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Thursday 05.12.2016

Global Monetary Elites Scream, “Buy Gold”

The gold debate is usually conducted between global monetary elites who disparage gold and so-called “gold bugs” who stack coins in their basements awaiting the end of the world. Both sides go too far.

But what happens when a bona fide member of the elite endorses gold? That’s an earthquake, and it just happened! Kenneth Rogoff, Harvard professor, chess grandmaster and author of the widely acclaimed book This Time Is Different, just sent shock waves through the global elite by recommending that emerging-market central banks buy gold to diversify their portfolios away from dollar holdings.

And JP Morgan’s Private Bank is also recommending its clients “position for a new and very long bull market for gold.”This bank is only open to wealthy clients with at least $5 million of investable assets. Later this year, the bank will require at least $10 million of investable assets. This is not for everyday Americans.

The super rich and the elites are now selling stocks and buying gold. And for good reason. Gold has fundamental support from Chinese and Russian efforts to get away from the dollar system. It also has technical support from scarcity on the physical supply side. Gold is flying off the shelves. When elites say dump dollars and buy gold, what are you waiting for? The good news is that there’s still time to diversify your portfolio into gold if you haven’t already. Now is the time to complete your gold allocation (I recommend 10% of investible assets) before it’s too late.

Jamie Dimon gets into war of words with banker he called a 'jerk' on CNBC

Not everyone in banking is intimidated by Jamie Dimon, it turns out. Camden Fine, head of the Independent Community Bankers of America, a trade organization for thousands of smaller banks, hit back after being called a "jerk" Wednesday morning on CNBC.

During his appearance on CNBC, an anchor read a statement from Fine regarding a column Dimon, the CEO of JPMorgan Chase, wrote in April in the Wall Street Journal calling for large and small banks to come together. Fine ridiculed the column, saying in a statement that Dimon was trying to deflect intensified regulatory pressure on big banks.

"I think the guy who wrote that's a jerk, OK." Dimon said. "We are one of the biggest banks to community banks," Dimon said Wednesday morning. "I'm completely sympathetic to the community bank saying that 'some of these regulations are killing us' ... I agree with that."

Dimon's "remarks reflect Wall Street's inability to take responsibility for the economic crisis it caused and the taxpayer-funded guarantee against failure it continues to enjoy," Fine said in a statement provided to CNBC.com after Dimon's appearance. "The nation's financial and economic stability should not be at the mercy of a few large financial institutions, regardless of whether they process checks for other banks." For his part, Dimon went on to say that he wants regulatory burdens for community banks reduced, even if the pressure isn't eased on bigger banks — like his.

Too Big to Fail Still Too Big a Problem, Fed President Kashkari's Quest for Solutions Continues

Opinions about how to correct the too-big-to-fail problem range from downsizing the big banks to leaving them intact, but the questions lie in exactly how to accomplish that.

Breaking up the big banks, treating too-big-to-fail companies like utilities with heavy regulation and capital requirements, taxing debt across the financial system, or putting a size cap on banks were a few solutions discussed during the first "Ending Too Big to Fail" symposium spearheaded by Federal Reserve Bank of Minneapolis President Neel Kashkari.

Kashkari is leading a series of meetings in his too-big-to-fail initiative to discuss, analyze, research and examine "transformational" solutions for fixing the too-big-to-fail problem to try to prevent another financial crisis from happening in the future.

"These transformational options, in my view, were taken off the table in 2010 because they were so transformational it made people nervous," he said. "It's time we give those transformational options serious consideration." At a second symposium to be held Monday, experts will focus on two proposals to solve the too-big-to-fail problem, including taxing leverage in the financial system and finding alternatives or enhancements to the Dodd-Frank Act Resolution. Ben Bernanke, former chairman of the Federal Reserve, will serve on a symposium panel.

Schiff: Gold is just getting started

3 Ways to Cut USPS Losses: Chop People, Offices and Delivery Days

The U.S. Postal System (USPS) is headed toward a major restructuring, caused by losses that it cannot sustain as it is currently constituted. The three primary factors in lowering costs have been part of the debate about the future of the USPS: closing offices, firing people and cutting the number of days that it delivers mail.

The USPS lost $2 billion in its most recent quarter. Management said its revenue grew 4.7% to $17.7 billion. However, what it calls “controllable income” rose to $576 million, compared to $313 million in the same quarter last year. The loss was triggered by what it calls “legally-mandated expense to prefund retiree health benefits.” A loss is a loss, regardless. And Congress has not let the USPS off the hook by changing the way that benefits are counted.

The first among the major cuts could be a drop in the number of post offices. The USPS reports that it has 35,520 retail offices. The number has changed very little since 2006. In 2011, USPS management suggested the shuttering of 3,652 locations. Since retail customer visits have dropped from 1.23 billion in 2006 to 919.5 million last year, the logic to support the plan is easy. As more people do business online, the plan makes even more sense. Unique visitors to the USPS website have risen from 190 million in 2009 to 547 million last year. Online revenue has more than doubled over 10 years to $1.05 billion.

The next set of cuts would be in workers and routes. Delivery routes numbered 244,700 in 2006 and 226,777 last year. Total vehicles operated by the USPS were 216,004 in 2006 and 214,933 last year. That is despite a drop in mail volume from 213.1 billion in 2006 to 154.3 billion last year. The argument has been repeatably made that FedEx and UPS can, and do, serve many of the same functions as the USPS. That is inarguably true. USPS has too many workers. That would be particularly true if the number of days of delivery drops.

T. Boone Pickens gets behind Trump

T. Boone Pickens, a billionaire oil investor, is feeling bullish about presidential candidate Donald Trump. He says it's time to "try somebody different" as the GOP presidential nominee, whose unorthodox bid has given other major GOP donors pause.

Pickens, one of the party's most prolific donors, says Trump called him on Monday and the two had a chuckle about how he'd given big money to GOP rivals Jeb Bush and Carly Fiorina before Trump beat them. Pickens says he told Trump he's with him now.

The blunt-talking 87-year-old says he would contribute to Trump and likely to a pro-Trump super PAC, as well, although he says is too early to put a dollar amount on it.

Pickens made the comments Wednesday at the SALT conference, an annual gathering of financial industry leaders held in Las Vegas. Pickens says he agrees with one of Trump's more controversial plans, to temporarily ban Muslims from entering the country.

Xerox Reverses Plans to Lay Off Workers at Colorado Springs Call Center

U.S. outsourcing firm Xerox has reportedly reversed its decision to fire hundreds of employees in Colorado Springs, saying that its client has agreed to extend its contract on the back of robust growth in business.

The outsourcer had handed pink slips to as many as 328 employees, but most will now be recalled. Not all the employees received pink slips had left the job because May 31 was slated to be their last day of work.

The company previously said cuts were necessary because of the “changing needs” of the client, but it now says the client’s business is growing and wants to extend the contract. Of the 328 workers informed, 128 had been switched to positions with other Xerox clients, according to the Colorado Springs Gazette. The remaining 200 employees are being contacted.

According to a Xerox executive the Gazette quoted, as many as 90 employees have so far agreed to come back. The Norwalk, Connecticut-based company is preparing to split into two businesses, separating its printer and copier unit from its business services unit. It acquired the bulk of the business services operations when it bought Affiliated Computer Services Inc. for nearly $6 billion in 2010.

$1,914,651,000,000: FY2016 Taxes Set Record Through April; $12,679 Per Worker; Feds Still Run Deficit of $354,592,000,000

The U.S. Treasury raked in a record of approximately $1,914,651,000,000 in tax revenues in the first seven months of fiscal 2016 (Oct. 1, 2015 through April 30, 2016), according to the Monthly Treasury Statement released today.

That is up about $14,151,330,000--in constant 2016 dollars—from the approximately $1,900,499,670,000 in constant 2016 dollars the Treasury collected in the first seven months of fiscal 2015.

(Tax revenues from previous years were adjusted to 2016 dollars using the Bureau of Labor Statistics Inflation Calculator.) Even though the Treasury has collected more in inflation-adjusted tax revenues so far this fiscal year than in any previous year, tax collections were actually down in the month of April alone compared to last April. In 2015, the Treasury collected approximately $471,801,000,000 in April (in 2015 dollars). In 2016, the Treasury collected $438,432,000,000 in April.

Despite collecting record revenues over the span of the first seven months of fiscal 2016, the federal government still ran a deficit of $354,592,000,000 during the period--as federal government spent $2,269,242,000,000 in those seven months.

Painful Process Coming for America Not Going to Be Pretty

America's middle class is shrinking almost everywhere

America's once-mighty middle class is shrinking all around the nation. The share of middle-income households declined in 90% of the country's 229 metro areas between 2000 and 2014, according to a new report by the Pew Research Center, released Wednesday.

The middle class contraction is also happening on a national scale. Overall, some 51% of Americans lived in middle class households in 2014, down from 55% in 2000. But national statistics can sometimes obscure what's going on at a local level. For instance, the housing crash in the late 2000s hit certain places much harder than others.

When it comes to the middle class, however, the trend holds true in almost every metro area. "The middle class is losing ground in communities all across the country," said Rakesh Kochhar, associate director for research at Pew. "In the North. In the South. In areas large and small."

There's no one reason why the middle class is shrinking, Kochhar said. One of the main causes? Rising income inequality, driven by factors including globalization, the decline of unions, the outsourcing of jobs and advancements in technology. They are also seeing their incomes shrivel. Pew defines the middle class as those having incomes ranging from two-thirds to double the national median, based on household size.

Payday Loan, Check Cashing Operation Trained Employees To “Never Tell Customer The Fee”

All American Check Cashing collects approximately $1 million in check-cashing fees each year. But according to federal regulators, the company, which also provides payday loans, obtains those fees through deceptive means, including refusing to tell customers what they will be charged and lying to prevent consumers from backing out of transactions.

This is according to a lawsuit filed by the Consumer Financial Protection Bureau against All American, its owner, and its affiliate Thrifty Check Advance, accusing the defendants of a litany of illegal and deceptive business practices. Mississippi-based All American Check Cashing offers check-cashing services and payday loans at approximately 50 stores in Mississippi, Alabama, and Louisiana.

According to the CFPB complaint, since at least 1999 AACC has charged a fixed fee for its check cashing services that vary by state and by whether a check is government issued. In Mississippi and Alabama, AACC charges a 3% fee for government-issued checks and a 5% fee for other checks. In Louisiana the fee is 2% for government-issued checks and 5% for other checks.

While charging fees is typical of check-cashing companies, the CFPB alleges that AACC refuses to tell consumers how much they will be charged before handing over funds. “All American instructs its employees to hide the check-cashing fees by counting out the money over the fee disclosure on the receipt and removing the receipt and check as quickly as possible,” the complaint states.

A Central Banker Officially Loses It: "We Are Magic People"

Over the years, first on fringe blogs who dared to point out long ago that the emperors are actually naked, and increasingly everywhere else there has been speculation that locked deep inside the ivory towers of central banks one could find either career academics or Goldman Sachs alumni who were convinced they were all powerful, all capable deities, who in addition to printing money out of thin air, are comfortable micromanaging not only the world's capital markets but also economies. Just like gods, or "magicians"... but really just insane nutjobs.

Today we got an official confirmation of just how truly profound the central banker delusion of grandeur, and sheer insanity, is courtesy of ECB Governing Council member Vitas Vasiliauskas, who told Bloomberg in an interview that the ECB can still conjure up policy surprises - read inflation - if needed to combat economic shocks and push prices higher. While this was merely the usual jawboning by an ECB member, we bolded the word "conjure" for a reason. It will become clear why soon enough.

What followed was the usual verbal diarrhea we have grown accustomed from every central banker, whose first (and only) job is to preserve confidence in a broken system; so broken that even ordinary people are saving instead of spending despite negative rates.

The 42-year-old Vasiliauskas, who was appointed to a second term on April 7, declined to comment on specific policy options the ECB will take, but refuted the notion that the central bank wouldn’t be able to react to shocks such as a sudden worsening in the international economy. “Such conversations, such speculations are taking place before every meeting,” he said. “We still have a lot of tools and we can make surprises for the market. I don’t see for the moment any need for a new rabbit because we should implement what was agreed, what was announced.”

Is Donald Trump Behind This Year's Rally in Gold? Maybe...

The Frogs Are Boiling Again—–Why Wall Street Stays In The Pot

Yesterday’s spasm of machine rage begs a question. After the S&P 500 has chopped sideways for 600 days in no man’s land either side of 2060, and given the baleful headwinds now gathering from all points in the global economy, there is absolutely no reason to stay in the casino.

At Tuesday’s closing level there was, at best, a 2% upside back to the May 2015 high of 2130, and a momentary one at that. In the other direction stood the prospect of at least a 40% of downside to 1300 (15X current shrinking earnings of $87/share) when the third great central bank bubble of this century inexorably bursts. Anyway, the likelihood was that the machines would take it all back at the first chance.

So why do the frogs of Wall Street stay in the boiling pot? Some do because they are perma-frogs. Not having been boiled for 7 years, they have apparently forgotten the pain. Jeffrey Saut of Raymond James, for instance, told CNBC today that the water is actually still a tad on the cool side. Why earnings this year are projected at $118 per share and next year’s looking like $135.

So that’s a perfect 15.4X and, besides, we are not merely heading for a second half rebound from the Q1 GDP bottom. According to Saut, public policy is fixing to get more effective and supportive of the market, too. You could wonder, of course, whether he had Hillbama or Wild Man Trump in mind as to the latter point. Or you could just say the man feels no heat because he has wetted himself in his own Cool-Aid and be done with it.

Italian Judge Rules It’s Okay For The Hungry To Steal Food

It could be basic compassion or it could be Pope Francis’s influence, but Italy’s highest court just ruled that the theft of a small amount of food when one is starving isn’t a punishable offense. Roman Ostriakov, a homeless Ukrainian man, stole cheese and sausages in 2011. Last year, he was convicted and sentenced to six months in jail and a fine. The court’s latest judgment overturns that, and “reminds everyone that in a civilised country not even the worst of men should starve.”

While it’s not a declaration that everyone can now steal bread from the mouths of decadence, this is a grand statement in a country where “statistics suggest 615 people are added to the ranks of the poor ... every day,” according to Italian newspaper Corriere Della Sera. Italy is a deeply Catholic country, and there is certainly biblical precedent to the new ruling. Consider this verse from Proverbs 6:30: “People do not despise a thief if he steals to satisfy his hunger when he is starving.”

There is also some global precedent for how Italy’s court responded to this case. Writing in Bloomberg View, Berlin-based Leonid Bershidsky cites an occasion in the U.K. when a family forced to live on $11.58 per week was caught taking from a Tesco dumpster and ultimately let go. It’s rather rare that people are let off for the crime, though, so it should be interesting to see how this creates a precedent in Italy: The New York Times points to statistics that show an increase in Italian hunger-related food thefts over the the last few years and chain Alì Supermercati has launched a new initiative in which they post pictures of shoplifters at the entrances to stores.

There are certainly discrepancies in how those who are caught stealing food are treated the world over; it depends on the law enforcement agency and whether the hungry person is deemed worthy of pity. Recently in Venezuela, hungry soldiers were caught stealing goats for food while left with nothing to eat amid the country’s current economic woes, but are likely to be prosecuted. The mentally ill and those with prior convictions, too, aren’t always as lucky as Ostriakov.

Singer Says Gold Rally Just Beginning as Goldman Sees Losses

Billionaire hedge fund manager Paul Singer said that gold’s best quarter in 30 years is probably just the beginning of a rebound as global investors -- including Stan Druckenmiller -- weigh the ramifications of unprecedented monetary easing on inflation.

“It makes a great deal of sense to own gold. Other investors may be finally starting to agree,” Singer wrote in an April 28 letter to clients. “Investors have increasingly started processing the fact that the world’s central bankers are completely focused on debasing their currencies.”

Gold for immediate delivery rallied 16 percent in the first three months of the year, the biggest quarterly surge since 1986, as the Federal Reserve refrained from tightening and central banks in Europe and Japan pressed on with negative interest rates. Druckenmiller, the billionaire investor with one of the best long-term records in money management, said last week gold is his largest currency allocation and the bull market in stocks was exhausted.

If investors’ confidence in central bankers’ “judgment continues to weaken, the effect on gold could be very powerful,” Singer wrote in the letter. “We believe the March quarter’s price action could represent something closer to the beginning of such a move than to the end.”

Puerto Rico Defaults on Debt, Worse Yet To Come

The uncertainty that the global markets are facing continues to grow with the recent announcement that Puerto Rico, a branch of the United States, would be forgoing its debt repayment and instead using the funds to focus on essential services needed to keep the country running.

This is a growing concern, as once done, there is no going back. This is just the first round of debt defaults that the government of Puerto Rico is going to engage in. Their economy, much the same as large parts of the United States, is in shambles and collapsing. Knowing that it is only a matter of time, the government is taking a page from the books of Greek history and attempting to "extend and pretend" for as long as they can.

On May 1st, the debt payment missed was $400 million, which is a sizable sum, but a drop in the bucket when compared to the staggering amounts that they have accumulated over the years while trying to keep their sinking ship afloat.

The total "official" debt is over $70 billion. This is a truly stunning number and is likely why the FED engaged in its recently much discussed emergency meetings with the President and the Vice-President. These meetings set the markets on edge with speculation as to why they were happening. My guess is that this was one of the major topics discussed. This news has to have the FED and government officials on edge. They know that if Puerto Rico can begin to default on their debt payments, then why can't the many states who are facing similar problems?

Report: Oil, Gas Job Cuts Top 350,000 Worldwide

Worldwide job losses in the oil and gas industry have just topped 350,000, according to analysis by Graves & Co. transaction service on May 9. As of May 6, announcements of reductions in force reached 351,410 globally, and the impact of layoffs has been most severe in the oilfield service sector of the industry, with 152,015 layoffs, or more than 43% of the total worldwide, Graves said.

Layoffs in the upstream E&P sector began slowly and for many months were much lower than the service, drilling and supply sectors. In recent months, job cuts in the E&P sector have surpassed those in the drilling contracting and supply sectors, reaching 80,265, or just under 23% of total layoffs, while drilling and supply now represent 15% and 14.5%, respectively, according to Graves.

“For a long time, job cuts in the E&P sector lagged behind the oilfield service, drilling and supply sectors as oil and gas producers attempted to hold on to important talent,” John Graves, president of Graves & Co., said. “As the downturn has persisted beyond the expectations of many in the industry, the impetus to cut costs has significantly affected those responsible for finding, developing and producing oil and gas.”

The Graves & Co. job cuts count is based upon public announcements, WARN Act notices and extrapolations from the Baker Hughes rig count. It began in January 2015 and includes announcements beginning in June 2014, when crude oil prices began falling.

Should Europe follow Germany’s export-led economic model?

Chipotle spends $1 billion on stock buybacks as recovery lags

Chipotle Mexican Grill Inc. is stocking up -- on itself. The burrito chain has spent more than $1 billion on share buybacks in the past year, part of efforts to cope with a food-safety crisis and a flagging stock price. But the move has raised questions about whether the money would be better spent somewhere else -- say, on new technology or remodeling restaurants -- especially since the shares remain down.

The cost of the repurchases is roughly twice the cash Chipotle’s restaurants generated in the same period, according to data compiled by Bloomberg. Chipotle’s ratio of stock repurchases to cash from operations in the past 12 months was the third-highest among U.S. restaurant companies.

While Wendy’s Co. and Domino’s Pizza Inc. had higher ratios, those brands are heavily franchised and generate less cash from operations. Chipotle, which has more than 2,000 locations, doesn’t franchise. Amid the worst crisis in its history, Chipotle’s supersized buybacks may not be the best move, said John Gordon, principal at restaurant adviser Pacific Management Consulting Group. While the repurchases may signal management’s vote of confidence to investors, the cash could be spent elsewhere, he said.

“They did buybacks instead, and it’s somewhat surprising,” Gordon said. “We really didn’t see much uplift to the stock price. In fact, it fell. So what was the value of the buybacks really?” Chipotle has declined 4.2 percent since the previous two quarters’ buybacks were announced beginning Feb. 2. The Standard & Poor’s 500 Index has gained 9.5 percent in that time.

Macy’s first-quarter sales slump wasn’t just a tourism problem

Tourists can be blamed for a lot of things: pedestrian traffic jams or sold out tickets to “Hamilton,” for example. But are they also responsible for the sales decline at Macy’s Inc. during the first quarter? The retailer, whose shares were down some 14% at one point Wednesday, is facing headwinds from a “second consecutive year of double-digit spending reductions by international visitors in major tourist markets where Macy’s and Bloomingdale’s are key destinations,” said Chief Executive Terry Lundgren in a statement.

Karen Hoguet, chief financial officer of Macy’s M, -15.00% , said sales on international tourist credit cards were down 20% for the quarter, in addition to a 21% drop last year in the first quarter, according to a FactSet transcript. A breakdown of what that translates to in dollars wasn’t provided. Experts told MarketWatch there are issues at work beyond tourist spending.

“There’s no doubt the softer global economy and the strength of the dollar is having an impact,” said Jared Wiesel, a partner at pricing and revenue management consulting firm, Revenue Analytics. “But to say that sales dropped 7% and say that that’s the major driver, I’m a little skeptical.”

“There’s a larger fundamental weakness to the business model – to the department store model – that drives this sort of long-term weakness rather than it just being an international customer segment that’s protracting,” he added.

Thursday 05.12.2016

NEWS to Disturb the Comfortable...

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