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Wednesday 05.11.2016

Best-paid U.S. hedge fund managers take home $13 billion

Hedge funds lost money for their investors last year but the industry's top-paid managers had a banner year, with five men earning more than $1 billion each in 2015, an industry survey released on Tuesday showed.

Together, the 25 best-paid hedge fund managers took home $13 billion, 10 percent more than the previous year. For many, computer models played a critical role in their success, according to Institutional Investor's Alpha's 15th annual ranking of the industry's highest-earning managers.

Citadel's Kenneth Griffin, who started trading from his Harvard dormitory in the 1980s, and Renaissance Technologies' James Simons, a former code breaker who launched his fund in 1982, each took home $1.7 billion in 2015 to tie for top honors. In 2014, they also took home 10 figures each but slightly less than in 2015, to claim the No. 1 and No. 2 spots.

Bridgewater's Raymond Dalio, Appaloosa Management's David Tepper and Millennium Management's Israel (Izzy) Englander rounded out the top five spots, with each man making more than an $1 billion in 2015, the survey shows. The higher payday came "despite the fact that roughly half of all hedge funds lost money last year," said Institutional Investor Editor Michael Peltz. He added that "about half of the 25 highest-earning hedge fund managers used computer-generated investment strategies to produce their investment gains."

1 in 3 US Manufacturing Workers Get Public Aid

Between 2009 and 2013, the federal government and the states spent $10.2 billion annually on public safety net programs for 34% of frontline manufacturing production workers and their families who were enrolled in the safety net programs. A full 50% of workers hired through a staffing agency were also enrolled in a public safety net program like Medicaid, Children’s Health Insurance Program (CHIP) or SNAP (food stamps). That rate is similar to the rate at which fast-food service workers utilize safety net programs.

In a report published in November 2014 by the National Employment Law Project, the researchers said that manufacturing production wages in the United States now rank in the bottom half of all the country’s jobs. A typical manufacturing production worker in 2013 earned 7.7% less than the median wage for all occupations and the median wage for production workers in the manufacturing industry was $15.66, and 25% of these workers earned $11.91 or less.

Researchers at the University of California at Berkeley Labor Center have just published a report on the impact of increased trade with low-wage companies on both wages and use of safety net programs in the United States. The research looked specifically at jobs held by frontline manufacturing production workers who worked at least 10 hours a week for at least 27 weeks a year in the manufacturing industry either as regular employees or contract workers supplied through staffing agencies.

Among the key findings of the Labor Center’s report is the high utilization rates of safety net usage by manufacturing production workers is primarily the result of low wages, not inadequate work hours. Of the 10 states with the highest participation rates in public safety net programs, eight are in America’s South. The other two are New York and California.

Who owns America's debt?

Donald Trump says he can "make a deal" on America's debt. Last week, he implied that he could negotiate with America's creditors to get them to accept a lower rate of repayment, such as 85 cents for every dollar. It sounds shrewd, until you think about who would get hurt under this scenario. Who exactly owns the $19 trillion-plus of U.S. debt?

There's been a lot of attention in recent years over China rising to become one of the largest holders of U.S. debt. China's share of the debt is sizable -- about 7% -- but it's hardly the largest holder of U.S. government bonds. The top holder by far is U.S. citizens and American entities, such as state and local governments, pension funds, mutual funds, and the Federal Reserve. Together they own the vast majority -- 67.5% -- of the debt. Foreign nations only hold 32.5% of the total.

Trump's proposal stunned the financial world. The U.S. government is the world's safety net. Lenders expect the U.S. Treasury to always make good on its payments. "The global financial system is built on the notion that U.S. Treasuries are absolutely safe assets," economist Doug Holtz-Eakin told CNN's Jake Tapper Monday. "If he were to put a crack in that foundation, the global financial system would crater and we would have a global economic recession."

Renegotiating debt terms is a common practice among companies in financial trouble. Creditors are willing to accept lower payments because that's preferable to getting nothing. However, the U.S. government isn't a "junk bond" company. Trump walked back his debt deal making comments when he appeared on CNN's "New Day" show Monday morning as the outrage grew.

Billionaire backs Trump's message to the average guy

Why You’re Not Getting a Raise Anytime Soon

Despite recent employment growth and a low jobless rate, many American workers have experienced essentially flat wages for years now. Economists have long argued about the cause of the trend, and new research sheds light on one of the driving factors: high health care costs.

The health care analytics group Human Capital Management Services finds in a new report that growing health care costs are leaving less room in employers’ budgets for employee paychecks. HCMS studied health care, compensation and paid time off data for nearly four million Americans who receive benefits at more than 300 companies. “Health care costs are siphoning money out of employee’s wages,” says HCMS’ CEO Hank Gardner. “And people on the lower end of the totem pole suffer the most.”

The study found that for a majority of private employers, health care costs jumped more than 10 percent in 2014, while employee pay rose a mere 4.1 percent. Low-income workers were hit the hardest. Wages inched up a mere 0.5 percent for employees making less than $30,000. Employees making more than $80,000 saw their wages rise by 4.2 percent.

Lower-wage workers suffer the most because employers are willing to pay more for higher levels of human capital, according to Gardner. “Lower wage earners have their wages constrained even more because whatever resources the employer had are being given to high paid workers.” In addition, many employers view low wage employees as expendable. As a result, “higher wage workers have more leverage in terms of generating higher compensation than lower wage workers,” Gardner says.

"This Is The Most Obvious Disaster In Finance. Central Bankers Don't Understand..."

In a recent note, Eric Peters, CIO of One River Asset Management, summarizes everything that's been happening over the past few years in one tidy anecdote. Citing an unnamed CIO, he points out that the central bank was created to help its member banks, and it attempts to impact the real economy by using interest rates as a mechanism to control the attractiveness of lending money. However, throughout all of the meticulous planning done by the creaters of the Federal Reserve, nobody bothered to ask what would happen if the central bank suddenly couldn't influence the attractiveness of lending money, thus not being able to affect the real economy - which is precisely where we are today.

From Eric Peters: “Central banks were created to be the banks for banks,” said the CIO. “They were structured to influence the economy by increasing or decreasing the attractiveness of lending money.” If central banks wanted to spur banks to lend to the real economy, they reduced the interest rate they could earn from parking their money at the central bank. If they wanted to reduce bank lending, they increased the attractiveness of making risk­free loans to the central bank by raising interest rates.

“But no one ever asked the question of what to do if the central bank was somehow unable to increase the attractiveness of lending money? If that happened, how could central banks influence the real economy?” Which is basically where we are today.

“It’s one of those questions that seemed so implausible that no one ever really considered it.” With central banks perplexed by this dilemma, they turned to negative interest rates. Hoping that by taxing banks for keeping money with the central bank, they’d spur lending to the real economy. “But by going negative, they simply push longer­dated interest rates lower, further reducing the attractiveness of making loans.”

Negative Rates Are Taxes In Sheep’s Clothing

“At the end of the day, negative interest rates are taxes in sheep’s clothing. Few economists would ever claim that raising taxes on households will stimulate spending. So why would they think negative interest rates will?” Those are the shocking words of St.Louis Fed Director of Research Christopher Waller whose brief note today will be required reading for everyone at The Bank of Japan, The ECB and every other central banker on the verge of NIRP…

If you pick up any principles of economics textbook, there will typically be a discussion of taxes and tax incidence. Tax incidence describes who bears the burden of a tax. For example, suppose the government levies a payroll tax on a firm. The burden of the tax may be borne by the firm, the workers or the firm’s customers.

How can this be if the firm is responsible for paying the tax? The firm may bear the burden of the tax by accepting lower after-tax profits. However, the firm can pass the tax onto its workers by paying them lower wages or hiring fewer workers. The firm can also pass the tax onto its customers by charging them a higher price for the firm’s output. In general, all parties bear some portion of the tax.

This logic also applies to a tax levied on banks. Banks hire inputs (in this case, deposits), which are used to produce output (loans). The bank charges a price for its output (the interest rate on the loan) and pays wages to its inputs (the interest rate on deposits). The spread between the loan rate and the deposit rate determines the profit margin for the firm on a loan (ignoring default costs and other costs for ease of exposition). So any tax imposed on banks will be borne by the bank, the depositors and/or the borrowers. The firm can bear the burden of the tax by accepting lower profits. However, the bank can also pass the tax onto depositors by paying a lower interest rate on deposits and/or pass the tax onto borrowers by charging them a higher interest rate on loans.

Americans have stopped having babies

Demographics are our future and until the recession America’s looked adequate. Unlike most other rich countries, in 2007 the United States had 69.3 babies per 1,000 fertile-age women (age 15 to 44), enough to keep the population from shrinking. But during the recession people put off having babies and the birth rate fell.

Years into the recovery, birth rates still haven’t reached their pre-recession levels and there is reason to believe they never will. In 2014, America produced only 62.9 babies per 1,000 fertile-age women. At this rate, America’s population will start to shrink.

The baby bust certainly can be blamed on the recession. University of New Hampshire demographer Kenneth Johnson says the recession resulted in 2.3 million fewer babies over five years. He says a similar thing happened during the Great Depression. Women who were fertile during the Depression had some of the highest rates of childlessness ever recorded. But a decade later came the baby boom and the population recovered. This time may be different.

Even before the recession, American women delayed having kids. This has been especially true for Hispanic women. Before the recession, Hispanic Americans had exceptionally high birth rates and did much of the heavy lifting to keep the population stable. In 2007, Hispanic females were just 17% of fertile-age women, but they had 25% of America’s babies. But their birth rates collapsed during the recession.

Newspaper chain sending IT jobs overseas - CEO tells IT staff he's ‘pleased’ to announce new tech plan

The McClatchy Company, which operates a major chain of newspapers in the U.S., is moving IT work overseas. The number of affected jobs, based on employee estimates, range from 120 to 150.

The chain owns about 30 newspapers, including The Sacramento Bee, where McClatchy is based; The Fresno Bee, The News & Observer in Raleigh, N.C., The State in Columbia, S.C. and the Miami Herald. In March, McClatchy IT employees were told that the company had signed a contract with Wipro, an India-based IT services provider.

In a letter sent to the chain’s IT employees in late March, McClatchy CEO Patrick Talamantes detailed all the improvements the Wipro contract would bring, but buries, well down in the letter obtained by Computerworld, what should have been in its lead paragraph: There will be cutbacks of U.S. staff.

One employee said representatives from the IT vendor are at some of the newspaper's sites and "knowledge transfer" is underway, meaning employees are training replacements to take over their jobs. This is expected to continue through August. "This has taken us all by surprise," another IT employee said. "I'm not saying that we felt untouchable as they have been doing layoffs for the past 10 years, but being part of IT we felt that we had a big part in what happens" in the company.

Puerto Rico Might Start Cutting Pensions To Deal With Debt Crisis

Treasury Secretary Jack Lew said Monday pension cuts are on the table for Puerto Rico to help deal with the debt-ridden island’s fiscal woes.

The commonwealth – which faces a $70 billion debt burden and recently defaulted on a major payment –has been pushing Congress to extend it Chapter 9 bankruptcy rights. Puerto Rico Gov. Alejandro Garcia Padilla has said on numerous occasions he has ruled out cutting pensions as an option to pay its bills.

“That doesn’t mean that all debt is equal. We’ve never said that pensions should be made senior to all debt,” Lew told reporters Monday evening, USA Today reports. “But there does have to be a balancing — and at the end of the day you’re going to need to have a functioning economy.”

Lawmakers are expected to unveil a reworked version of legislation shortly designed to allow the island to restructure its debt and put an advisory board in place to guide financial decisions.

What will the global economy look like after the ‘great reset?’

A very common phrase used over the past couple years by the International Monetary Fund’s Christine Lagarde as well as other globalist mouthpieces is the “global reset.” Very rarely do these elites ever actually mention any details as to what this “reset” means. But if you take a look at some of my past analysis on the economic endgame, you will find that they do, on occasion, let information slip which gives us a general picture of where they prefer the world be within the next few years or even the next decade.

A few goals are certain and openly admitted. The globalists ultimately want to diminish or erase the U.S. dollar as the world reserve currency. They most definitely are seeking to establish the International Monetary Fund’s Special Drawing Rights basket system as a replacement for the dollar system; this plan was even outlined in the Rothschild run magazine The Economist in 1988. They want to consolidate economic governance, moving away from a franchise system of national central banks into a single global monetary authority, most likely under the IMF or the Bank for International Settlements. And, they consistently argue for the centralization of political power in the name of removing legislative barriers to safer financial regulation.

These are not “theories” of fiscal change, these are facts behind the globalist methodology. When the IMF mentions the “great global reset,” the above changes are a part of what they are referring to.

That said, much of my examinations focus on the macro-level; but what about the local level? What kind of economic system would we wake up to on a daily basis if the globalists get exactly what they want? This is an area in which the elites rarely ever comment, and I can only offer hypothetical scenarios. I am basing these scenarios on the measures that the establishment most obsessively chases. If they want a particular social or economic change badly enough, the signs become obvious. Here is what the world would probably look like after a global reset…

Gold Should Be 'Schmoozing' with $1,300 - This is Why its Not Says Expert

Prepping for Doomsday: Bunkers, Panic Rooms, and Going Off the Grid

The apocalypse has become big business. And it’s getting bigger every day. In the ’50s, homeowners fearing Communist attacks built bunkers in their backyards and basements, hung up a few “God Bless Our Bomb Shelter” signs and called it a Cold War. But today, Americans en masse are again preparing for the worst—and Communists are just about the only thing not on their list. What is? Terrorist attacks, a total economic collapse, perhaps even zombie invasions. Or maybe just a complete societal breakdown after this November’s scorched-Earth presidential election.

But this is not your Uncle Travis’ guns-and-canned-foods-militia vision of Armageddon preparedness. While the fears of survivalists and so-called preppers are modernizing, so too are their ideas and methods of refuge.

The business of disaster readiness is getting higher tech, higher priced, and way more geographically diverse, with state-of-the-art underground shelters tricked out with greenhouses, gyms, and decontamination units in the boondocks and the latest in plush panic rooms in city penthouses. Welcome to the brave (and for some, highly profitable) new world of paranoia.

“There’s a lot of uneasiness in society. You see it in politics. You see it in the economy. The world is changing really, really quickly and not always for the better,” says Richard Duarte, author of “Surviving Doomsday: A Guide for Surviving an Urban Disaster.” Prepping “gives them a certain comfort that at least they’ve got some sort of preparations to … take care of their family if things start falling apart all around them,” he says.

How Strong Is the Economy Really?

In the six years since the recovery began, there has been endless debate over the strength of the US economy. There are basically two sides of the debate. Those taking the positive side maintain the economy has almost returned to its pre-crisis levels and is on a firm footing. The opposing camp maintains that while the upper classes are in fine shape, the middle class is still hurting from the residual damage inflicted by the housing bubble implosion and credit crash. Is one side entirely mistaken or is there truth to both assertions?

And what about the US retail picture? The following graph shows our New Economy Index (NEI), which is a real-time measure of the overall strength or weakness of the US retail economy. As the chart shows, NEI is testing its previous all-time high and may well make a token new high by the end of this week. The index is reflecting strong retail sales from online firms like Amazon, as well as healthy shipping volumes from Fed-Ex. The NEI is telling us that the overall US retail sales climate is quite firm as we head closer to summer.

Although many business owners remain worried about growth prospects, mainly because of overseas woes, consumers don’t seem to share this concern. They just keep spending as the NEI chart suggests. Even discretionary consumer stock components in the NEI like Starbucks Corp. (SBUX) are seeing healthy demand, a sign that the retail economy is anything but weak.

Is it possible, however, that the bulk of retail spending is being done by upper-middle and upper-class shoppers without widespread participation among the “middle” middle class? Neal Gabler, writing in the May issue of Atlantic magazine, made the startling discovery that fully 47 percent of Americans would have a hard time coming up with $400 for an emergency expense and would have to borrow or sell something to raise the cash.

U.S. companies are saving $100 billion a year by shifting profits overseas

U.S. multinational companies are saving $100 billion a year by shifting their profits overseas to lower their tax bills, according to a study released Tuesday that found that corporate tax-dodging is a bigger problem than previously estimated.

Most U.S. companies pay far less than the country’s 35 percent tax rate and are using a multitude of maneuvers to keep their tax bills low, according to the study by Kimberly A. Clausing, an economics professor at Reed College. The study will be presented this week by the Washington Center for Equitable Growth, a D.C.-based think tank.

In addition to merging or buying smaller foreign firms and moving their headquarters overseas to lower their tax rates, known as an inversion, companies also assign patents to subsidiaries in countries in which the profits made from them will be taxed at a lower rate, the report says. “It is a much bigger issue than just inversions, that is just the tip of iceberg,” Clausing said in an interview.

Most of the profits are being shifted to countries — Bermuda, the Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland — where the effective tax rate is less than 5 percent, the report says. “There is indisputable evidence that the erosion of the U.S. corporate income tax base is a large and increasing problem,” the report says.

If You’ve Got Gold, You’ve Got Money; If You Haven’t Got Gold, You’ve Got A Problem

One would have to be blinded from either denial or ignorance not see the escalating political and military tension between the U.S. and Russia/China. While the U.S. media spins the story into a tall-tale in which BRIC nation leaders are the provocateurs, the truth is that the U.S. has transformed its illegitimate “war on terror” into war on the world in a last-gasp attempt hold onto the economic and geopolitical hegemony it has enjoyed for several decades.

When you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you – you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed. – Francisco’s “Money Speech,” from “Atlas Shrugged”

If you reread that passage, think about how it applies to the Patriot Act, Homeland Security Act, Wall Street, the Justice Department and Hillary Clinton. It’s pretty obvious the U.S. is collapsing economically, politically and socially. Perhaps the one last chance at saving the United States is embracing the truth – the truth as it is and not the “truth” the U.S. Government would have you believe. But economic and political truth is seeded in honest money – think about the Federal Reserve, the Comex and the political elitists in the context of this passage from “Atlas Shrugged:”

Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. – Francisco “Money Speech” The San Francisco Fed’s “President,” John Williams was blowing his weekly smoke on Monday. He said that higher interest rates would trigger “big movements downward” in asset valuations. He didn’t exactly discover plutonium with that revelation. But with his comments, Williams inadvertently admitted that the policy makers were responsible for creating what is now the biggest asset bubble in history. This is not going to end well.

Sorrentino: No recession imminent

Trump Versus the Fed

Donald Trump's ideas about managing the U.S. government's finances have generated a lot of debate, shedding useful light on the presidential hopeful's unconventional approach to economic policy. But Trump has yet to address a crucial issue: How he would manage a likely conflict with one of the world's most powerful institutions -- the Federal Reserve.

Trump has proposed large spending increases and steep tax cuts, a combination that the nonpartisan Committee for a Responsible Federal Budget has estimated would boost government debt to 129 percent of gross domestic product over ten years, from about 75 percent now. (As far as I can tell, this estimate does not include Trump’s more recent proposals to increase infrastructure and military spending.)

Fears that Trump's policies would trigger a sovereign debt crisis have prompted him to offer largely unworkable plans to renegotiate the U.S. debt. There's actually little reason, however, to believe that such a crisis would occur. As I have noted, a debt burden of 129 percent of GDP is not necessarily any less affordable than 75 percent. What matters is the trajectory of the budget deficit, which the U.S. must get under control over the next half century by either raising taxes or cutting benefits to older residents. The U.S. need not begin that process immediately -- and more spending now might actually make it easier by increasing the economy's longer-term growth potential.

Moreover, the world seems to need a lot more safe assets, such as the Treasury bonds that the U.S. issues to finance deficit spending. Trump’s fiscal plans would help meet this demand. Problem is, Trump's proposals are likely to run into direct conflict with the Fed's monetary policy. More government spending and lower taxes would generate more demand for goods and services. This would add to inflationary pressures, raising the question: How would the Fed respond?

Credit Suisse Reports Big Loss Amid Sour Market Conditions

Swiss bank Credit Suisse reported Tuesday a loss of 302 million Swiss francs ($310 million) for the first quarter, when market volatility discouraged client activity, while pressing apace with planned staff reductions.

The loss compared with a profit of 1.05 billion francs a year earlier. Revenues plunged 30 percent to 4.64 billion francs.

Still, the loss was not as bad as investors had feared, and the shares rose 3.7 percent to 13.93 francs in Zurich.

The bank said that during the quarter it achieved over half of its 2016 target for 1.4 billion francs in net cost savings, and has reduced 3,500 positions of a total 6,000 planned reductions this year.

American Wages Have Actually Been Falling For 46 Years

It’s widely known by now that America has a serious wealth inequality crisis, and there is an abundance of evidence to support that assertion. While the wages of the top 1% of wage earners has risen by over 150% since 1979, the wages of the bottom 90% have only risen by 17.1% in that same time period.

Another key figure is the relationship between productivity and wages. While the average worker is nearly 2.5 times more productive now than he or she was in 1948, the wages of our workers have been stagnant. Hourly wages grew at nearly the same exact rate as productivity until the early 1970s, at which point they suddenly stopped growing, even as our workers grew more productive than they had ever been before.

Both of those statistics are frequently cited, but they don’t really paint a full picture of how bad this situation is. They make it sound like the middle class has merely stagnated. But when you adjust these statistics for inflation, and consider where the benefits GDP growth has flowed towards, it’s obvious that the middle class has been gutted over the years.

The wages of the bottom half of income earners has actually fallen by 4.6% since 1973, while the top 5% of income earners received a 51.4% pay raise. Meanwhile, American wages as a percentage of GDP have been falling for 46 years. While GDP per capita hasn’t really stopped growing in the big scheme of things, the average household income peaked in 1999 and never recovered. If the earnings of the average worker hadn’t so wildly diverged from productivity and GDP growth, the average household income would be $13,500 higher right now.

Wednesday 05.11.2016

NEWS to Disturb the Comfortable...

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