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Tueday 09.13.2016

JPMorgan's Jamie Dimon: I'd love to be president

Is JPMorgan Chase CEO Jamie Dimon the next Donald Trump? "I would love to be president," he said Monday in response to a question at a presentation at the Economic Club of Washington, D.C.

Dimon said that before Trump's campaign, he assumed a rich businessman couldn't run for the highest office without first serving in lower posts such as governor or senator. "Shows you what I know," he said. But as much as he might like the idea of serving as president, he won't be hitting the campaign trail any time soon.

"I think it's too hard and too late," Dimon said. At 60, Dimon is 10 years younger than Trump and eight years younger than Hillary Clinton. He has also had a health scare. Dimon was diagnosed with throat cancer two years ago. He has completed treatment and said his prognosis is good.

But he told CNNMoney last fall, "I don't necessarily assume I'm going to live for 10 years. And you want to live very deliberately. You want to end every day and say, 'That was a good day.'" As for why the job might appeal to him, Dimon said he's frustrated with the state of political discourse and that Washington can't come together and use analytics to solve problems. "We need policy. We need thoughtful people," he said.

Cash Abolition – Dirty Money & The ‘Clean’ New Fiver

This year’s fresh madness of negative interest rates in Tokyo and Frankfurt just makes the idea more urgent – even if, so far, negative rates only apply to commercial banks’ own deposits at the Bank of Japan and the European Central Bank. And even if – so far – the appliance of NIRP has done less than nothing to boost bank lending or economic growth.

But if households and business faced the same certain loss of 0.1% or 0.4% or more per year on their bank savings, they would surely choose to spend! Spend! SPEND! instead, according to the theory. Or they could simply sidestep the policy – and escape its intended effect of urging savers to spend – by withdrawing all their money as hard cash instead. Unless hard cash…say the £5 or $1 or €50…didn’t exist anymore.

“The ECB has no intention to move away from physical money,” said ECB chief Mario Draghi in a letter to one worried European politician earlier this summer. “I would like to underline that the decision [to cease circulation of] the EUR 500 banknote is not aimed at limiting cash.” Yikes – an official denial! Followed by another from the Bundesbank too!

But away from central-bank schemes for a “ban on cash” however – imagined or denied – a slow death for physical money is much plainer to see. Indeed, one key driver has spurred the latest innovation in physical cash for UK savers and shoppers… …the plasticated £5 note, now ready for its launch this week by the Bank of England. You can fold it, crush it, put it through the washing machine…take it on a day trip to the Isle of Wight…or just immerse your New Fiver in a tank of bubbling water if you must…

AI will eliminate six percent of jobs in five years, says report

Within five years robots and so-called intelligent agents will eliminate many positions in customer service, trucking and taxi services, amounting to six percent of jobs, according to a Forrester report.

"By 2021, a disruptive tidal wave will begin," said Brian Hopkins, VP at Forrester, in the report. "Solutions powered by AI/cognitive technology will displace jobs, with the biggest impact felt in transportation, logistics, customer service, and consumer services."

Intelligent agents, chat bots and digital assistants include Amazon's Alexa, Apple's Siri, Alphabet's GoogleNow and Facebook's Messenger bots. They are powered by artificial intelligence and they can already understand a person's behavior, interpret their needs and even make decisions for them.

AI-based services and apps will eventually change most industries, resulting in a redistribution of jobs, Forrester found. Self-driving cars, for example, will have wide-ranging impacts on both the auto and transportation industries. Facebook and Google are soaking up top talent and building huge bodies of data to train algorithms that will power all kinds of new services, the report found.

Ross: If Fed doesn’t raise rates, we risk going into a recession

The Debt Riddle That Elites Are Trying To Solve

The biggest problem confronting the global monetary elite is sovereign debt. There’s too much of it, it’s growing fast and it cannot possibly be paid off in real terms. A default larger than any in history with trillions of dollars in losses for investors is coming sooner rather than later.

The only question is what form the default will take. Once the form of the default is ascertained, it’s easy to estimate the winners and losers and the approximate timing. The first myth that needs to be busted is the idea that the world “learned its lesson” in the 2008 crisis and the system has been made safer since then. It’s not true. In fact, debt has been piled on debt since 2008.

All that happened since the 2008 crisis is that government debt has been used to substitute for some private debt, while private debt has continued to grow on its own. These charts are for loans and securities only. They do not include interbank lending or derivatives.

The total amount of derivatives, which is just off-balance sheet debt, both over the counter and exchange traded, exceeds $1 quadrillion (that’s a thousand trillion)! There’s nothing inherently wrong with debt subject to two conditions: The debt is used for productive purposes and your capacity to repay the debt is growing faster than the debt itself. In other words, are you borrowing for good reasons, and can you afford to pay it back?

Fed's Brainard: Move Cautiously Before Hiking Interest Rates

Federal Reserve board member Lael Brainard indicated Monday that she's in no hurry to raise interest rates again, comments that were greeted with relief on Wall Street. In a speech in Chicago, Brainard said that the risk that higher rates will damage a fragile economy exceeds the risk that higher rates will ignite inflation. Economic weakness "counsels prudence," she said.

The Dow Jones industrial average shot up 200 points after Brainard's speech. Financial markets had been on edge after several Fed officials in recent days signaled a willingness to discuss a rate hike at their meeting next Tuesday and Wednesday.

Low rates have fueled a strong stock market rally. Until the recent comments, investors had been expecting the Fed to delay a rate increase until December or later. Brainard is among the Fed's top "doves," who believe the central bank should be cautious about raising rates. Had she signaled a change of heart, it might have convinced investors that a hike was coming next week, especially after another dove, Boston Fed chief Eric Rosengren , said on Friday that there's case for higher rates. The comments — and anxiety about what Brainard might say — sent stocks tumbling on Friday.

Brainard, a former White House and Treasury Department official, is seen as a contender for a top job in a potential Hillary Clinton administration. The Fed surfaced as a campaign issue Monday when Republican nominee Donald Trump accused Fed Chair Janet Yellen of holding rates "artificially low" to keep the economy rolling and benefit President Barack Obama. "She should be ashamed of herself," Trump said on CNBC.

American Growth Has Slowed Down. Get Used to It

Slow growth has been in the forefront of the candidates’ concerns about the economy throughout this presidential campaign. They’re right to point it out: Whatever your view of the past several years, America’s economic growth is not what it used to be. Our real gross domestic product roared along from 1947 to 1974, growing an average of 3.8 percent per year, and slowed only slightly until 2004. But since then, it’s dropped by half. Today’s economy, growing at a sluggish 1.6 percent per year, has been described using an old term inherited from the 1930s, “secular stagnation.”

Yes, the economy is stuck, and all candidates promise to unstick us. But can they? Well, there’s a good chance they won’t be able to do anything of the sort. I’ve spent the past five years looking at what really caused the American economy to grow so quickly for so many years, and the conclusion is that we’re going to have to get used to a very different idea of how fast our economy can grow.

Some treat the recent slowdown as an anomaly and assume we can get back to our “normal” high-growth mode. But a closer look at history suggests that the real anomaly is how fast things grew for much of the 20th century. The reason is not that we’ve stopped innovating. Instead, the basic explanation is that some inventions are more important than others—and the most important ones happened decades ago.

Economic growth doesn’t happen at a steady pace. Instead, progress jolts forward much more rapidly in some eras than in others. There was virtually no economic growth in human societies for millennia until the Industrial Revolution began around 1770. Growth began at a slow pace from 1770 to 1870, then—fueled by a unique clustering of what I call “the Great Inventions,” principal among which were electricity and the internal combustion engine—became remarkably rapid in the century ending in 1970.

Customs and Border Protection Apprehends 1,195 Illegal Aliens Per Day in August

U.S. Customs and Border Protection had another record-breaking month at the Southwest border in August, during which agents caught 9,359 unaccompanied alien children (UACs) and 5,804 members of family units crossing from Mexico unlawfully.

This makes August the worst month for UAC/family units crossings so far in 2016, and the second-highest apprehension rate for those groups this fiscal year. Last month’s apprehension totals surpassed the previous 2016 record set in July, when 12,570 UACs and family members crossed the border.

But unaccompanied children and family units aren’t the only folks hopping, skipping and jumping across the Rio Grande – a river so shallow it’s easily stepped over in some areas. CBP reports agents apprehended 21,894 single adults in August, bringing the total number of apprehensions last month to a staggering 37,057 – equating to about 1,195 people apprehended per day.

So far, CBP reports it’s caught 369,522 illegal alien border-crossers so far in FY2016, including 54,052 unaccompanied alien children and 68,080 members of family units. The remaining 247,390 individuals – about 67 percent of the total – were single adults.

Obamacare exchanges still vulnerable to fraud

Obamacare’s web exchanges are still “vulnerable to fraud,” according to a watchdog report Monday that says government investigators were able to get taxpayer-subsidized coverage for fake enrollees despite a brand-new safeguard against chicanery on the law’s insurance exchanges.

The Government Accountability Office said six fictitious applicants who were able to obtain private coverage and subsidies under the Affordable Care Act during its testing in 2014 were successful again in 2016, even though none of the “enrollees” had filed a 2014 tax return.

The health law’s coverage provisions launched in 2014, and enrollees were supposed to file returns the following spring to make sure they received the correct amount of subsidy for their incomes. Those who failed to do so were supposed to lose their subsidies, beginning in 2016.

The GAO said that after a payment-processing error booted two of its fake enrollees, four of them were able to retain coverage — two filed paper forms that didn’t ask about the 2014 return, and two lied and said they’d filed returns. The GAO said one of its lying customers had to verbally reassure a marketplace representative and then received a warning in May about filing a 2014 return, though coverage remained in place as of August.

The Fed Plans for the Next Crisis

In her recent address at the Jackson Hole monetary policy conference, Federal Reserve Chair Janet Yellen suggested that the Federal Reserve would raise interest rates by the end of the year. Markets reacted favorably to Yellen’s suggested rate increase. This is surprising, as, except for one small increase last year, the Federal Reserve has not followed through on the numerous suggestions of rate increases that Yellen and other Fed officials have made over the past several years.

Much more significant than Yellen’s latest suggestion of a rate increase was her call for the Fed to think outside the box in developing responses to the next financial crisis. One of the outside the box ideas suggested by Yellen is increasing the Fed’s ability to intervene in markets by purchasing assets of private companies. Yellen also mentioned that the Fed could modify its inflation target.

Increasing the Federal Reserve's ability to purchase private assets will negatively impact economic growth and consumers’ well-being. This is because the Fed will use this power to keep failing companies alive, thus preventing the companies’ assets from being used to produce a good or service more highly valued by consumers.

Investors may seek out companies whose assets have been purchased by the Federal Reserve, since it is likely that Congress and federal regulators would treat these companies as “too big to fail.” Federal Reserve ownership of private companies could also strengthen the movement to force businesses to base their decisions on political, rather than economic, considerations.

Wells Fargo Exec Who Headed Phony Accounts Unit Collected $125 Million

Months ago, CEO John Stumpf praised the executive in hot water as “a standard-bearer” for the bank. Wells Fargo & Co’s “sandbagger”-in-chief is leaving the giant bank with an enormous pay day—$124.6 million.

In fact, despite beefed-up “clawback” provisions instituted by the bank shortly after the financial crisis, and the recent revelations of massive misconduct, it does not appear that Wells Fargo is requiring Carrie Tolstedt, the Wells Fargo executive who was in charge of the unit where employees opened more than 2 million largely unauthorized customer accounts—a seemingly routine practice that employees internally referred to as “sandbagging”—to give back any of her nine-figure pay.

On Thursday, Wells Fargo agreed to pay $185 million, including the largest penalty ever imposed by the Consumer Financial Protection Bureau, to settle claims that that it defrauded its customers. The bank’s shareholders will ultimately have to swallow the cost of that settlement. The bank also said it had fired 5,300 employees over five years related to the bad behavior.

Tolstedt, however, is walking away from Wells Fargo with a very full bank account—and praise. In the July announcement of her exit, which made no mention of the soon-to-be-settled case, Wells Fargo’s CEO John Stumpf said Tolstedt had been one of the bank’s most important leaders and “a standard-bearer of our culture” and “a champion for our customers.”

For-profit colleges explained

Marc Faber: Dow Could Go to 100,000

They call him Dr. Doom and for good reasons. Dr. Marc Faber, publisher of the Gloom Boom & Doom report, author, and investment advisor, usually emphasizes the risks in the financial system and never minces his words.

However, his views are more nuanced than most people think, and his advice for investors is more pragmatic than idealistic. Epoch Times spoke to Dr. Faber about central bank manipulation of financial markets, the reasons for income inequality, a potential system collapse, and how to invest in this environment.

Epoch Times: How long can the central banks manipulate markets?

Dr. Marc Faber: This is an issue that will be decided by central banker,s and I don’t have control over the manipulation of central banks. Haruhiko Kuroda of the Bank of Japan [BoJ] expressed the view that there is no limit to monetary inflation. That they can keep on buying assets and they can keep on buying equities and real estate. So the madness in the present time may go on. In a manipulated market, it won’t end well, but you don’t know when it will not end well, and how far the manipulation can last.

Jim Grant Rejects Rogoff's "Curse Of Cash", Warns "Government Wants To Control Your Money"

If there is a curse between the covers of this thin, self-satisfied volume, it doesn’t have to do with cash, the title to the contrary notwithstanding. Freedom is rather the subject of the author’s malediction. He’s not against it in principle, only in practice.

Ken Rogoff is a chaired Harvard economics professor, a one-time chief economist at the International Monetary Fund and (to boot) a chess grandmaster. He laid out his case against cash in a Saturday essay in this newspaper two weeks ago. By abolishing large-denomination bills, he said there, the government could strike a blow against sin and perfect the Federal Reserve’s control of interest rates.

“The Curse of Cash,” the Rogoffian case in full, comes in two parts. The first is a helping of monetary small bites: a little history (in which the gold standard gets the back of the author’s hand), a little central-banking practice, a little underground economy. It’s all in the service of showing where money came from and where it should be going.

Terrorists traffic in cash, Mr. Rogoff observes. So do drug dealers and tax cheats. Good, compliant citizens rarely touch the $100 bills that constitute a sizable portion of the suspiciously immense volume of greenbacks outstanding—$4,200 per capita. Get rid of them is the author’s message. Then, again, one could legalize certain narcotics to discommode the drug dealers and adopt Steve Forbes’s flat tax to fill up the Treasury. Mr. Rogoff considers neither policy option. Government control is not only his preferred position. It is the only position that seems to cross his mind.

The Coming Crash Will Create An Economic Tsunami, Skyrocketing Gold

Stephen Leeb: “All roads lead to Rome, which is to say there are many ways the Chinese have of effecting a new monetary system that will include gold as an anchor. The new system may evolve gradually, but it is growing more likely that it will be created out of chaos. In the last interview with you, Eric, I spoke of SDR’s as a route. And that is still a high probability. Recall, the SDR route requires the inclusion of the Renminbi in the SDR basket along with the Dollar, Euro, Pound, and Yen…

A basket of paper currencies is still paper currencies, which means that the dollar can still rule as a substitute with one critical caveat. The Chinese have the dominant market share in cyber finance, which include virtual currencies such as the bitcoin and blockchains, which are distributed data sets associated with transactions. Just the use of a cyber financial network which only the Chinese can provide will give the SDR a major edge over the dollar. And with a sixth component added to the SDR, namely gold, it’s game over.

All currencies, even the Renminbi, will likely pale in relation to gold. Meaning gold will become the world’s dominant currency. You can actually see how this might work just by looking at the chart of gold vs the SDR over the past 40 years. Gold’s nine-fold rise would mean that whatever the metal’s initial weight in the SDR, it would come to dominate the composite currency. And it won’t take two generations for it to happen, as this time around gold will be an anointed part of the global currency. And that will mean wide-eyed demand from the start. At some point limits will have to be set but a nine- or ten-fold gain in a fairly short period of time is not a crazy projection.

That is a template for the (relatively) slow road to new money – a road that still ends in the greatest bull market you will ever see in a major asset. One reason the road could be slow is that while China has the technology and other areas of domination to effect the changes almost immediately, they still may want to accumulate more gold before letting things fly.

IMF's Lagarde trial in Tapie case to begin December 12

International Monetary Find (IMF) chief Christine Lagarde will stand trial for her role in a 400 million euros (330 million pounds) payout as French finance minister in 2008 to businessman Bernard Tapie from Dec. 12, a French court said on Monday.

France's highest appeals court rejected her appeal against a judge's order in December for her to stand trial at the Cour de Justice de la Republique, a special court that tries ministers for crimes in office.

"She will attend," Lagarde's lawyer Patrick Maisonneuve told Reuters. The trial, which will run until Dec. 20, will only be the fifth in the history of the tribunal, which is made up of three judges and six lawmakers from both the lower and upper houses of parliament.

Lagarde is accused of negligence with the result that public funds were misused by improperly approving the decision to allow an out-of-court arbitration in the dispute with Tapie, a supporter of conservative former president Nicolas Sarkozy.

OPEC opening up to non-members?

For-Profit College Operator Bridgepoint Agrees To Forgive $23.5M In Student Loans

Two months after Bridgepoint Education, the operator of for-profit colleges Ashford University and the University of the Rockies, revealed it was being investigated by the Department of Justice over its federal student aid funding, another federal agency has ordered the company to forgive $23 million in student loans and pay an $8 million penalty over allegedly illegal student lending practices.

The Consumer Financial Protection Bureau ordered Bridgepoint on Monday to pay $31.5 million to resolve allegations it deceived students into taking out private student loans that cost more than advertised.

According to the CFPB consent order, starting in 2009 Bridgepoint offered private loans to prospective students to help cover the cost of tuition not paid by federal loans.

An investigation by the Bureau found that Bridgepoint reps weren’t forthright with information about these loans. Alleged bad practices included giving students incorrect information about their monthly repayment amount. In some cases, the CFPB found that students were told that previous borrowers normally paid off loans with monthly payments of as little as $25.

People In Venezuela Are Abandoning Their Dogs Because They Can’t Afford Food

Dog owners in Venezuela have been forced to abandon their pets as the country’s crippling economic crisis has meant they can no longer afford to keep them. The ongoing situation has led to triple-digit inflation and severe shortages of essential supplies like food and medicines.

This has meant that ordinary Venezuelans have been forced to abandon their pets as they can no longer afford to feed them. While the minimum wage in the socialist country stands at $23 per month, a 20-kilogram packet of dog food can go for $50 on the black market — double the price in the United States.

Reuters photographer Carlos Garcia Rawlins and journalist Girish Gupta traveled to the Famproa shelter in Los Teques, in the hills near the capital, Caracas, to visit some of the dogs that have been suffering during the country’s plight.

The shelter’s founder, Maria Arteaga, 53, told the reporters she has seen a noticeable increase in dogs arriving over the last few months — animals are dropped off every few hours, she said. Nine poodles were left there in the last two weeks alone.

US Credit Card Debt to Top $1 Trillion in 2016

Americans added $34.4 billion to their credit card debt in the second quarter of 2016, nearly half the total added in all of 2015. Debt holders also paid down just $27.5 billion, the smallest amount since 2008.

The data were released Monday by personal finance firm WalletHub. Researchers now project that the total U.S. credit card balance at the end of this year will top $1 trillion, a new record.

The average indebted household’s balance rose to $7,817 in the second quarter, just $611 below a level that WalletHub has identified as being unsustainable. Add to that the relative ease of obtaining credit and the snapshot looks quite similar to the situation in the United States in the second quarter of 2007, just six months ahead of the beginning of the Great Recession.

According to WalletHub, the current charge-off (bad debt) rate is 3.13%, still short of the 3.85% rate in the second quarter of 2007. The $34.4 billion additional debt in the second quarter is more than the $31.1 billion Americans amassed in 2007, and total credit card debt of $912 billion is higher than the $898 billion total nine years ago.

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