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Thursday 09.08.2016

Want to Keep Gold in Your IRA at Home? It’s Not Exactly Legal

Advertisements this summer have claimed that people can invest their tax-free retirement accounts in gold and store it at home. But the IRS has issued a stern warning against the move.

The internet and radio pitches suggest that people can invest funds from their individual retirement accounts in gold coins and bullion and store the metals at home or in a safe-deposit box, away from stock-market collapses and government intrusion. One ad, for Hartford Gold Group, shows a smiling couple near an open safe containing gold bars and the text, “Your Gold, Your Hands, Your Control.” Others urge consumers to “Start Your Home-Storage Gold IRA” and “Store IRA metals wherever you choose, even in your own home.”

Experts on “alternative-asset” IRAs, which hold investments other than traded securities, are highly skeptical of this strategy. In such holdings, “the result is one the IRA rules are intended to prevent—which is that the account owner possesses tangible personal property belonging to the IRA,” says Amiram Givon, a lawyer with GCA Law Partners in San Francisco.

The Internal Revenue Service says it “warns taxpayers to be wary of anyone claiming that precious metals held in your IRA can be stored at home or in a safe-deposit box.” As is often true of such maneuvers, the tax law isn't entirely clear in this area, giving advocates room to operate. As written, the law prohibits investments of IRA assets in “collectibles,” such as antiques, artwork, wine or gems. That leaves room for IRA investments in a wide variety of alternative assets, including real estate, untraded securities, tax liens and even fishing rights.

Fed Sees Modest Economic Growth Amid ‘Slight’ Inflation

The U.S. economy grew at a modest pace in July and August as a strong labor market failed to put much upward pressure on wages and prices, a Federal Reserve report showed.

“In general, expectations of wage growth for the coming months were modest” and price increases “remained slight overall,” according to the Fed’s latest Beige Book release, a survey of business contacts published Wednesday in Washington.

While the job market “remained tight in most districts,” overall consumer spending was “little changed” from the previous report, it said. Business contacts in real estate and construction mentioned concerns about the upcoming U.S. presidential election. “Contacts in several districts cited only modest expectations for sales and construction activity moving forward, due in part to economy uncertainty surrounding the November elections,” the report said.

The U.S. central bank’s policy-setting Federal Open Market Committee meets Sept. 20-21 to decide on interest rates, which have been held steady this year following a hike in December that marked the first in nearly a decade. Mixed readings on the U.S. economy throughout the year and sluggish progress toward Fed officials’ 2 percent inflation target have so far prevented another increase.

Caterpillar Hires H-1B Foreign Graduates, Fires 300 American Professionals

Caterpillar is firing 300 American employees in Mossville, Illinois, even though it is continuing to recruit and pay foreign “H-1B” guest-workers to do the white-collar jobs sought by American professionals in the United States.

Caterpillar’s combination of white-collars layoffs and H-1B outsourcing matches the much-criticized decision by Carrier, a company in next-door Indiana, to outsource 1,400 blue-collar factory jobs to Mexico.

Outsider GOP candidate Donald Trump has vigorously denounced the outsourcing by Carrier’s air-conditioning business. His opposition has helped him get a nine-point polling advantage in the state. But Trump’s support for major reforms to the H-1B program to reduce the outsourcing of professional jobs is raising his support among upper-income professional-class voters in many other states.

The Caterpillar outsourcing “is all the same thing happening over and over again,’ said John Miano, a lawyer and software expert who has sued the federal government to reduce or stop various outsourcing programs, such as the H-1B visa. “What we see is that companies ask for more [H-1B visas] while they’re laying off the same kind of [American professionals] … this is going to be an election that decides whether this continues,” Miano said.

Chris Martenson-Fed Afraid of Most Damaging Bubbles Ever

Shipping Company Bankruptcy Leaves Container Ships Stranded With Dwindling Food, Water For Crews

We recently wrote about how the bankruptcy of Hanjin Shipping could put holiday orders for hot-ticket items from companies like Samsung and LG at risk for delays and higher costs, but what we didn’t get into at the time was the increasingly spartan living situations for the workers stranded on board dozens of ships stuck at sea or in port.

As we mentioned in the earlier story, many Hanjin ships never made it to port after Korea’s largest shipping company suddenly declared bankruptcy last week. In many cases, remaining out to sea prevented creditors from trying to seize Hanjin ships and property. Some ships that were already docked when the bankruptcy occurred had already been claimed by creditors looking to get repaid. In other instances, ships were refused entry because of an apparent inability to pay port fees.

While much of the focus has been on the cargo that’s not making it to shore, and therefore not to stores or consumers, a recent Bloomberg report looks at the more pressing issue of the lives potentially being put at risk because the stranded crews are running short on the essentials.

As of yesterday, there were 85 Hanjin-operated ships sitting out at sea, waiting for someone to give them a place to park their massive vehicle. “Our ships can become ghost ships,” a manager at the company’s labor union tells Bloomberg. “Food and water are running down in those ships floating in international waters.” Even in some cases where ships have been allowed to dock and unload their cargo, they have had to go back out to sea.

Central Bank Interest Rate Policies To Benefit Precious Metals Yet Again

45 years ago, almost to the day, Richard Nixon rocked the global financial system by abandoning the fixed exchange convertibility of gold and the United States dollar. The president justified his 1971 action by telling the world he had been “converted” to Keynesian economics. In reality, quick action was required on his part to protect existing U.S. gold reserves and continue the fiscal policy expansion designed by previous government technocrats to concurrently fund a war and social spending. The price of gold quadrupled over the next 3 years.

Today, global regulations and negative interest rate policies, designed by a younger group of policy makers and implemented by monetary authorities at the Swiss National Bank, Nordic Central Banks, and the European Central Bank have “converted” traditionally safety-seeking European investors into market timing speculators.

Life insurance companies and pension funds no longer invest in European government bonds for safety and yield. They invest in these guaranteed to loose (when held to maturity) securities either due to regulatory requirements or in the hope of selling them at a higher price to central bankers unconstrained by the formalities of profit and loss calculations.

The markets functioned in a different fashion not that long ago. Bonds were the safest investment. They promised full return of principal plus interest. Next down the risk spectrum came commercial real estate, offering rental yield, like a bond, but were subject to an indeterminate sale price in the future with the potential for capital appreciation. Equities offered the potential for capital appreciation with a reduced dividend yield, or none at all, and an indeterminate terminal price. Lastly, commodities and precious metals, viewed, as the riskiest investments of all offered no yield, an indeterminate terminal price, only the potential for speculative price appreciation.

The Great Debt Unwind Beneath the Surface: US Commercial Bankruptcies Soar

They’d believed in six years of Wall Street hogwash. Not that you would have guessed from the stock market, hovering at all-time highs, or from soaring junk bonds, even the riskiest paper: CCC-and-below rated junk bonds skyrocketed since their February 12 low as their average yield plunged from 21.6% to 13.5%. Even the S&P US Distressed High Yield Corporate Bond index has soared 57% since February 12. Those are miracles to behold.

At the slightest squiggles of the market, the Fed goes into bouts of by now embarrassing flip-flopping on rate increases that demonstrate to the world that they have absolutely nothing else in mind than keeping the stock market inflated and keeping the biggest credit bubble in US history from unceremoniously imploding.

And the ECB is out there with its scorched-earth monetary policies, with negative interest rates and bond purchases, including asset backed securities and corporate bonds, that it has been caught buying directly from issuers. It’s driving even corporate bond yields into the negative. Just now, French drugmaker Sanofi and German household products maker Henkel issued bonds with negative yields, thus getting paid by these hapless investors to borrow.

The idea for bondholders being that you have practically no income throughout and get “most” of your money back at maturity. An idea that is sending NIRP refugees into US assets, driving up their values and pushing down their yields. It all works wonderfully.

Gold Market Not Factoring In Sept. Rate Hike; Looks For Catalyst - Peter Hug

Barclays and Wave complete world's first blockchain trade finance transaction

Optimising the antiquated arena of global trade finance has become one of the busiest spaces in blockchain, with the likes of R3, IBM, Hyperledger bringing some considerable horsepower to the race.

Now Barclays and Israeli start-up Wave, which graduated from the former's TechStars accelerator, are claiming to be the first organisations to execute a global trade transaction using blockchain technology.

The letter of credit transaction between Ornua (formerly the Irish Dairy Board) and the Seychelles Trading Company is the first to have trade documentation handled on the new Wave platform, with funds sent via Swift.

It is hoped this landmark transaction could herald a new era of simpler, safer and faster trade finance, said a statement. Currently trade transactions of this nature often involve a high number of participants in different jurisdictions around the world, which in turn requires a significant amount of paperwork, counter-signing and courier journeys.

European Central Bank policies for growth not working, warn experts

Monetary policymakers in the bloc could increase so-called quantitative easing amid low growth and inflation when they meet tomorrow. But Brian Coulton, chief economist at the Fitch ratings agency, has sounded the alarm over the unintended negative consequences of the measures. He said: "Quantitative easing has some downside effects for the profitability of banks. "It may not spur bank lending as strongly as you would expect."

He also said money printing was distorting markets. The ECB's current program, running until March 2017, is injecting a whopping €1.7 trillion worth of cash into the economy. However, jobless figures last week showed unemployment in the eurozone is still at a hefty 10.1 per cent. At the same time, prices are not rising in line with ECB targets.

The dire figures have raised expectations the bank could increase its quantitative easing programme further still. It comes as the Bank of England and Bank of Japan have also restarted money-printing programmes in recent months.

Yet the policy is not filtering through to global growth, said Mr Coulon. Separately Hans Lorenzen, a credit strategist at Citigroup, also recently wanted over the policy and said quantitative easing had become "too much of a good thing".

One of the main reasons insurance companies are ditching Obamacare isn't going away

Obamacare has a millennials problem, and the healthcare program is struggling to get rid of it.

To recap, one of the main reasons that large health insurance firms such as Aetna and United Healthcare care ditching the public insurance exchanges of the Affordable Care Act — also known as Obamacare — is because not enough young, healthy people are signing up.

Insurers need young people to, in a basic sense, pay into the system, since they tend to be healthier and use fewer healthcare services — thus partially subsidizing the older and less healthy people that cost more to cover than they pay in.

Since the rollout of the exchanges, the number of young, healthy people signing up has not been enough to offset the sicker population, leading to millions of dollars in losses for many insurers. According to new data from the Centers for Disease Control and Prevention's National Center for Health Statistics division, it appears that the gap between the percentage of younger and older people without insurance is not closing.

Making the Most of the Next Recession

The U.S. economy is teetering on the edge of a cliff. The federal government's mounting debt combined with slow economic growth and exploding entitlement spending all but guarantee a recession is in our near future. That isn't necessarily a bad thing. Recessions are part of the natural economic cycle. In the best-case scenario, they restore balance to an economy by "cleansing out the misuses of labor and capital," says John Tamny, senior fellow in economics at Reason Foundation. "Recessions, while painful, are the happy sign that growth is on the way."

Unfortunately, the upsides of recessions can be wiped out by bad government policies that prevent the economy from making needed adjustments. What's more, many policies aimed at "moderating" recessions can lead to excesses in the economy that make the next downturn even worse. Instead of redirecting resources to more efficient uses, these measures often cause a doubling down of investment into wasteful endeavors that produce little in the way of surplus for society.

Writing for The New York Times in December 2008, George Mason University economist Tyler Cowen explained how the 1998 bailout of Long-Term Capital Management, a hedge fund, harkened the Great Recession of 2007–09. It's true that move prevented large disruptions in capital markets that would have made the situation more painful for some in the late '90s. However, Cowen wrote, "with the Long-Term Capital bailout as a precedent, creditors came to believe that their loans to unsound financial institutions would be made good by the Fed—as long as the collapse of those institutions would threaten the global credit system. Bolstered by this sense of security, bad loans mushroomed."

Government produced a sense of immunity for many in the financial sector, thus contributing to the biggest financial crisis since the 1930s. And this is but one example of government interventions that are aimed at helping ease economic problems in the near term but get in the way of necessary reallocations of resources and set the economy up for even bigger problems in the future.

OPEC's dire finances fuel oil freeze talks

Price wars can be painful -- even for the mighty OPEC. That's why the oil cartel, along with Russia, is once again entertaining a freeze in production aimed at putting a floor beneath low prices.

The goal is to keep prices high enough to give oil-reliant countries a financial boost, but not so high that they encourage their chief rival -- American shale oil producers -- to start pumping aggressively again. However, the very fact that these talks are taking place is evidence of the enormous financial damage inflicted by low prices on oil-rich governments, and their increasingly restless citizens.

At one end of the spectrum, cheap oil is causing food shortages and outright chaos in OPEC member Venezuela. Even the cartel's kingpin Saudi Arabia has been forced to usher in painful austerity moves. And it's one of the chief causes of a deep recession in Russia.

"No sovereign producer can be judged a winner," Helima Croft, a former CIA analyst who is now global head of commodity strategy at RBC Capital Markets, wrote in a recent report. "It is only a question of which cash strapped country can be declared the biggest loser."

Did cash payments to Iran violate federal regulations?

Fed Governors Testify In The House, Fed’s Record On Handling Asset Bubbles

Jeffrey Lacker of the Richmond Fed and Esther George of the Kansas City Fed appeared before a subcommittee of The House Financial Services Committee today to discuss Federal Reserve “independence.”

I say “independence” because The Fed governors and the Chair of the Fed are appointed by The President of the United States subject to confirmation by the US Senate. So, The Fed is really a public-private partnership.

Two regional Federal Reserve presidents defended the public-private structure of the U.S. central bank in prepared testimony they’re scheduled to deliver before lawmakers on Wednesday, saying it helps guard monetary policy from political interference.

"The Fed’s public-private structure supports monetary policy independence by ensuring a measure of apolitical leadership,” Jeffrey Lacker, president of the Richmond Fed, said in the text obtained by Bloomberg. Lacker and Esther George, head of the Kansas City Fed, are set to appear before a subcommittee of the House Financial Services Committee in Washington. George said the Fed’s structure, created by Congress in 1913, “recognized the public’s distrust of concentrated power and greater confidence in decentralized institutions.”

Gold Bars Flood Into GLD as Odds of Fed Rate-Rise Fade

Gold bars in London wholesale trade rose near 3-week highs against a weakening Dollar and touched 1-month highs against the Chinese Yuan on Wednesday, as poor US data saw traders cut their bets of a US Fed rate rise at the September meeting in 2 weeks' time.

Service-sector activity in the US suddenly slowed last month to its weakest level in more than 6 years, the private-sector ISM report said Tuesday, with the New Orders Index registering a plunge of 8.9 percentage points.

Regaining an overnight break above $1350 per ounce, prices for wholesale gold bars showed their fastest week-over-week rise since the Dollar price peak of early July at 3.2% this morning, as Asian shares closed lower but European equities rose.

Investor demand for gold-tracking ETF the SPDR Gold Trust (NYSEArca:GLD) yesterday returned from the US Labor Day holiday to need an extra 14.2 tonnes, the heaviest 1-day inflow since immediately after the Independence Day holiday on 4th July. That took the GLD's total holdings of London Good Delivery gold bars – vaulted at HSBC bank in London and needed to back the trust's stockmarket shares in issue – to a 1-week high of 953 tonnes.

US job openings jump to record high in mixed signal to Fed

American employers advertised a record number of open jobs in July, a sign hiring may stay healthy despite a slowdown last month. Job openings jumped 4 percent to 5.87 million, the Labor Department said Wednesday, slightly above the previous peak reached in April. The data dates back to December 2000.

The report muddies the employment outlook for the Federal Reserve, which meets in two weeks to consider whether to raise short-term interest rates for the first time this year. The big increase in open jobs suggests hiring will pick up in the coming months.

But that message runs counter to the government's jobs report Friday, which showed that employers pulled back on hiring in August. They added 151,000 jobs last month, about half the total of the previous two months. The unemployment rate stayed a relatively low 4.9 percent for the third straight month.

Economists and investors don't think the Fed is likely to raise rates at its Sept. 20-21 meeting. But if Fed officials believe the economy is accelerating and will push up wages and prices, an increase in December is more likely. Last Friday's sluggish jobs report moved the Fed in a more cautious direction. Traders now see about a 46 percent chance that the Fed will raise rates by its December meeting, down from over 50 percent last week, before the employment report was released.

Will the dollar live to die another day?

75% Of Americans Concerned About Becoming Homeless – New Survey

A majority of Americans worry about becoming homeless, according to a new survey by the NHP Foundation. The national shortage of affordable housing is at crisis levels – the country is losing roughly 125,000 affordable rental units a year – and the need to provide high-quality housing for low and moderate income families is an urgent concern. In addition, as the country continues to slowly recover from the recession, families at all income levels are concerned about the rising cost and health of the housing market.

In order to take a deeper look at today’s housing crisis, The NHP Foundation, a national not-for-profit aimed at providing service-enriched affordable housing to individuals, families and seniors undertook a study of over 1,000 people nationwide. Key findings include:

1. 75% of Americans are concerned about losing housing. 2. Nearly 40% of respondents fear job loss will lead to loss of housing. 3. Over 65% of Americans are “cost-burdened” – meaning they spend more than 30% of their income on housing.

With the August Jobs Report cited as the “worst month for job gains” of the year, The NHP Foundation, a not-for-profit provider of service-enriched affordable housing, polled 1000 Americans to gauge their feelings about housing and job security. The survey’s highlights include the following: When asked how concerned Americans are that they or a friend or relative could lose housing, 30% consider themselves “very concerned”, 27% are “concerned” and another 19% are “somewhat concerned.” Eighty-three percent of respondents are concerned about housing costs in America overall. Affordable housing is housing for which occupants pay no more than 30% of their income. Those who spend more than that on rent or a mortgage are considered cost-burdened; over 65% of Americans put themselves in that category.

Phyllis Schlafly's Good Fight Against Equal Rights Amendment

Phyllis Schlafly, the longtime conservative activist and author who died earlier this week, famously led the fight against the Equal Rights Amendment in the 1970s. The amendment said that neither the federal government nor any state could abridge or deny any right on the basis of sex, and its ratification seemed like a lock. Both parties supported it, and it passed the Senate in 1972 with 84 votes.

Then came Schlafly, who organized a small army of traditionalist women to defeat it.

Her argument was that however unobjectionable most people found the amendment’s language, judges would use it to push through policies many of those same people would dislike. If the military draft ever returned, the amendment would mean that women had to be subject to it. Supporters of the right to abortion that the Supreme Court had recently pretended to find in the Constitution would use the ERA to strengthen their case, too.

Whatever one thinks of traditional gender roles and, for that matter, abortion, Schlafly’s basic argument was right. Most of the point of the amendment was to put into law language that judges could use to enact policies that could not get through the democratic process by themselves. By the time Schlafly was debating the ERA, the Supreme Court was using what it had described as the Constitution’s “majestic generalities” as a license to fill in the blanks.

Fannie Mae sells $1 billion in non-performing loans to Goldman Sachs subsidiary

In what is becoming a frequent occurrence, Fannie Mae announced Tuesday that it sold a large portfolio of non-performing loans to a collection of private equity funds and a subsidiary of Goldman Sachs.

The government-sponsored enterprise said Tuesday that it sold off $1.06 billion in non-performing loans from its portfolio, with some now-familiar names making up the buyer pool.

Among the buyers is MTGLQ Investors, a "significant subsidiary" of Goldman Sachs. According to the Securities and Exchange Commission, Goldman Sachs owns, directly or indirectly, at least 99% of the voting securities of MTGLQ Investors, L.P. This latest purchase is MTGLQ Investors’ fifth purchase of NPLs from one of the GSEs this year alone.

Over the course of this year, in various sales, MTGLQ Investors bought more than $2.3 billion in unpaid principal balance from the GSEs. In this sale, MTGLQ Investors purchased 2,887 non-performing loans from Fannie Mae. Those loans carry an aggregate unpaid principal balance of $468,901,523, pushing MTGLQ Investors total NPL acquisitions this year above $2.7 billion.

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