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Friday 08.12.2016

Here Is Why Internet Currency Bitcoin Will Never be Digital Gold

Bitcoin may be the new big thing in global currencies, but don't count on it replacing the old, boring store of value, now or ever. New paradigms often create market bubbles. They are a new technology or idea that will change the world and, along the way, offer investors unlimited profits. Mania soon takes hold as prices detach from reality and people get rich, at least on paper. The mania soon fades, though, and before long prices fall, sometimes dramatically.

The cryptocurrency bitcoin is a good example of this new paradigm thinking. Bitcoin is a digital currency that is created and held electronically. At its core is the blockchain, a super database that tracks all bitcoin transactions. Some of its fans think that soon bitcoin use will grow exponentially and offer unlimited profits to investors.

They think that bitcoin will become the gold of the digital era, a safe place to park cash whenever there is a financial crisis and which is beyond the printing press threat of paper currency. Bitcoin proponents say that it is similar to the Internet in the 1990s and personal computers in the late 1970s. It is a disruptive technology about to go mainstream. And as investors abandon paper currencies, a tsunami of money will chase bitcoins as a safe-haven global currency, sending prices for the limited number of bitcoins available soaring.

The bubble in bitcoin prices, which rose from $215 last summer to a high of $763 this summer, reflects the exuberance. It could also show the impact that Chinese traders are having on bitcoin, as 90% of all bitcoin transactions happen in China, and much of bitcoin's price volatility is due to China-based short-term traders. In market bubbles, the mania phase eventually turns into the fourth and final blow-off phase. This is when paper fortunes and big gains disappear.

More Adult Americans Live With Their Parents And Grandparents

Despite the end of the Great Recession, there’s been a surge in multigenerational households. Both the number and share of Americans living in multigenerational family households has continued to rise in recent years, according to a new study by the Pew Research Center, a nonprofit think tank in Washington, D.C. In 2014, a record 60.6 million people, or 19% of the U.S. population, lived in a multigenerational household, up from 42.4 million (17%) in 2009 and 27.5 million (12%) in 1980. Multigenerational families — households with two or more adult generations, or one that includes grandparents and grandchildren — is growing among nearly all racial groups and age groups, says D’Vera Cohn, a senior writer and editor at Pew.

There are some demographic reasons. The Asian and Hispanic populations are growing more rapidly than the white population, Cohn’s analysis of the latest U.S. Census Bureau data found, “and those groups are more likely than whites to live in multigenerational family households.” What’s more, foreign-born Americans are more likely than the U.S.-born people to live with multiple generations of family, and Asians and Hispanics are more likely than whites to be immigrants. Some 28% of Asians lived in multigenerational households versus 25% of Hispanics and African-Americans and 15% of Caucasians.

More young U.S. adults live with their folks, Cohn says, and that doesn’t include those still studying. Among Americans aged 25- to 29 in 2014, 31% were part of multigenerational households. The share and number of 18- to 34-year-old adults living with parents surpassed other living arrangements in 2014 for the first time in more than 130 years. Education levels make a big difference: Young adults without college degrees are now are more likely to live with parents than to be married or cohabiting in their own homes, but those with college degrees are more likely to be living with a spouse or partner in their own homes.

As child care costs have surged 50% over the last decade, grandparents can also provide a valuable role as care givers. In fact, 60% of grandparents provided some care for their grandchildren during a 10-year period, and 70% of those who did provided care for two years or more, a 2012 study of over 13,000 grandparents aged 50 and older by the University of Chicago found. “Importantly grandparents with less income and less education, or who are from minority groups, are more likely to take on care for their grandchildren,” Linda Waite, a professor in urban sociology at the University of Chicago, wrote in the report.

Fed should raise interest rates this year, Williams says

The Federal Reserve should raise interest rates further this year, a top U.S. central banker said in an interview published on Thursday, reflecting improved labor market conditions and the likelihood that inflation is heading higher.

"As the economy gets closer to its goals, we can again pull our foot off the gas a bit and hopefully execute a nice, soft landing over the next couple of years," San Francisco Fed President John Williams told the Washington Post in an interview conducted this week.

Asked if the Fed's gradual rate increases should include any rate hikes this year, Williams said, "In my view, it does," the paper reported. The Fed raised benchmark U.S. rates last December for the first time in nearly a decade, but did not continue to lift them as it had anticipated in order to cushion the economy from the slowdown in China and financial market turmoil.

Williams had at the beginning of the year expected the Fed to raise rates several times in 2016, but global events have caused him to pencil in "a little more gradual pace of increases," he said in the interview.

Gold Bear Turns Bullish - Why This Financial Advisor Made the Switch

Nearly 44,000 retail workers have been laid off in 2016

These are tough times for people working at department stores and other big mall-based retailers. Macy's (M) announced on Thursday that it plans to close 100 stores. The company didn't give any details about how many people would lose their jobs.

But more and more department stores that are mall stalwarts, companies like Macy's, JCPenney (JCP), Sears (SHLD) and Kohl's (KSS), are losing customers -- and laying off workers. According to figures from job placement firm Challenger, Gray & Christmas, more than 43,600 layoffs have been announced in the retail sector so far this year.

The only two sectors to cut more jobs in 2016 are energy -- due to the massive drop in oil prices over the past two years -- and computers, largely a reflection of layoffs at Microsoft (MSFT, Tech30), IBM (IBM, Tech30), Intel (INTC, Tech30) and other old school tech giants.

Retail's biggest problem is the shift in how -- and where -- people shop. More consumers are shopping online as opposed to at brick and mortar stores. "The traditional retail industry in some respects is facing Armageddon. There were far too many stores built," said Mark Cohen, professor and director of retail studies at Columbia Business School.

A Tight U.S. Job Market is Putting Slack Employers at Risk

It’s another sign that America’s job market is hot. Workers are in no mood to stick around too long while businesses make up their mind about hiring them.

Almost one of every four employees loses interest in an opening if they don’t hear back from a prospective employer within a week of being interviewed, according to a survey by staffing firm Robert Half. Make that two weeks of waiting, and the share jumps to 46%. Further, 39% of people surveyed said they’d move on to chase other openings when faced with a lengthy hiring process.

“They have options, they want to move quickly,” said John Reed, senior executive director of the technology staffing division at Robert Half, the world’s largest specialized staffing company. “The market is so strong that candidates can have a lot of influence in the pace of the interview process.”

This is especially true for candidates with high-demand skills, in so-called white collar professions and industries such as technology, he said. The survey of more than 1,000 U.S. professionals was done in June.

Feds Use Funds for Medicaid, Children's Services For Zika Vaccine Research

Federal health officials have been forced to take $81 million in funds from various government programs, including the Centers for Medicare and Medicaid Services and the Administration for Children and Families, in order to avoid delaying research on Zika vaccines, according to a letter from U.S. Health and Human Services Secretary Sylvia Burwell.

Burwell has pledged the money to help keep research for a potential vaccine for the Zika virus on schedule, according to a letter to members of Congress. Burwell announced that $34 million will be transferred within the National Institutes of Health and another $47 million will be given to Biomedical Advanced Research and Development Authority (BARDA) so that neither has to delay research into Zika vaccines.

The funds allocated for the NIH will come "exclusively from other NIH accounts," including research into health issues like diabetes and cancer to keep that trial on schedule. "The failure to pass a Zika emergency supplemental has forced the Administration to choose between delaying critical vaccine development work and raiding other worthy government programs to temporarily avoid these delays," Burwell wrote.

The BARDA funds are being transferred from HHS agencies such as the Administration for Children and Families as well as the Centers for Medicare and Medicaid Services. The National Institutes of Health launched a trial for a possible Zika vaccine earlier this month. Burwell wrote that re-purposing funds will mean removing needed resources from other health programs and that additional funds are needed to get other potential Zika vaccines into testing.

State Department Spending $396,000 for Climate Change Competition in Morocco

The State Department is spending almost $400,000 for a climate change competition in Morocco. The agency said it is “aggressively” fighting climate change and is seeking to influence green energy policy in the North African country.

“Morocco and the U.S. share a strong commitment to combatting climate change which they are tackling aggressively at the international, national, and local levels,” according to a grant announcement. “The U.S. Department of State Bureau of Energy Resources (ENR) seeks to highlight this shared commitment by driving policy and commercial innovation through a Green Growth Climate Challenge.”

The agency is looking for universities, organizations, or nonprofits to host a competition for ideas how to “mitigate the impacts of climate change through the use of clean energy and energy efficient technology.”

“The energy industry is undergoing rapid transformation, offering countries the opportunity to accelerate clean energy deployment, from solar and wind to energy efficiency, through innovative policies and business models,” the State Department said. “Local innovation is a critical component in the fight against climate change, fueling creative approaches to climate change mitigation and resiliency.” The contest will help Morocco break down barriers so they can adopt more liberal environmental policies.

Macy's CEO: No Second Thoughts On Leaving Macy's

Big Banks and Big Insurers Send Scary Signals

There’s something big and scary going on behind the scenes but, as usual, the public isn’t reading about it on the front pages of the newspapers.

Yesterday, the broad stock market, as measured by the Standard and Poor’s 500 Index, declined a modest 0.29 percent while big Wall Street banks like Citigroup and JPMorgan Chase fell by triple that amount. Bank of America, which bought the big retail brokerage firm, Merrill Lynch, in the midst of the 2008 crash, fell by 8.6 times the rate of the decline in the S&P to give up 2.50 percent.

Equally noteworthy, two major insurers, MetLife and Prudential Financial, saw percentage market losses far in excess of the S&P. MetLife declined by 2.74 percent while Prudential Financial lost 1.68 percent. Prudential Financial has been named a Systemically Important Financial Institution (SIFI) by the Financial Stability Oversight Council. MetLife had received the same designation but won a court battle to rescind the designation. The U.S. government is appealing.

The vote of no confidence on down market days in the complex U.S. banks that hold both insured deposits from Mom and Pop savers while also making huge derivative gambles is a repeat of the action we saw earlier this year. On February 3, 2016, four big Wall Street banks (Bank of America, Citigroup, Goldman Sachs and Morgan Stanley) set 12-month lows in intraday trading – far outpacing the declines in the broader market index as measured by the S&P 500. The banks have recovered some since then but are nowhere near setting record highs as the broader market indices have of late. These mega banks should be a barometer of the overall health of the stock market and the U.S. economy. After all, these are the banks that are making corporate loans, underwriting corporate stock and bond issues, and doling out credit to consumers. If the mega banks are experiencing air pockets of buying interest in declining markets, this does not bode well for either the market or the U.S. economy.

Proposed Rule On Student Loan Debt May Harm Colleges, Students And Taxpayers

A proposed rule governing student loan forgiveness is subjective and vague, critics say, and could lead to a rush of litigation for many colleges — both for-profit and nonprofit — and cost students and taxpayers billions.

One of the biggest issues with the 530-page draft regulation, set to go into effect next year, is a broadened definition of “misrepresentation,” as it relates to student loan forgiveness.

“The new standard for ‘substantial misrepresentation’ looks to me to be extremely broad, allowing government officials to hand out severe punishments, at their discretion, to colleges even for small and innocent mistakes in what college officials say publicly,” Patrick Wolf, a professor in the University of Arkansas Department of Education Reform, told Watchdog.org. “This rule would change the risk environment for colleges and universities dramatically.”

The U.S. Department of Education rule was largely a response to the collapse of Corinthian Colleges — a for-profit school sued by former students in 2015 who said they had been defrauded. Students participated in a debt strike and many received loan forgiveness. Wolf and others say the Education Department proposal is an overreaction. “There is an old saying that outlier cases make for bad law,” Wolf said. “The Department of Education should continue their process of redressing the harm caused by Corinthian, but not punish the entire for-profit and nonprofit college sector for the transgressions of a single bad actor.”

Obamacare On “Verge Of Collapse” As Premiums Set To Soar Again In 2017

If Obamacare enrollments continue their current trend and insurers continue to hike premiums at alarming rates then Republicans may not have to worry about “repealing and replacing Obamacare” as it might just work itself out “naturally”. The 4th open enrollment period for Obamacare begins on November 1, 2016 and industry experts are warning that another year of tepid demand from “young and healthy” Americans could force more insurers out of the exchanges effectively marking the end of Obamacare as we know it. According to a story published by The Hill, 11 million people bought health insurance through the exchanges for 2016 which was drastically below the Congressional Budget Office’s initial projection of 21 million.

Well we’re shocked! Turns out that whole “adverse selection bias” was a real thing. So you’re telling us that young, healthy people don’t want to pay for insurance they know they’ll never use? We guess America’s youth can actually do basic math, after all. Apparently they were able to figure out they would rather take the lower tax associated with Obamacare penalties than the larger tax associated with buying a healthcare policy they’ll never use. We guess Millennials are a little less enthusiastic about embracing socialism when the costs are coming out of their pockets.

With America’s youth continuing to shun health insurance, insurers are all racking up massive losses on the exchanges. For many insurers the losses will simply result in massive premium hikes but others have decided to withdraw from the exchanges all together. In fact, UnitedHealthCare recently announced plans to exit most state exchanges by 2017 (see our post entitled “Largest US Health Insurer Exits California, Illinois Obamacare Markets“) Per The Hill:

In the last month, two major insurers – Aetna and Anthem – both reversed course on their plans to expand in the marketplace. Now, all five of the nation’s largest insurers say they are losing money on the exchanges. “From a policy point of view, we’re basically seeing the exchanges unravel,” said Michael Abrams, a healthcare strategist with Numerof & Associates who consults for insurers including UnitedHealthGroup.

Is bad news for economy good news for home buyers?

We Are About To Witness A 50% Stock Market Crash

Are we about to witness one of the largest stock market crashes in U.S. history? Swiss investor Marc Faber is the publisher of the “Gloom, Boom & Doom Report”, and he has been a regular guest on CNBC for years. And even though U.S. stocks have been setting new record high after new record high in recent weeks, he is warning that a massive stock market crash is in our very near future. According to Faber, we could “easily” see the S&P 500 plunge all the way down to 1,100. As I sit here writing this article, the S&P 500 is sitting at 2,181.74, so that would be a drop of cataclysmic proportions. The following is an excerpt from a CNBC article that discussed the remarks that Faber made on their network on Monday…

The notoriously bearish Marc Faber is doubling down on his dire market view. The editor and publisher of the Gloom, Boom & Doom Report said Monday on CNBC’s “Trading Nation” that stocks are likely to endure a gut-wrenching drop that would rival the greatest crashes in stock market history. “I think we can easily give back five years of capital gains, which would take the market down to around 1,100,” Faber said, referring to a level 50 percent below Monday’s closing on theS&P 500.

Of course, Faber is far from alone in believing that the market is heading for hard times. Just recently, I wrote about how legendary investor Jeffrey Gundlach is warning that “stocks should be down massively” and that he believes this is the time to “sell everything“.

And on Tuesday, Donald Trump told Fox News that the stock market is “a big bubble”… “If rates go up, you’re going to see something that’s not pretty,” the billionaire businessman told Fox News during a Tuesday morning phone interview. “It’s all a big bubble.” Worries that the Fed has created a market bubble have shadowed the second-longest bull market in history as the central bank has kept its key rate near zero and expanded its balance sheet by $3.8 trillion in order to pump liquidity into the financial system.

Millennials Have Lots of Problems With Working Government Jobs

“Nobody’s actually growing up saying they want to work for the federal government,” Tim McManus says. It’s a candid admission, coming as it does from a vice president at the Partnership for Public Service, a Washington, D.C., nonprofit dedicated to strengthening America’s civil service — in part by recruiting young people.

His point, in an interview with InsideSources Wednesday, is that children and adolescents tend to dream about specific professions. They want to be leaders, lawyers, scientists, space explorers. And though government hires for all these roles, the youthful dreamer typically doesn’t envision assuming them in the public sector — especially since the private sector can be more lucrative, more innovative and more adept at drawing talent.

“That’s a hard nut to crack,” McManus says on the first week of the Olympics, “in the age where bashing federal employees has become almost an Olympic sport.”

According to the Office of Personnel Management, today’s young professionals make up just 17 percent of the federal workforce, and McManus isn’t the only one trying to change that. But in a new e-book from the trade publication Government Executive, “Government’s Quest to Attract (and Keep) Millennials,” experts identify a series of specific factors keeping twenty- and thirty-somethings away. They help explain why, according to a Chamber of Commerce study cited in the book, just two percent of millennials planned on working in government.

Clear Signs That Your Job Is Due To Be Automated

In H. G. Wells’s classic The War of the Worlds, the narrator pauses a moment to rue the fact that he didn’t react sooner to the arrival of an "intelligence greater than man’s"—in his case, Martians landing on earth. Comparing himself to a comfortable dodo in its nest, he imagined those ill-fated birds also dithering as hungry sailors invaded their island: "We will peck them to death tomorrow, my dear."

And what about you? As intelligent technologies take over more and more of the decision-making territory once occupied by humans, are you taking any action? Are you sufficiently aware of the signs that you should? To help you get the head start you may need, here are the signs that it’s time to fly the nest. All of them are evidence that a knowledge worker’s job is on the path to automation.

If you don’t have to touch your work or see your customer face-to-face in order to perform your job, there’s less reason not to automate it. If you deal primarily in documents (as real estate and many other types of attorneys do, for example) or images (like radiologists), systems can digest that content and determine its meaning. If your job requires you to wrestle with something physical in unpredictable ways, it’s not going away very soon. An anesthesiologist friend, for example, says he often has to move patients around a lot to clear airways, so he doubts robots will put him out of work.

We already know that analytics and algorithms are better at creating insights from data than most humans. They have already replaced some insurance policy underwriters and financial planners. They’ll probably replace more, since this human/machine performance gap will only increase.

Postal Service posts $1.6B loss for quarter

The U.S. Postal Service's financial woes worsened, with the mail delivery service reporting a loss of $1.6 billion for the third quarter of fiscal 2016. That was up from a $981 million loss a year earlier.

The report prompted calls that Congress address the post office's losses and reform the agency — including from the postal service itself.

"We incurred a net loss resulting, in part, from continued decreases in first-class mail volume and systemic financial imbalances associated with our retiree health benefit pre-funding requirements," said Chief Financial Officer and Executive Vice President Joseph Corbett.

The losses were caused partly by the expiration of a surcharge Congress had allowed the postal service to charge customers, forcing the standard postage stamp to drop from 49 cents to 47 cents in April and reducing revenue for the quarter by about $500 million. The rest of the losses mainly came from the USPS paying down its large pension and healthcare obligations. Corbett tried to put the best face on the news, noting that the postal service's revenue was up by $117 million compared with the same period last year, but added, "Despite the encouraging numbers, net losses continue to mount.

State Department aide helped Clinton Foundation

Home affordability remains as depressed as the average American paycheck

Home prices increased yet again in the second quarter, outpacing wage growth, according to the latest quarterly report by the National Association of Realtors. This is causing affordability to decline despite historically low mortgage interest rates, according to the trade group's head economist.

Low rates are normally an incentive to get a mortgage, but not in this, current housing market. In fact, prices rose so much that in San Jose, California, the median single-family home price hit above $1 million.

With affordability falling, it's not surprising that homeownership continues to decrease. In fact, it is now at it's lowest rate since 1965. That being said, some experts have their own theories as to why homeownership is so low.

The median single-family home price increased in 83% of measured markets, about 148 out of 178 metropolitan statistical areas. The gains are based on closed sales in the second quarter compared to the second quarter last year. On the other hand, 16% of the areas, 29 metros, showed lower median home prices than last year. There were fewer increasing markets in the second quarter compared to the first quarter when prices increased in 87% of metro areas.

Is The Department Store Era Ending?

Amid competition from fast-fashion and discount-clothing retailers, plus online stores, Macy’s is downsizing. The nation’s largest department store announced Thursday a plan to close about 100 stores next year to boost profits and invest in other areas, including its online business. The closures will comprise about 15 percent of Macy's stores.

"The announcements we are making today represent an advancement in our thinking on the role of the stores, the quality of the shopping experience we will deliver, and how and where we reinvest in our business for growth," said Macy's President Jeff Gennette, reported the Associated Press. Mr. Gennette will succeed Terry J. Lundgren as CEO in the first quarter of 2017.

The announcement comes on the heels of Wednesday’s news from Coach that it will stop selling handbags and leather goods at about 250 department stores across North America because the stores' steep discounts are hurting the luxury perception of the brand among shoppers. Though Coach did not say which department stores it would withdraw from, Macy’s is one of its biggest customers, as Forbes reports.

“While we understand that customers may use department stores for trial and shopping across brands, the high level of promotional impressions created negatively impacts our long-term brand health,” Coach Chief Executive Victor Luis told analysts during a presentation.

Is Arizona finally ready to stop paying for pro sports stadiums?

We ordinarily don’t approve of elected representatives dragging down the level of discourse in this country, but we’ll make an exception in Andy Kunasek’s case.

One of top officials in Maricopa County in Arizona has been listening to Major League Baseball’s Arizona Diamondbacks’ request for money for much of the last year and, frankly, he’s sick of it. The team is looking for $65 million for a paint job and a new scoreboard for their Chase Field home and thinks the county should pay for it, as well as the $187 million in repairs it will need before the team’s lease runs out in 12 years. Keep in mind that this is a ballpark that has a pool beyond the outfield fence that rents for between $4,750 and $7,000 a night.

Kunasek, who knows the county already gave the team $238 million toward the $364 million ballpark opened in 1998, thinks the panhandling team can take it walking. That’s actually a nicer way for phrasing what he said. We’ll let a letter from Kunasek to Diamondbacks President Derrick Hall in April say the rest:

“My instinctive concern for the taxpayer is amplified by my belief that this facility should never have been built using public funds and, to turn the music up louder, they were never given the opportunity to make that decision at the ballot box. I have no intention of compounding that wrong by supporting your obscene demand that we provide another massive infusion of taxpayer money to the private business that currently employs you.”

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