. What are they going to do in the next crisis? Take the balance to $8 trillion, $12 trillion? They can’t do it. There’s an invisible confidence boundary. No one knows exactly where it is — you find out the hard way. And when you cross it, you destroy confidence in the dollar.

The only clean balance sheet left in the world is at the IMF, the International Monetary Fund. And, that’s where the liquidity will come from in the next crisis. They have a printing press. They can print this world money called a geeky name: the special drawing right, or the SDR. But just think of it as ‘world money’, because that’s what it is.

Greg Hunter Election Update/a>

Virginia Gov. Pardons 60,000 Felons, Enough To Swing Election

Virginia Gov. Terry McAuliffe has granted voting rights to as many as 60,000 convicted felons just in time for them to register to vote, nearly five times more than previously reported and enough to win the state for his long-time friend, Democratic nominee Hillary Clinton.

McAuliffe sought to allow all of Virginia’s estimated 200,000 felons to vote, but state courts said each individual felon’s circumstances must be weighed. To get around that, McAuliffe used a mechanical autopen to rapidly sign thousands of letters, as if he had personally reviewed them, even as his office was saying the total was 13,000.

Now, The Daily Caller News Foundation Investigative Group has learned that McAuliffe — who managed Clinton’s unsuccessful 2008 presidential campaign — churned out five times as many letters before the registration deadline than publicly claimed.

Virginia’s recent political history has seen multiple races that were decided by tiny margins. The 2014 U.S. Senate race, for example, was decided by only 17,000 votes, while the attorney general’s race came down to a mere 165 votes.

Half of American Baby Boomers Face a Frightening Retirement Reality: But There's Worse News Incoming

There are plenty of tough retirement facts out there. Social Security is facing tough times. Pensions are on the decline. And, according to a recent survey, retirement savings are nowhere near where they need to be. According to the financial services company PWC's 2016 "Employee Financial Wellness Survey," 51% of American workers have $100,000 or less saved for retirement.

Of course, that number doesn't really tell you that much on its own. Millennials are included in that number, and 77% of them have $100,000 or less in retirement savings. That's not so bad, as Millennials have decades to save and invest their money, so a small account balance for that group isn't so scary.

But here's what is frightening: Fifty percent of baby boomers also have $100,000 or less saved for retirement. That's not even the worst news, though. According to the same PWC survey, 25% of baby boomer workers have already taken money out of their retirement accounts for non-retirement expenses. What's more, 36% think they'll need to pull money out of their retirement accounts for non-retirement expenses in the future.

Let that sink in for a moment. Half of baby boomers have less than $100,000 in savings. A quarter of baby boomers are already tapping their retirement accounts to cover other expenses. And over a third think they'll have to do so.

Yellen’s Conundrum: Forestall Monetary Mayhem Or Release Political Pandemonium

Regardless of who wins the election, one thing is certain: the vote that takes place in December within the confines of the Eccles Building cast by a dozen un-elected, Ivy Leagued, academic bankers whose combined real world business experience is near nonexistent (less for that read in some wood-paneled library) will decide monetary policy that will have more implications for not only the U.S., but the world as a whole. Effecting not only the global financial markets, but quite possibly, the entire international political stratum as well. And the new President (as well as every other world leader) will have to adjust to that outcome.

November 8th is only the first-act of this very real, “landmine” infested global drama playing out on the world stage. On December 14th the world will truly witness just how much power has really been transferred to this unelected cohort.

And when that final curtain is both lifted, then lowered? The calls coming forth from the “audience” might not be what these once regarded “maestros” ever dreamed possible. Yes, at first it might appear the “audience” is standing, and cheering. However, upon further scrutiny, one might find, it may not be in ovation. Rather, for something else entirely.

This is the true economic/political risk coming, and it’s in December regardless of any spin to the contrary by the main-stream financial/business outlets, be it from their gaggle of Ivory Towered academics, Think Tank dwellers, or next in rotation fund managers.

The Politics of Rage

Taco Bell to create 100,000 jobs

Taco Bell is rethinking hiring and retention amid a push to reach 9,000 locations in the U.S. by 2022.

Over the next six years, the Irvine, Calif.-based quick-service chain expects to add 100,000 new jobs. An estimated 40,000 people are currently employed at company restaurants, and another 170,000 employees work at franchised locations.

“Our planned growth over the next six years is going to help us reach $15 billion in global system sales by 2022. With that comes the need to attract and retain top talent so that we’re continuing to deliver the best customer experience possible,” Taco Bell CEO Brian Niccol said in a statement.

Earlier this month, Taco Bell launched a “Start with Us, Stay with Us” platform designed to encourage employees to leverage the company’s career building and educational programs. For example, the Graduate For Más program rewards and supports younger workers who are completing high school. The program also helps those who don’t finish high school to prepare for the general equivalency test.

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