Headline News Archives

Thursday 10.13.2016

Wells Fargo CEO John Stumpf Steps Down

Wells Fargo & Co. Chairman and Chief Executive John Stumpf is stepping down from both roles, effectively immediately, as the bank’s sales tactics scandal continues to roil the firm, a person familiar with the matter said.

Mr. Stumpf will be replaced by President and Chief Operating Officer Timothy J. Sloan, who was widely expected to succeed Mr. Stumpf when he retired in the future.

The bank’s independent chairman Stephen Sanger will take over as board chairman, the person said. Elizabeth Duke, a current board director and former Federal Reserve governor, will become vice chairman of the board, this person said.

The bank has been under fire for more than a month after agreeing in early September to pay a $185 million settlement with regulators and a city official for opening as many as 2 million accounts without customers’ knowledge. It has since faced a raft of federal and state investigations, including from the Department of Justice.

Germany To Cut Off Welfare Benefits For EU Citizens

In what may be the latest indication that Merkel's immigration policy blowback is being heard by the government, Germany's Handelsblatt reports that Merkel's government plans to prohibit foreign E.U. citizens from receiving welfare benefits for five years if they haven’t worked in Germany before.

Labor Minister Andrea Nahles, a center-left Social Democrat, introduced a corresponding draft measure during a cabinet meeting of Chancellor Angela Merkel’s coalition government on Wednesday, according to the news agency Reuters. Under the draft law, E.U. citizens can claim one-time assistance for the period of a month to pay for food and shelter. They can also receive a loan to cover the cost of the trip back to their home country if they fail to find work.

Nahles is seeking to close a loophole which arose from a ruling by the Federal Social Court in 2015. The court ruled that unemployed E.U. citizens have a right to welfare benefits after six months. Ms. Nahles said in the daily Frankfurter Allgemeine Zeitung on Wednesday that the “free movement of labor doesn’t mean one can claim German welfare benefits after a short stay without working.” She called for a legal framework within the European Union to coordinate member states social welfare systems to prevent people from making unjustified claims.

Ms. Nahles has received backing for her draft measure from the arch-conservative Christian Social Union, or CSU, the sister party of Ms. Merkel’s center-right Christian Democrats. Gerda Hasselfeldt, head of the CSU’s Bavarian faction, said the draft law sends the “right signal.” “Germany cannot afford to allow immigration into the social security system,” Ms. Hasselfeldt told Reuters.

Central Banks Explore Blockchains: Why Digital Dollars, Pounds Or Yuan Could Be A Reality In 5 Years

Last Wednesday, about 150 central bankers from 60 countries around the world convened at the Federal Reserve Bank of New York for the 40th anniversary of its annual central banking seminar, a private event titled “Policy Implications of Persistent Low Inflation and Rates.”

Economic and financial luminaries such as economist and Harvard president emeritus Lawrence Summers, founder of the world’s largest hedge fund Bridgewater Ray Dalio and the People’s Bank of China deputy governor Yi Gang gave talks on the low-interest rate, low-growth environment and monetary policy around the globe.

And then there was a presentation, “The Digital Asset Economy,” by a different type of financial player: Adam Ludwin, chief executive officer of Chain, a San Francisco-based startup helping enterprise clients such as Visa, Citi, Nasdaq and other giants of finance capitalize on blockchains, the technology behind Bitcoin.

Like the other speakers Ludwin was thinking about ways, post-financial crisis, the financial system could become more stable, but he was offering policy makers not a new idea for regulation but a completely different type of tool for helping to prevent or manage another crisis: technology in the form of blockchains.

Bill Holter-Between Now & Election Extremely Dangerous

Inside the Fed’s September Minutes: The Annotated Meeting

The Federal Reserve on Wednesday published the minutes of its September meeting, at which it held the target for its benchmark interest rate unchanged at 0.25 percent to 0.50 percent -- although three monetary policymakers dissented from the decision, preferring a rate hike.

While a number of members of the Federal Open Market Committee have since expressed a desire to lift interest rates, the most recent comments from New York Fed President William Dudley reinforce that there's a vibrant debate over how much better the economy can get without inflation rearing its head.

“You certainly want to go as far as you can,” he said in Albany, New York on Wednesday, ahead of the release of the minutes. “You don’t want to keep people unemployed just because you think you’re already at the full employment rate."

Fed officials continue to be divided over the scope for the labor market to continue to tighten, with some fearing a sharp uptick in inflation could arise if rates stay too low. That could prompt the central bank to aggressively raise rates to bring inflation back down, and put an end to the U.S. economic expansion in the process. Prior to this release, market pricing implies a 67 percent change of an increase in interest rates by December, with the odds of a pre-election hike in November sitting at 19 percent.

Alibaba's new payment system lets virtual reality shoppers pay by nodding

Alibaba Group Holdings' finance arm on Wednesday demonstrated a payment service that will allow virtual reality shoppers to pay for things in future just by nodding their heads. VR Pay, the new payment system, is part of Alibaba's efforts to capitalize on the latest technology in online shopping. In 2015, for example, it introduced a facial recognition technology for Alipay mobile payments service advertised as "pay with a selfie".

The VR payment technology means people using virtual reality goggles to browse virtual reality shopping malls will be able pay for purchases without taking off the goggles. They can just nod or look instead.

Lin Feng, who is in charge of Ant Financial's incubator F Lab that has been developing the payment service over the past few months, told Reuters: "It is very boring to have to take off your goggles for payment. With this, you will never need to take out your phone."

User identity can be verified on VR Pay via account logins on connected devices or via voice print technology that recognizes each person's unique voice. Lin said this was the most convenient method in a VR setting compared with other biometric recognition technologies. But passwords will still be needed for authentication, which the user can also enter with head movements, touch, or by staring at a point on virtual display for longer than 1.5 seconds, he said.

Labor Department Confirms That Total Job Openings Are Now on the Decline

If you have followed the Department of Labor’s monthly payrolls and unemployment reports, you probably realized that the endless strength of the jobs market is now looking a bit less strong. And now we have confirmation from the Bureau of Labor Statistics (BLS) that the number of job openings is part of the problem.

The BLS monthly Job Openings and Labor Turnover Survey, so-called JOLTS report, has a one-month lag, so it measures Augusts openings and turnovers, as opposed to last Friday’s Employment Situation report that was focused on September.

The JOLTS report is never a market-moving report, but this should be at least one bit on confirmation that the jobs market is not as strong as it has been recently. If you interpolate the actual BLS numbers, it looks pretty clear that the jobs market is now less robust than in prior quarters.

The total number of job openings was 5.443 million in August. July’s total job openings figure was revised lower, from 5.871 million to 5.831 million. On a net basis, that means that there were 6.65% fewer job openings at the end of summer than in the mid-summer report. Wednesday’s JOLTS report gets worse on other metrics as well. Hiring had previously been on the rise, but it slowed by almost 1% in August. Hires were 5.2 million and separations were 5.0 million.

Live it up, retirees, on your 0.5% Social Security pay raise

Retirees on Social Security are likely to bank a pay raise next year for the first time since 2015 -- though many won’t even notice the cost-of-living increase in their benefits, which will amount to a cup of coffee or two for the average recipient.

The American Institute for Economic Research forecasts an increase of 0.2 percent to 0.5 percent, or $2 to $6 on the average payment, making it the stingiest increase since the Social Security Administration began making annual adjustments in the 1970s.

There were no increases at all in 2010, 2011 and 2016. The upshot of the small cost-of-living adjustment is its rationale -- unusually low inflation, which means retiree dollars are stretching farther on some expenses. For instance: Since August, energy costs (read: gas prices) have dropped 9.2 percent, according to data from the Bureau of Labor Statistics.

But for retirees who don’t drive or don’t drive much, fuel savings likely will be eclipsed by, say, the rise in the cost of health-care services of 5.1 percent over the same period. Meantime, wealthy retirees and people working past retirement age are likely to see their Social Security benefits fall, as fees deducted for Medicare Part B continue to rise faster than cost-of-living adjustments. (Annual increases in Medicare premiums are capped for 70 percent of Social Security recipients to prevent Social Security check amounts from falling year to year.)

Julian Assange's Influence on the U.S. Election

Daewoo Shipbuilding to Cut 3,000 jobs Amid Mounting Losses

Daewoo Shipbuilding & Marine Engineering Co., the world’s second-largest shipbuilder, plans to eliminate 3,000 jobs, or 24 percent of its workforce, this year as part of a restructuring plan to improve its financials.

Daewoo is receiving applications for a voluntary retirement program until Oct. 21, the Geoje, South Korea-based company said an e-mailed statement Wednesday. The company had 12,699 employees on its payroll at the end of June. Including contract workers, the company employs about 40,000 people.

Daewoo Shipbuilding, Hyundai Heavy Industries Co. and Samsung Heavy Industries Co., the world’s three biggest shipyards based in South Korea, are all reducing capacity, cutting jobs and selling assets amid a plunge in orders for offshore drilling units and ships. The shipyards posted losses last year and are struggling with mounting debt after a slide in oil prices prompted oil companies to slash spending and cancel or postpone projects.

Daewoo Shipbuilding expects about 1,000 employees to participate in the voluntary program, it said. The company is also planning to transfer about 2,000 workers into a new company, the statement said without elaborating. The Maeil Business Newspaper reported the job cuts earlier Wednesday.

Study: Obamacare Penalizes People for Getting Full-Time Job

Obamacare urges people to avoid getting a full-time job because they’ll take home more money by working less, according to a study.

The broader effect of the Affordable Care Act will be to reduce America’s work force by 4 million people, or 3 percent, the Mercatus Center, a libertarian think tank at George Mason University, says in the report.

“The ACA’s employment taxes create strong incentives to work less,” the study says. “The health subsidies’ structure will put millions in a position in which working part-time (29 hours or fewer, as defined by the ACA) will yield more disposable income than working their normal full-time schedule.”

President Barack Obama in 2010 enacted the law in the most significant overhaul of the U.S. healthcare system since Medicare and Medicare were created in 1965. The goal was to cut the number of uninsured from an estimated 45 million people by using tax incentives, penalties and subsidies for medical coverage.

Lloyds Banking Group cuts 1,200 jobs

The bank, which is 9% state-owned, and has been working to reduce costs and improve returns for shareholders. The jobs will go from the group operations, retail, customer products and marketing, finance and risk divisions.

The cuts are part of the 9,000 job losses the bank first announced in October 2014. The bank said the process involved "difficult decisions" and all affected staff had been told. Employee unions Accord and Unite were consulted prior to the announcement, the bank said, but Unite national officer Rob MacGregor called the move "horrific".

Lloyds said its policy was to use natural turnover and to redeploy people wherever possible in order to "retain their expertise and knowledge" within the firm. Voluntary redundancy packages will also be offered with compulsory redundancies happening as a "last resort".

Another part of the strategy to cut costs and modernise is the closure of hundreds of branches of the bank. In July, the bank said it was doubling the number of planned branch closures to 400. They will all close by the end of 2017. The bank attributed the cuts to changes in people's banking habits, with more demand for online services, as well as the sustained period of low interest rates.

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Wells Fargo faces long road to recovery after massive scandal

Embroiled in a scandal over unauthorized customer accounts, Wells Fargo faces a steep challenge in overhauling its hard-charging sales culture without gutting profits.

Until recently, Wells staffers labored under ambitious quotas while executives boasted to Wall Street about “cross-selling” each customer multiple accounts.

That system collapsed with revelations that thousands of employees opened as many as 2 million accounts without customer permission, leading to a $185 million fine in September. But the problems ahead extend far beyond regulatory penalties, investigations and lawsuits.

Executives will have to dismantle and rebuild systems of sales incentives and performance management that date back two decades, said retail banking experts, including two consultants who have worked for Wells Fargo. That will require heavy spending on hiring, training and installing safeguards against abuses.

Here's What Could Drive Gold to a Record in Next Two Years

Rising inflation and sagging confidence in the ability of central banks to revive global growth will drive up gold, according to Incrementum AG, which says bullion could climb to a record in the next two years.

Consumer prices are set to rise as oil rebounds, while low or negative interest rates and bond buying by central banks have failed to boost economies, said Ronald Stoeferle, managing partner at the Liechtenstein-based company, which oversees 100 million Swiss francs ($101 million). Incrementum was the top precious metals forecaster last quarter, Bloomberg-compiled data show.

“Inflation may surprise to the upside and this will be the moment when you want to have some gold in your portfolio,” Stoeferle, 35, said in an interview. “Not the absolute level of inflation, but the momentum and the direction of inflation is the most important driver. In this uncharted territory, with big monetary experiments going on, it just makes sense” to hold bullion, he said.

Gold had a momentous surge in the first half as the Federal Reserve stood pat on borrowing costs, negative interest rates spread in Europe and Japan and political risk climbed after the U.K. vote to leave the European Union. But the rally is unraveling with the metal posting its biggest weekly loss in almost a year on rising odds of a U.S. rate hike, increasing bond yields and deepening worries that some central banks have reached the limits of their effectiveness.

Infrastructure Spending and Helicopter Money: Two Hideous Ideas

The key to restoring Main Street prosperity is not launching an infrastructure financing bank as the Beltway bandits keep insisting and even Donald Trump has advocated. That will result in waste of capital, malinvestments, reduced economic efficiency and an even more bloated public sector than we already have. The bank that needs addressing, in fact, is the nation’s central bank.

Until the Fed’s massive intrusion in financial markets is eliminated via abolishing the Federal Open Market Committee and government-debt purchases, there is virtually no prospect of reigniting capitalist vigor and growth in the United States.

What that means, therefore, is that a half-trillion-dollar infrastructure spree like the one The Donald pulled out from under his comb-over represents a very dangerous idea. It would add measurably to the $35 trillion of public debt that is already baked into the cake, and put the politicians of the Imperial City knee-deep in the distribution of prodigious amounts of pork barrel.

In fact, they desperately need to get on with the opposite — a painful process of fiscal retrenchment that is unavoidable if national bankruptcy is to be prevented. Worse still, adding to the nation’s monumental debt pile in the face of nominal GDP growth that is stuck under the 3% barrier would be nearly suicidal. It would raise the ratio of public debt to national income — which is already on a path toward 150% — to even more crushing levels. At the end of the day, Donald Trump knows a lot about debt, and its dangers when it gets out of hand, and almost nothing about the economics of growth and public infrastructure. He should be sounding the alarm about the former.

Earnings growth will start to pick up, expert says

Despite Alcoa's earnings miss and warnings from some big names about expectations, overall earnings growth is going to start to accelerate, Bespoke Investment Group co-founder Paul Hickey said Wednesday.

"I think we've seen the trough in earnings," he told CNBC's "Power Lunch." While the earnings recession is expected to end this quarter, Alcoa kicked things off on Tuesday by missing estimates on both earnings and revenue. The firm reported revenues of $5.21 billion and earnings per share of 32 cents. Analysts had expected sales of $5.31 billion and profits of 35 cents per share, according to a consensus estimate by Thomson Reuters.

Plus, three large industrial firms, Dover, Honeywell and PPG, have recently lowered earnings and revenue estimates. But Hickey said there have been fewer earnings warnings coming into this season compared with prior quarters heading into the third-quarter earnings period.

"You always see some high-profile names giving an earnings warning because there's 500 companies in the S&P 500," he said. "So some of those are going to warn every year and they make the headlines."

What Going on with the New Global Reserve Currency, the Chinese Yuan?

The Chinese yuan fell to 6.722 to the US dollar currently, the weakest since September 2010. It’s down 3.3% so far this year. OK, a squiggle compared to the wholesale drubbing the UK pound has been taking since the Brexit vote, but there’s a difference: the yuan gets managed with an iron fist.

Some folks interpret this to mean that the People’s Bank of China has been weakening the yuan to gain some trade advantages and revive the export boom and kick economic growth back into gear. But evidence is piling up that the PBOC instead has been trying to slow down the yuan’s descent.

And this happened just days after the yuan joined the IMF’s special drawing rights (SDR) basket of reserve currencies, a huge milestone for the Chinese government that has been laboring on the internationalization of the yuan for years, mostly in tiny baby steps.

But the yuan is up against the mega-problems in China’s debt plagued economy, and it’s pressured down by enormous and, it turns out, not officially disclosed capital outflows. “If that trend persists, expect further yuan weakness versus the greenback,” wrote Krishen Rangasamy, Senior Economist Economics and Strategy at the National Bank of Canada.

US Job Openings Fall to Lowest Level in 8 Months

U.S. employers posted the fewest jobs in eight months in August, a sign job gains will likely remain modest in the coming months. The Labor Department said Wednesday job openings dropped nearly 7 percent to 5.4 million, down from 5.8 million in July. That month's total had been a record, but was revised lower.

The data adds to recent evidence that hiring may be slowing a bit from the robust pace of the previous two years. Yet the economy is still generating enough jobs to lower the unemployment rate over time. And most economists have expected job gains to taper as the number of unemployed has dwindled.

The biggest declines in job openings occurred in professional and business services, which includes accountants and engineers as well as temp workers, and manufacturing. The number of people who quit their jobs remained mostly unchanged at nearly 3 million. That's up 4.4 percent in the past year, though the total has flattened in recent months. Quitting is a sign that Americans are more optimistic about the job market and their chances of finding work.

It also can push up wages, as people are more likely to quit for a new job at higher pay. Layoffs declined slightly and remained near pre-recession lows. Many employers say they are having trouble finding the new employees they need, which suggests they are more likely to hold onto their current staffers.

Keiser Report: Business Death…Allegedly

Samsung’s Smartphone Recall Is Costing It Billions of Dollars

Samsung Electronics Co slashed its quarterly profit estimate by a third on Wednesday, soaking up a $2.3 billion hit from ditching its flagship smartphone in what could be one of the costliest product safety failures in tech history.

Quantifying the financial pain of Tuesday’s move to scrap the Galaxy Note 7 smartphone after a global recall and weeks of mounting problems, the world’s top smartphone maker said it expects its July-September operating profit was 5.2 trillion won ($4.7 billion), down from the 7.8 trillion won it estimated five days ago.

Samsung said in a statement the 2.6 trillion won ($2.3 billion) guidance cut reflects the sales and earning impact it currently expects from the decision to permanently halt sales of the $882 Note 7 device. Its third-quarter revenue estimate was also cut to 47 trillion won from 49 trillion won previously.

The new earnings guidance is 30 percent below third-quarter 2015’s operating profit, and left investors and analysts pondering the longer impact on Samsung’s brand and earnings. Rival suppliers of smartphones that use the Android operating system, like Samsung’s, stand to benefit if the Note 7 damage drive consumers elsewhere.

The Fed has its eye on the 'new housing crisis'

The Federal Reserve doesn't think the US has enough houses. In the release of the Federal Reserve's minutes from the September meeting, the members of the Federal Open Markets Committee spoke about the various aspects of the US economy and their progression since the July meeting.

Among the items discussed were inflation, the labor market, and notably, the US housing market. The FOMC said that the housing market looks a bit weak, saying "real residential investment spending continued to be soft in the third quarter." The reason? The Fed said that at least part of the issue is the so-called "new housing crisis."

Here's how the FOMC characterized the problem: "However, the sluggishness in the housing sector appeared to have continued into the third quarter. A couple of participants pointed to limited availability of lots and a shortage of skilled labor as restraining residential construction activity in their Districts; in one District, constraints on the supply of new homes for sale were expected to boost spending on home improvements and offset some of the drag from the slowing in new construction."

Put another way, the supply of new and existing homes has declined to the point that it is not able to keep up with new demand from younger people looking for a new home. This in turn drives the price of new homes up, pricing out first-time home buyers and resulted in the sluggish recovery for the housing market.

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