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Friday 10.14.2016

UBS: Gold Is Setting Up For A Big Comeback

Gold is set for a comeback six to 12 months from now, according to UBS. As long as the Federal Reserve sees no reason to raise interest rates in a hurry, gold should do well, according to strategists at the bank's Chief Investment Office Wealth Management Research arm.

They see gold prices climbing to $1,350 per ounce over the next year, up 7% from its current level. Because gold does not bear any interest, it loses appeal when rates rise and investors go after better alternatives.

Also, gold is favored in times of panic and economic stress, when investors are looking for assets that are considered safer. UBS' Wayne Gordon and Giovanni Staunovo said in a note that the Fed is still likely to raise its benchmark rate in December, and that may be bearish for gold in the short term.

And so, they forecast that gold could fall to as low as $1,225 an ounce over the next three months. Gold traded near $1,258.60 on Thursday, up by 0.4%. They noted that Friday's employment report was not enough to keep the Fed from raising rates later this year. The report was a dud; it showed fewer job gains than expected but did not have many worrying details about the labor market.

HP to Cut Up to 4,000 Jobs Over Three Years Amid PC Slump

HP Inc. will cut about 3,000 to 4,000 jobs over three years to help bring costs in line with slumping demand in the market for computers and printers.

The company will eliminate positions across the board, Chief Executive Officer Dion Weisler said. The comments came Thursday during HP’s analyst meeting in New York. The reductions could include about 1,000 jobs being outsourced if the number of positions edges close to 4,000, Chief Financial Officer Cathie Lesjak said.

Weisler is looking for additional ways to drive profitability after gaining independence last year from Hewlett Packard Enterprise, which sells corporate tech gear. Earlier this year, Weisler said the company will need to accelerate a plan announced in 2015 to eliminate about 3,000 positions over three years. Instead, those reductions are to be completed this fiscal year.

HP has about 50,000 employees now. "As technology improves and as we become a faster, nimbler company, you are always looking to become more and more efficient," Weisler said in an interview. "Efficiency wins the day. And when I think about the markets that we’re in, what’s important is that we remember to stay focused on the reinvention, the innovation that we’re driving."

Poll finds Americans' economic anxiety reaches new high

It’s been a year. A long year, both in this economy and in the campaign. Last October, Marketplace launched our first-ever national economic survey, the Marketplace-Edison Research Poll. We did it so that we could find out and track — over time — how people are feeling about the economy all through this election year and heading into the voting booth. And find out we did.

Over the past year, we’ve learned about the economic things that keep Americans up at night. (Thirty-nine percent of us lose sleep over our finances — 11 percentage points higher than it was a year ago). We’ve learned that 28 percent of Americans are afraid of not being able to pay their mortgages — that’s up from 10 percent a year ago.

And we’ve learned that almost half of all Americans with full- or part-time jobs – 48 percent — say they’re working “just a job” and not part of a career development path.

There’s way more in there: The steep jump in our Economic Anxiety Index in the past year. What Americans think makes a "good" job. How much we trust — or don’t — government economic statistics, like the unemployment rate. The sharp differences in how Trump voters and Clinton voters see the economy.

Jim Grant: The Ultimate Gold Bug

WSJ: Economists Believe Recession to Hit America Within Next 4 Years

The Wall Street Journal’s latest monthly survey of economists put the odds of a recession striking the United States within the next four years at nearly 60 percent. “That is not an assessment that the next U.S. president will cause a downturn,” the Journal explained.

“Rather, it is a recognition that throughout its history the American economy has never grown for more than a decade without a recession. Over the course of the next four years, something—whether exhaustion of the economy’s cyclical momentum, a policy mistake from the Federal Reserve or some outside shock—could knock the economy off course,” the Journal reported.

The current expansion started in June 2009, and has continued for 88 months, making it the fourth-longest period of growth in records stretching to 1854, WSJ.com reported.

“Economists see a 20 percent chance of a recession within the next year, and see those odds rising as the window gets longer. Asked to name the specific risks, a plurality cited the possibility of a global economic slowdown, which could be largely beyond the next president’s control,” the Journal reported. “We do not think expansions die of ‘old age’ but there’s more probability that a shock will hit the U.S. economy further out in the horizon,” Lewis Alexander, chief U.S. economist at investment bank Nomura, told the Journal.

Will Eliminating Cash Save The Economy?

Given the still-subdued economic growth many experts are of the view that the presence of cash has constrained central banks from setting negative rates to stimulate the subdued economic activity. In a future economic or financial crisis, current low rates would restrict the effectiveness of monetary policy, so it is held.

The presence of cash, it is argued, prevents the central banks from lowering policy rates to a level, which is going to meaningfully revive economic activity. What prevents the dramatic lowering of rates is that this is going to severely hurt savers who keep their cash in various bank accounts and so this is seen as politically unacceptable.

The abolition of cash, it is held, is going to enhance the ability of the central banks to use negative rates (perhaps as low as minus 5 percent per year) and this would provide central banks with additional flexibility and tools to deal with a slowdown.

By advocating the abolition of cash, many experts are implying that cash can be replaced by electronic money. Electronic money can function, however, only as long as individuals know that they can convert it into fiat money, i.e., cash on demand. Without a frame of reference or a yardstick, the introduction of new forms of settling transactions is not possible. Money emerged out of barter conditions to permit more complex forms of trade and economic calculation. The distinguishing characteristic of money is that it is the general medium of exchange, evolved from private enterprise from the most marketable commodity.

Red alert for US stocks with ‘very high’ chance of severe fall, warns HSBC technician

"The possibility of a severe fall in the stock market is now very high," warn technical analysts at HSBC, who have dialed up the bank's outlook for U.S. stock markets to "red alert" following an aggressive wave of selling.

The warning heightens the note of caution in HSBC's tone from a September 30 report in which the bank issued a lower rated "orange alert", pointing to similarities between Dow Jones (Dow Jones Global Indexes: .DJI) Index trading patterns seen just prior to the 1987 "Black Monday" stock market crash and now.

HSBC contends the "head and shoulders" shape - a visual representation of price trends which are seen to signify the approach of a market top – is currently in evidence for the industrials-focused index, saying the pattern has recently been tested and re-tested. The report described Wednesday's sell-off as "broad-based" and as demonstrating "intense selling pressure", both factors in its decision to crank up the alert level.

The note highlights 17,992 points for the Dow and 2,116 points for the S&P 500 as the critical pivot points to watch for signs of a broader capitulation. At Thursday's session open, the Dow fell more than 150 points and hit its lowest level since July. "As long as those levels remain intact, the bulls still have a slight hope. But should those levels break and the markets close below (which now seems more likely), it would be a clear sign that the bears have taken over and are starting to feast," the note, authored by Murray Gunn, head of technical analysis, said Thursday.

Goldman Sachs Launches Personal Loan Service

Goldman Sachs unveiled a long-awaited online consumer lending service Thursday, the investment bank's latest push to retail banking. Eligible customers will be able borrow up to $30,000 as fixed-rate, no-fee, unsecured personal loans, with terms from two to six years. The service will be called Marcus, after one of the firm's founders, Marcus Goldman.

It's only the second foray into consumer finance for the venerable investment bank, which is better known as a power-player on Wall Street catering to wealthy investors, corporations and institutions. Earlier this year, it began offering online savings accounts and CDs. Goldman Sachs is entering into a crowded industry. Online lenders like Prosper, Lending Club, Sofi and Avant are among the bigger names in the online lending market.

And there are plenty of personal loan offerings from traditional retail banks like JPMorgan Chase, Bank of America, or U.S. Bank. Most of these loans are aimed at customers with high credit scores looking to refinance credit card debt.

"Marcus offers an option for consumers who are searching for a simpler alternative to credit card borrowing, where rates can change and multiple fees can be charged," Harit Talwar, head of Marcus, said in a prepared statement.

Deutsche Bank Is Said to Begin Companywide Hiring Freeze

Deutsche Bank has instituted a companywide hiring freeze as the embattled lender looks to speed up efforts to reduce costs and regain the confidence of investors as concerns mount about the progress of its turnaround, according to a person familiar with the bank’s plans.

The bank, Germany’s largest, has seen its stock price decline more than 50 percent in the last year as it has posted a string of poor financial reports and struggled with difficult markets. Its American subsidiary failed a stress test by the Federal Reserve in June.

The International Monetary Fund also said in a report on the German financial industry this year that Deutsche Bank appeared to be “the most important net contributor to systemic risks.” The I.M.F. did not step back from that view this month.

Its shares have been pushed to new lows in recent weeks on worries that the lender may be forced to pay billions of dollars in fines in the United States Department of Justice’s investigation of its underwriting of residential mortgage-backed securities. The Justice Department has proposed that the bank pay as much as $14 billion to settle the case.

Immigrants becoming most important group for housing?

The homeownership gap between immigrants and the native-born is closing as more foreign-born U.S. residents move towards buying homes, according to a new report from Trulia.

Trulia used the U.S. Census Bureau’s Current Population Survey and American Community Survey data for this study. For calculations involving the American Community Survey data, the company used five-year 2014 data.

Not only are immigrants closing the gap, but states where immigrants resided in the U.S. for longer periods of time also have higher rates of immigrant homeownership, according to the report.

While those born outside the U.S. still lag behind those born in the U.S., the homeownership gap has been shrinking since 2000. The gap now rests at 15.4 percentage points, down from 20.7 percentage points in 2001. The homeownership rate for those born in the U.S. remained roughly unchanged from 1994 to 2015, however the rate for immigrants increased 2.3 percentage points.

Fed’s Harker Says May Be Prudent to Wait on Election Before Rate Hike

Federal Reserve Bank of Philadelphia President Patrick Harker said uncertainty stemming from the U.S. presidential election might be an argument for delaying a rate increase until after the November ballot.

“What I’m worried about is, depending on the outcome of the election and what happens after that, if there are policies that would have distortive effects that we would have to respond to,” he told reporters Thursday after giving a speech in Philadelphia. In that case, “it may be prudent -- and I emphasize may be prudent -- to wait until we resolve some of that uncertainty,” he said.

Democratic presidential nominee Hillary Clinton has proposed tax increases for wealthy Americans while her Republican rival Donald Trump has made renegotiating U.S. trade agreements a central part of his campaign. Republicans say higher taxes could hurt growth, while economists from both parties say that Trump’s vow to slap tariffs on certain imports could spark a damaging trade war.

Investors see a roughly two-thirds probability of a quarter percentage point rate hike at the policy-setting Federal Open Market Committee’s meeting in December, and a less-than 20 percent chance of a move at next month’s gathering, held the week before the Nov. 8 U.S. presidential election.

TPP explained

Greece's Tsipras Urges Lenders to Deliver on Debt Relief

Greece signaled Thursday that it was running out of patience with international lenders sitting on the fence over its call for debt relief, with Prime Minister Alexis Tsipras saying delays would damage the battered economy further.

Against the backdrop of a slump in ratings from unpopular economic reforms seen as vital under a multibillion-euro bailout program, the leftist party is seeking to rally its supporters at a three-day national congress.

"The July [bailout] accord is clear. As we abide by it, despite the costs, we expect our partners to keep their end of the deal. There is no more 'we will see,' " Tsipras told a sea of cheering supporters in a conference hall in Athens.

Heavy taxation, pension cuts and the highest unemployment rate in the eurozone seven years into the crisis have seen his Syriza party tumble in ratings against the opposition New Democracy party, which is leading in some polls by up to 10 percentage points.

Global Elites Are Getting Ready To Blame You For The Coming Financial Crash

Those people that have any doubts about where the narrative is headed for global economic stability simply have not been paying attention lately.

As I pointed out in my pre-Brexit referendum article, Brexit: Global Trigger Event, Fake Out Or Something Else?, the story being scripted by the globalists is one of the “failures and crimes" of conservative movements. I predicted that the Brexit would pass based on this language used by international financiers and elites leading up to the vote.

The vast majority of analysts in the mainstream and in the alternative media refused to acknowledge the possibility that a successful Brexit actually works in FAVOR of the globalists, because it provides them a perfect scapegoat for a financial crisis that has been broiling for years and is now ready to burst into flames. I find still that many people will not dare to consider the idea that a successful conservative resurgence is actually part of the plan for globalist institutions. Many argue that the elites just don’t have that kind of pervasive control over the system, or that I am attributing “too much power and ability” to them.

I find this argument rather naive but also interesting, because many of the people that claim the elites do not have such influence were also the same people that argued before the Brexit that the elites would “never allow” the U.K. referendum to pass. So, do they have extensive influence, or don’t they? This kind of selective blindness to the game being played prevents a whole host of otherwise intelligent people from grasping reality.

New Wells Fargo CEO has 'one-week window' to prove he's right choice, critic says

Scandal-plagued Wells Fargo & Co. opted to choose a longtime insider, Timothy Sloan, to replace John Stumpf after the embattled chief executive abruptly quit on Wednesday.

But Sloan, who had been Well Fargo’s president, faces scrutiny as well. Critics say the bank’s entire top management oversaw an aggressive sales culture that led to Wells Fargo’s creating as many as 2 million accounts in customers’ names without their knowledge or consent.

“From a brand point of view, it would have been better for them to look outside,” Kelly O’Keefe, a professor at the VCU Brandcenter unit of Virginia Commonwealth University’s business school, said Thursday. Choosing Sloan “doesn’t reflect the kind of clean sweep and accountability that the public looks for when these types of things happen,” O’Keefe said.

“This is a significant betrayal of trust,” he said. “Just from a public-relations point of view, [choosing Sloan] keeps the fires of criticism burning as opposed to signaling change.” Others gave Sloan, a 29-year veteran of Wells Fargo, the benefit of the doubt. Sloan “has one job right now, and it’s to overreact,” said Scott Galloway, founder of the brand research firm L2. “He needs to put in place all sorts of changes and new procedures to convince people that they are taking this very seriously. I don’t see a reason why that can’t be done by someone internally.

Two New York Uber drivers get unemployment

In yet another example of how the legal system hasn't yet decided whether gig-economy workers are employees or independent contractors, the New York department of labor has ruled that two Uber drivers are eligible for unemployment but four others aren't.

Overall, say legal experts, the New York rulings don't set legal precedent because unemployment is determined on a case-by-case basis and at the state level. However “in an increasing number of these cases, drivers are being deemed workers, which means the state analysis as to whether they are employees or contractors is leaning in the direction of employees,” said Veena Dubal,a law professor at the University of California Hastings College of Law.

The New York Timesfirst reported the case of the two drivers on Wednesday. The drivers received the rulings in August and September from the New York State Department of Labor.

On Thursday Uber told USA TODAY that four other drivers who had also applied for unemployment benefits in New York state were found not to be eligible. The company plans to appeal the rulings for the two who were, it said. In a statement, Uber said that its drivers don’t want to be employees because they would lose the personal flexibility of being contract workers, which they value most.

Obamacare Enrollment to See 'Significant Slowdown' Next Year

Enrollment in the Obamacare insurance marketplace is likely to stall or even decline for 2017 as higher premiums drive away people who aren't eligible for government subsidies, according to S&P Global Ratings forecasts.

"Our forecasted modest-to-negative growth is clearly a bump in the road, but doesn't signal 'game-over' for the marketplace," S&P analyst Deep Banerjee wrote in a report released Thursday.

This November will be the fourth open enrollment period for individuals to choose insurance plans under the Affordable Care Act, President Barack Obama's signature health-care law. The "significant slowdown" predicted by S&P would be another setback for ACA's government-run insurance markets, after big insurers pulled out of many states because of mounting losses.

ACA enrollment will range from 10.2 million to 11.6 million people after 2017's enrollment season, which starts Nov. 1, S&P said. The lower end of the forecast range implies a decline of 8 percent compared with 2016 and the higher end a 4 percent gain.

Wells Fargo’s John Stumpf resigns, still makes millions

Huge Crude Inventory Build Sees Oil Fall Below $50

The Energy Information Administration tipped markets towards bear territory when it reported that US crude oil inventories had jumped by 4.9 million barrels in the week to October 7. The total of 474 million barrels remains higher than the average for this time of year.

Yesterday, the American Petroleum Institute was the first to spread oil doom and gloom by estimating that crude inventories had gone up by 2.7 million barrels in the same week. This immediately weighed on international oil prices, as it came amid a temporary pause to the news flow about OPEC and Russia’s freeze plans. It also suggested that inventories may be building for the first time in the last six weeks.

Analysts polled by media had expected an increase of 2 million barrels in crude oil stockpiles, along with a 900,000-barrel decline in gasoline inventories. Last week, the EIA reported a 3-million-barrel draw after API estimated a draw of 7.6 million barrels the day prior.

According to the EIA, gasoline inventories last week fell by 1.9 million barrels, with refineries producing an average 9.9 million barrels a day. The rate of crude oil processing stood at 15.6 million barrels, down 480,000 bpd from the previous week, with the facilities operating at 85.5 percent of available capacity.

Everyone May Be Junk Bond Investors, Whether They Know It or Not

When most bond investors invest, they probably think of Treasury bonds, government agency bonds or high-grade corporate bonds. Just hearing the terms “junk bonds” or “speculative grade” bonds might make some people squeamish when it comes to the safety of their assets. Still, some investors flock to the junk and speculative bonds.

It turns out that the investing community may have no choice but to own junk-rated and speculative bonds. 24/7 Wall St. routinely reviews the makeup of the investment grade market and the speculative grade debt markets. Standard & Poor’s most recently showed that the speculative-grade composite spread was 527 basis points, meaning that the yields across all maturities on the curve came to an average yield of 5.27% higher than their respective Treasury yield.

So, how is that every investor out there who invests in bonds is likely a holder of junk bonds? Recall that ratings under BBB- (those rated BB+ and lower) make up the junk bond universe.

S&P sent out a note showing that the investment-grade companies (again, those rated BBB- and higher) as a total share of U.S. companies have gradually declined over the past several years. They also show that speculative-grade issuers (again, those rated BB+ and lower) have been the majority of U.S. corporate ratings since 2010.

NEWS to Disturb the Comfortable...

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