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Tuesday 11.08.2016

Rickards: Trump Still Wins. Here’s Why...

I first issued a forecast that Trump would win the election before the Oct. 28 announcement by the FBI that the Hillary email investigation was being reopened. That Oct. 28 announcement gave gold a tail wind, as it increased Trump’s chances of winning, but it didn’t change my basic outlook.

Likewise, yesterday’s announcement that the email investigation is “case closed” did not change my view. But it did hurt the price of gold, as markets revised downward their expectations of a Trump victory. The two-day drawdown from $1,305 to $1,285 per ounce is a gift in the sense that it offers a better entry point for those who are not fully allocated to gold (I recommend a 10% allocation of investible assets).

Even if Hillary wins, the trend for gold is higher because her fiscal spending programs will lead to stagflation (just like in the late 1970s, when gold soared). If Trump wins, as I still expect, gold should be up $100 per ounce by Wednesday.

If Clinton wins, there will be little or no market reaction. But if Trump wins, the stock market will hit an air pocket and plunge 10% overnight. This is setting up like “Brexit” in June, where markets were fully priced for “Remain” and hit an air pocket when “Leave” won.

Consumer-Facing Companies Blame All Of Their Woes On Election

It’s all your fault. Yes, you, Mr. or Ms. Consumer, because you’re apparently preoccupied with the election instead of out shopping like a proper American should. How do we know this? Executives of publicly-traded companies keep getting on conference calls with analysts and journalists and saying so.

An analysis by Reuters shows that 80 executives have specifically mentioned the election during their quarterly earnings calls, usually as an excuse for poor sales. Companies selling everything from furniture to appliances to recreational vehicles are holding back, the executives say.

It’s not just that people don’t want to buy stuff: they don’t want to buy new businesses, either. The CEO of Dunkin’ Donuts blamed the election for slowing growth in new franchisees, noting that the election results will determine the future of workplace regulations and minimum wage and benefits laws. That apparently makes aspiring donut shop owners hesitant to open new outlets.

Not everyone buys this excuse, of course. Reuters compares executives’ use of the election as a reason for poor sales to a child saying that the dog ate their homework.

What Should We Do About Guns?

Consumer Borrowing Rises With Student, Auto Loans Hitting Record

The Federal Reserve said Monday that total consumer borrowing rose $19.3 billion in September to $3.7 trillion outstanding. Consumer debt has climbed at an annual pace of 6.3 percent, slightly below the growth rates seen in 2014 and 2015.

Revolving credit, which covers credit cards, posted an annual gain of 5.2 percent to $978.8 billion. The non-revolving category, which includes auto and student loans and makes up the bulk of consumer debt, has risen 6.7 percent over the past year to a record $2.7 trillion.

Roughly 70 percent of U.S. economic activity comes from consumers, so the increase in borrowing suggests that spending will keep aiding growth.

The economy expanded at an annual pace of 2.9 percent during the third quarter, its healthiest growth rate in two years. The troubled export sector recovered and companies started to restock their shelves in anticipation of greater consumer demand.

Tesco Bank freezes transactions after cash taken oline from 20,000 accounts

Tesco Bank was scrambling to restore services for customers on Monday after it admitted 40,000 customers had been affected by an online heist over the weekend when money was stolen from half the number of accounts targeted.

Tesco immediately froze online transactions and pledged to refund the 20,000 customers whose current accounts had been plundered in one of the largest cyber-thefts ever to hit a UK bank.

Benny Higgins, chief executive of the supermarket chain’s banking arm, said the decision to suspend some banking activities was an attempt to protect customers from “online criminal activity”. The National Crime Agency (NCA) is one of a number of organisations scrutinising what has taken place at a bank with more than 7 million customers.

“We apologise for the worry and inconvenience that this has caused for customers, and can only stress that we are taking every step to protect our customers’ accounts,” said Higgins. Refunds to customers – some of whom claimed they had lost thousands of pounds – were under way on Monday but Higgins was facing demands from MPs for an explanation of what had gone wrong in the face of repeated warnings about cybersecurity from regulators in recent years.

Americans Delay Medical Treatment to Avoid High Deductibles

It has long been said that many Americans have avoided seeking medical treatment because they were not insured or that they were specifically excluded from coverage for a pre-existing condition. The Affordable Care Act (aka, Obamacare) has insured about half those Americans who did not have insurance and eliminated the pre-existing condition exclusion.

But these things have come at a cost. No matter who provides the insurance now — your employer, yourself though private coverage or Obamacare — deductibles have increased as insurers struggle to keep monthly premiums down. The effect has been to change the reason for putting off treatment from no insurance to an unaffordable deductible.

In a recent survey commissioned by Insurance.com, researchers found that 64% of have delayed seeking care because of a high deductible. Most respondents said their deductibles settled in a range of $1,501 to $2,000, and another 20% said they paid more than $2,000, while 8% paid $1,500 or less.

Most people (45%) chose a high-deductible health plan (HDHP) because it was the most cost-efficient option. More than a third (37%) said it made the most sense for their situation, and 16% said that it was the only choice their employer gave them.

Greenspan: Repeal Dodd-Frank, Return to Square One

About 6.1 Million Illegals Filed Taxes in US – Many Didn't Pay, Received Refunds

In the last presidential debate between Hillary Clinton and Donald Trump, Clinton said that “half of all” illegal immigrants in the U.S. “actually pay federal income tax.” PolitiFact, a Pulitzer Prize-winning fact check organization, investigated Clinton’s claim and reported: “While there is no official figure, experts estimate that about half of all undocumented workers pay federal income taxes, if not more.”

In reality, the polar opposite is true. Federal government data shows that while roughly half of illegal immigrants file federal tax returns, the vast majority of them don’t pay any federal income taxes. Instead, they use these returns to claim refundable tax credits, which are a form of cash welfare. In other words, illegal immigrants mainly use the federal income tax code to collect money from U.S. citizens.

Federal law generally prohibits illegal immigrants from earning income in the U.S., but many of them do so by working for cash and by fraudulently using Social Security numbers. A 2013 report by the Social Security Administration notes that illegal immigrants get Social Security numbers by using counterfeit birth certificates, usurping other people’s numbers, and reusing numbers that they received to work temporarily in the U.S.

Because illegal immigration is often covert, reliable data on it is scarce. In the words of the Congressional Budget Office, figures for the number of illegal immigrants in the U.S. “are subject to considerable uncertainty.” This applies to most data on illegal immigration, but various federal agencies have produced estimates that shed degrees of light on these issues.

Those October Jobs Numbers

As The Associated Press told it, “Workers enjoyed their best pay raises in seven years last month as employers added 161,000 jobs, the government said in the last major snapshot of a slow but durable economy before Americans choose a new president.” That narrative, which noted the unemployment rate fell to 4.9 percent and characterized the jobs market as “resilient,” came under the headline “U.S. workers gain jobs, raises in final pre-election report.”

One newspaper editorial even went as far as to opine that the “encouraging” October employment numbers “should warm the hearts of Americans.” The headline: “Solid numbers.” A secondary headline touted the “strong economic news.” But much of the media’s take on last month’s employment picture is incomplete and misleading, says Jake Haulk, president of the Allegheny Institute for Public Policy.

“Forget the headlines about unemployment falling in October,” the Ph.D. economist says. “Forget the 161,000 payroll employment increase; 19,000 was a government job gain.” But Haulk says even the 142,000 private-sector gain is misleading. What we need to look at is the growth in aggregate hours worked. Or in this case, the absence of growth, he notes.

“From July to October, private sector weekly hours were unchanged. No growth,” Haulk says. “Any economic growth emanating from the private economy would have to be in the form of productivity gains, which, of late, have been miniscule.” Over the past 12 months, private sector hours grew at a very sluggish 1.3 percent. And the think tank president says virtually all of that is accounted for by the 2 percent increase in hours worked in private services.

The Presidential Election Won’t Stop the MOTHER OF ALL DEFLATIONS

Unfortunately, it doesn’t really matter which party wins the presidential election as neither one will be unable to stop the coming MOTHER OF ALL DEFLATIONS. While it is frustrating to watch just how insane this presidential race has disintegrated into, I try to not to focus on it.

Why? Because the U.S. Government will become totally powerless to deal with the future financial and economic collapse. Furthermore, most institutions will also lose the ability to function when the system cracks. This really isn’t a matter of if or when…. IT’S HAPPENING NOW.

According to a recent Zerohedge article, Dallas “Pension Fund Panic” As Major Warns Of 130% Property Tax Hike To Avoid Collapse, “This is much like a Bernie Madoff scheme, if you ask me,” said Dallas mayor Miek Rawling discussing the collapse of the local Dallas Police and Fire Pension Fund. The Dallas pension board wants the city to contribute $1.1. billion in 2018, but to do that, they would have to increase the property tax rate by 130%.

This is just one sign of many hundreds that continue to eat away at the financial and economic system. What is ironic to see is the complete failure of the analyst community to understand this. While most of the blame is put on the totally useless Mainstream Financial Networks, the majority of the alternative media analysts are clueless as well.

Japanese blockchain consortium by 42 banks

McDonald’s credit rating downgraded over sales concerns

Fitch Ratings downgraded McDonald’s Corp.’s credit rating on Monday, saying the burger giant’s weak traffic could lead to further erosion of share in the competitive U.S. restaurant market.

The agency lowered McDonald’s long-term Issuer Default Rating to BBB from BBB+. The ratings agency said that, while McDonald’s same-store sales have improved since the fall of 2015, “Fitch does not view recent performance as sustainable.” The agency believes the Oak Brook, Ill.-based burger giant “will continue to lose share over the medium term.”

McDonald’s same-store sales increased 1.3 percent in the U.S. in the quarter ended Sept. 30, the fifth straight quarter in which the chain reported an increase in the key metric following more than two years of weakness.

Yet that increase was due in large part to pricing of 3.5 percent, meaning traffic was down by at least 2.2 percent in the period. In addition, Fitch noted that McDonald’s “gap” in same-store sales with its competitors narrowed to 0.6 percent from 2.9 percent.

Half of Americans probably won't vote — but requiring them to would change that

Even in such a bitter, unusual election, roughly half of eligible Americans probably won't vote by the end of Election Day. In recent elections, turnout has ranged from about 50% to 60% of the voting-age population.

But there is a simple change the US could make to boost turnout dramatically, something that has worked in at least 26 other democracies. The government could make Americans vote.

President Barack Obama has endorsed the idea, and yet it has never taken hold in the US, for a variety of reasons. But many experts think it's a good idea. The two countries leading in voter turnout are Belgium and Turkey, according to Pew Research data. In their most recent elections, those countries saw turnouts of 87% and 84%. The 2012 US presidential election saw just 55% of people rocking the vote.

Political scientists worry about this because older and wealthier Americans vote more often than anyone else. This means leaders' policies are more likely to favor their interests over other groups'. It's called "class bias."

Taxpayers are still bailing out Wall Street, eight years later

Eight-years after taxpayers rescued the U.S. financial system, some of the country's largest banks, including JPMorgan Chase and Wells Fargo, continue to receive billions in bailout money, according to government data.

Wells Fargo is eligible for up to $1.5 billion in bailout funds over the next seven years. JPMorgan and Bank of America could receive $1.1 billion and $964 million respectively. The continuous flow of funds is a remnant of the $700 billion bailout effort, known as the Troubled Asset Relief Program or TARP, put in place during the financial crisis. Some of that money, about $28 million, was carved out to help distressed homeowners by paying banks to lower their interest rates and monthly payments.

The program, the Home Affordable Modification Program, has undergone several revamps over the last few years and fallen short of helping the 3 million to 4 million homeowners the Obama administration initially hoped. But it continues to operate -- HAMP will accept its last homeowner application at the end of this year -- and big banks continue to be paid for helping.

At least the money being paid to the banks is making it more likely that homeowners will qualify for help with their mortgages, said Alys Cohen, staff attorney for National Consumer Law Center. “To some extent, companies are being paid for what they should have been doing anyway,” said Cohen. “A large portion of the bailout money didn’t go to helping individuals or communities, but this money does.”

Decline in Prime-Wage Workers Signals Economic Weakness

The last Bureau of Labor Statistics employment report before the election brought some decent news. In October, the economy added 161,000 jobs and the unemployment rate held steady at 4.9 percent.

However, the long-term picture for the economy was more mixed. The labor force participation rate, or the share of Americans working or actively looking for work, declined slightly to 62.8 percent. The employment-population ratio, defined as the share of the population working, was just 59.7 percent—down from 63.3 percent ten years ago.

While commentators tend to focus on the unemployment rate—which is moderate at 4.9 percent—the employment-population ratio is arguably more informative. After long spells out of a job, people may become discouraged and give up looking for work altogether. A large group of working-age, able-bodied individuals outside the labor force is a sign of major weakness in the economy.

However, some of the decline in the employment-population ratio over the past decade is due to the aging (and retirement) of the population; indeed, this is often used as an excuse to claim the economy is doing better than it really is.

Should the Social Security retirement age be 76?

Here’s a stunning suggestion: The U.S. government should raise the Social Security retirement age for receiving full benefits to 76, from today’s 66-67. That’s what Anne L. Alstott, a Yale Law School professor and author of “A New Deal for Old Age” believes. She thinks it would make things “fairer.” Seriously?

Yes. Alstott has actually thoughtfully framed a moral and practical — albeit highly provocative — argument for overhauling Social Security in ways that lives up to her book’s subtitle: “Toward a Progressive Retirement.” She wants to redesign Social Security to offer greater support to Americans who’ve been dealt a harsh hand, due to rising inequality in income, health, longevity, disability, opportunities and family stability.

“For the well-off, age 65 now represents late middle age. It isn’t until age 80 or so that the average better-off American feels old or faces serious impediments to work and healthy leisure,” Alstott writes in the book’s introduction. “By contrast, many lower earners struggle to stay in the workforce to age 65. Many face disability in their early 60s, and many more confront limited job options and long-term unemployment.”

Alstott rightly maintains that the Third Age phenomenon calls for putting the ability to work at the core of any Social Security reforms. And here’s another Social Security proposal from Alstott that might make you sit up in your chair: The government should repeal the Social Security spousal benefit. (Under current law, with the spousal benefit, if you’re married, you may be able to get Social Security benefits equal to as much as half your spouse’s Full Retirement Account.) Alstott calls the spousal benefit “an artifact of family life in the mid-twentieth century, when most wives did not work out of the home.”

Boeing's Retiring Boomers Underscore US Manufacturing Plight

John Rothery said his goodbyes, handed in his badge and walked away from Boeing Co. (IW 500/9). He had worked on almost every commercial jet model over four decades, from a 707 bristling with military radar in the late 1970s to today’s sleek 787 Dreamliner. The date, Oct. 3, had been circled on Rothery’s calendar for more than a year. It was the last time that Boeing would bump up pension pay for Seattle-area factory workers before it froze the plan at month’s end, provisions dictated by a deeply unpopular 2014 contract extension. For Rothery, it was the final straw.

“I’ll be 64 in November. After 37 years, that’s enough,” said Rothery, a tool-and-die maker. “I was working just to build a pension. As of Oct. 31, there’s no pension. Why stay?”

The benefit change could hasten a generational shift as Boeing’s baby boomers retire, a trend that’s also looming for other U.S. manufacturers. The planemaker’s most experienced workers are packing up their tools during critical upgrades of its two largest profit-drivers: the 737 and 777 jetliners. About 10,000 mechanics are eligible to retire from the company’s Puget Sound manufacturing base alone, and no one knows how many are poised to leave.

“It’s a conversation that anyone who is close to retirement is having,” said Becky Beasley, 75, a grandmother and body-structures mechanic who helps rivet together hulking aluminum panels to form the 777’s hull. Boeing is well aware of the risks: Shortages of skilled workers from a smaller, mid-1990s exodus contributed to a factory meltdown that halted production of its cash cow, the 737. So earlier this year, the manufacturer carefully structured a voluntary layoff aimed at retirement-age workers, staggering the departures of 1,057 machinists to avoid massive disruptions.

Tesla’s supercharging stations no longer free of charge

Electric car maker Tesla Motors will end unlimited free use of its worldwide charging station network. The Elon Musk-led company said on Monday cars ordered after Jan. 1 will be limited to about 1,000 miles worth of credits at its supercharging stations.

After credits are used, owners will have to pay fees. Cars ordered or sold on or before Jan. 1 would still get free charging. Tesla didn’t specify the fees but said charging would cost less than the price of filling a comparable gasoline car. The company, based in Palo Alto, Calif., said it will release fee details later this year.

It said prices could fluctuate over time and vary by regional electricity costs. Buyers of new cars ordered or sold on or before Jan. 1 must take delivery before April 1 in order to get the free charging.

This means free charging won’t apply to the $35,000 Model 3, which is due to enter production in the second half of 2017. Tesla said 373,000 people put down $1,000 deposits for the Model 3 as of May.

Firms marketing $1 million in gold coins from 1715 shipwreck

A New Orleans investment firm has begun marketing gold coins from a 300-year-old shipwreck discovered off Florida’s coast. Blanchard and Co. is one of two dealers offering the coins from an area where 11 treasure-laden ships of a Spanish fleet were smashed onto reefs by a hurricane on July 31, 1715. The other dealer is California-based Monaco Rare Coins.

John Albanese, a New Jersey-based coin expert who brokered the sales, said in an interview Friday that most of the 295 coins being offered were found by divers exploring the area last year on the 300th anniversary of the disaster. Albanese said a few are from earlier expeditions in 2010 and 2013. He said the combined market value of the coins is more than $1 million.

The coins vary in denomination, size and shape. “They were very crudely made. They were handmade,” said Albanese, who added that the coins’ worth at the time they were made was based on their weight.

A Blanchard news release says the coins were struck in Columbia, Mexico and Peru. They were dated between 1692 and 1715. Most are from a discovery made in 6 feet of water about 100 feet off the coast of Vero Beach, Florida. Albanese said the coins sold quickly once they were available at the wholesale level.

US Postal Service quiet on supposed China partnership

The United States Postal Service isn't on the same page with a major Chinese company that claims they have an agreement in the works.

The USPS would not confirm or deny to CNBC the existence of an agreement with a major Chinese package-shipping firm that just launched an initial public offering in the United States. Meanwhile, the Chinese company in question has posted photographs online of an apparent deal signing between the two.

Shanghai-based ZTO Express debuted on Oct. 27 as the largest U.S. IPO of the year, and chief financial officer James Guo told CNBC then that the company had recently entered a partnership with the United States Postal Service for handling cross-border transactions.

A release on ZTO's website from Oct. 15 purports to show USPS Senior Vice President of Sales and Customer Relations, Cliff Rucker, signing a cooperation agreement with ZTO International Logistics in San Diego, California, on Oct. 12. The release, translated from Mandarin by CNBC, claims that the company established a "strategic cooperative relationship" with the USPS.

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