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Wednesday 09.14.2016

Wells Fargo cuts bank sales goals after $185M fine for fake accounts

Wells Fargo (WFC) said Tuesday it will end banking product sales goals at the end of this year, a move to help rebuild consumer confidence after the company was hit last week with a fine for secretly opening millions of fake accounts for customers without their permission

One of the nation's largest banks, Wells Fargo was fined $185 million last week by the Consumer Financial Protection Bureau, U.S. Treasury Department and the city and county of Los Angeles for employees opening more than two million deposit and credit card accounts that may not have been authorized by consumers.

The San Francisco-based bank said it has terminated about 5,300 employees over a five-year period for their involvement with the unauthorized accounts, which workers made to meet sales goals and targets. The findings stem in part from an L.A. County Superior Court lawsuit filed last year.

Wells Fargo CEO John Stumpf said the company took the step to allay consumer concerns. “We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers,” he said in a statement released by the bank Tuesday.

Billioniare Paul Singer warns of the 'biggest bubble in the world' - Prefers Gold

Billionaire hedge fund manager Paul Singer, founder of the $27 billion Elliott Management, called the bond market “the biggest bubble in the world.” Speaking at the CNBC Delivering Alpha Conference, Singer’s best idea to the room of investors was to sell their bonds.

“I think owning medium to long-term G-7 fixed income is a really bad idea. By removing these things that are bad ideas, that’s a helpful think. Sell your 30-year bonds. ” The bond market is $60 trillion. Right now, nearly $10 trillion in fixed income is negative yielding. He added that these prices and yields contain a “tremendous, never-before seen asymmetry between potential further reward and risk.”

Another investment Singer favors right now is gold.

He thinks that the precious metal is “underrepresented in many portfolios as the only money and store of value that has stood the test of time.” He added that at current prices gold is “undervalued.” For Singer, owning gold is “opposite confidence in central banks.”

Oil prices are on the brink of another big crash

The price of oil could be set for another substantial drop following news from one of the oil industry's most respected organisations that the global supply-and-demand problem will take longer to clear than had been previously expected.

"Global oil demand growth is slowing at a faster pace than initially predicted," the International Energy Agency's most recent Oil Market Report argues.

"For 2016, a gain of 1.3 mb/d is expected — a downgrade of 0.1 mb/d on our previous forecast due to a more pronounced 3Q16 slowdown," the report said. "Momentum eases further to 1.2 mb/d in 2017 as underlying macroeconomic conditions remain uncertain."

Oil will remain in oversupply until at least the end of the first half of 2017, the IEA argues. Previous predictions in the markets had pointed to a rebalancing by the end of 2016. The September edition of the Oil Market Report, one of the most watched monthly releases in the oil industry, shows that during August, OPEC producers increased productions to near record levels, further exacerbating the gulf between supply and demand, something that will almost inevitably lead to further slides in the price of the world's most important commodity.

US budget deficit totals $107.1 billion in August

The federal government recorded a deficit of $107.1 billion in August, slightly lower than the July deficit. But the imbalance through 11 months of this budget year is up sharply from a year ago, reflecting higher spending and lower-than-expected tax revenues.

The Treasury Department said Tuesday that the deficit, with just one month to go in the budget year, totals $620.8 billion, up 17.1 percent from the same period a year ago. The August deficit was slightly lower than the $112.8 billion imbalance in July.

The Congressional Budget Office last month revised its estimate for the 2016 deficit up sharply to show an imbalance of $590 billion. That was up from a March projection of $534 billion. The budget year ends on Sept. 30 and September is expected to show a surplus.

The CBO estimate for the 2016 deficit is close to the $599.9 billion deficit that the Obama administration estimated when it released its mid-session budget review in July. Both projections are about one-third higher d but it is about one-third higher than the actual deficit in 2015 of $439.1 billion, the lowest deficit in eight years.

Critical Economic Shifts Happening Right Now - Peter Schiff

U.S. sees stronger median household income, less poverty

The median U.S. household income rose last year, its first significant annual increase since 2007, and helped push down the number of people living in poverty to 43.1 million, federal government data released on Tuesday showed.

About 29 million people did not have health insurance in 2015, down from 33 million in the previous year, the Census Bureau said in its annual Income, Poverty and Health Insurance Coverage and Supplemental Poverty Measure report. The poverty rate fell to 13.5 percent from 14.8 percent in 2014, the report said.

Median income rose 5.2 percent to $56,500 from $53,700 in 2014, in large part due to increases in employment, Census officials told reporters on a conference call. The poverty rate has continued to edge down in the wake of the 2007-2009 recession amid a tepid recovery. The latest drop is the largest annual percentage point decline since 1999, Census officials said.

Analysts, however, caution against using the poverty rate to assess the long-term trend because it does not account for non-cash benefits, including food stamps and refundable tax credits.

Atlanta Fed President Leaving in February

Dennis Lockhart, the president of the Federal Reserve's Atlanta regional bank, has announced plans to step down in February of next year. Lockhart is leaving after a decade as president of the Atlanta bank, one of the Fed's 12 regional banks. He says he plans to pursue his interests in public policy, civic work and private business after stepping down on Feb. 28.

Lockhart has been a supporter of Fed Chair Janet Yellen's cautious approach to raising interest rates, though he is not one of the voting members of the Fed's policy committee this year. In a speech Monday, Lockhart said he believed economic conditions justified "serious discussion" of a rate hike in September.

However, in a separate speech Monday, Fed Board member Lael Brainard urged "prudence" and indicated she was in no hurry to raise rates. Private economists believe December is the most likely time for the Fed to hike rates for the first time this year.

Thomas Fanning, the chairman of the Atlanta Fed's board of directors and the president of Southern Company, will lead the committee that will conduct the search for Lockhart's replacement. Marie Gooding, the Atlanta bank's vice president, will serve as interim president if a successor is not found by Feb. 28.

Former AIG boss set to go on trial at 91-years-old

The 91-year-old, alongside the firm's former chief financial officer Howard Smith, is accused of engineering bogus transactions to hide the insurance giant's financial difficulties. Both have denied the allegations.

The charges were filed by then-New York Attorney General Eliot Spitzer in 2005, but Mr Greenberg and Mr Smith have fought them, saying they have no merit. However, the Court of Appeals said there's enough evidence for the trial to proceed.

Current New York Attorney General Eric Schneiderman said he wanted to pursue the case to show "no one, no matter how rich or powerful, can evade responsibility for misconduct."

Mr Greenberg's lawyer, David Boies, has said he believes the lawsuit was driven by Mr Spitzer's political motivations. "This case was brought by Eliot Spitzer expressly because he was angry at Hank Greenberg," Mr Boies said. The trial before Justice Charles Ramos of New York state court in Manhattan, which will take place three days a week, is expected to last for up to six months.

Don’t Be Fooled By Japan’s And Italy’s Low Interest Rates

Anyone doubting the highly distortionary effects of massive money printing by the world’s major central banks need look no further than current Japanese and Italian government bond prices. These two countries have demonstrably worse public finances than the United States. But their governments can currently borrow at interest rates significantly below those offered to the US government.

Despite all of these signs that the country’s economy is heading for a financial and economic train wreck, the markets price Japan as if it were Switzerland on steroids. That Japan’s public finances are on an unsustainable path would seem to be beyond dispute. The country’s gross public debt already stands at a staggering 240 percent of GDP at the same time that it has a primary budget deficit (the budget deficit excluding interest payments) of 5 percent of GDP.

According to IMF estimates, a primary budget deficit of that size would put Japanese public debt on a path to reach 300 percent of GDP by 2030. Compounding matters, the country has been unable to generate economic growth and it is again flirting with deflation. It has the most rapidly aging population among the G-7 countries, which is causing the country’s savings rate to fall precipitously.

Yet, despite all of these signs that the country’s economy is heading for a financial and economic train wreck, the markets price Japan as if it were Switzerland on steroids. Indeed, the Japanese government can now borrow for twenty years at negative interest rates, while its currency is now treated as a safe haven in times of global financial market turbulence. Among other things, this has led to a 20 percent Japanese yen appreciation over the past year, which is the last thing that an already very weak Japanese economy now needs.

JPMorgan nudges Wells Fargo off perch as most valuable U.S. bank

Wells Fargo (WFC) stock dropped nearly 4% on Tuesday after the bank announced plans to abandon its sales targets where customers were sold multiple bank products. Employees have said that these unrealistic targets led to a pressure cooker environment that prompted them to create millions of fake accounts. On Thursday, Wells Fargo was fined $185 million and admitted to firing 5,300 employees related to the phony accounts.

Overall, Wells Fargo's share price is only down 6% since the scandal broke. However, that's still enough to allow rival JPMorgan Chase (JPM) to surpass Wells Fargo in market value for the first time since early 2013, according to data from FactSet.

Wells Fargo's market cap dropped to $235 billion on Tuesday. That's about $4 billion less than JPMorgan's price tag. Wells Fargo has been embroiled in turmoil since federal regulators last week said the bank created more than two million phony bank and credit card accounts.

The allegations have tarnished Wells Fargo's reputation and threatened a key money-maker for the company: the ability to sell customers multiple accounts, also known as "cross-selling."

Sorry, You Can’t Have Your Gold

In this publication, we warn regularly of the risk involved in storing wealth in banks. They’ve made the removal of your deposits increasingly difficult in addition to colluding with governments to allow them to legally freeze or confiscate your money. To add insult to injury, they’re creating reporting requirements with regard to the contents of safe deposit boxes and restricting what can be stored in them – again, at risk of confiscation.

More and more, banks are becoming one of the more risky places to store wealth in any form. Not surprising, then, that many people are returning to those facilities that treat wealth storage the way the first banks did millennia ago – vault facilities that store your wealth for a fee but engage in no other banking activities.

But, in suggesting to our readers that such facilities are a better bet, I’ve also repeatedly warned readers that many such facilities don’t store actual, physical gold. They instead provide a contract to you that states that they will deliver an agreed-upon amount of gold upon demand. The trouble with this idea is that it becomes tempting for such facilities to sign such a contract with you and collect the purchase price but never actually purchase and store any gold. It’s been estimated that the total worldwide value of such contracts equals 150 times the amount of gold in existence in the world.

Uh-oh. This is why it’s imperative that you purchase only physical, allocated gold.

Inflation Not High Enough for a Fed Hike Says Schwab Fixed Income CIO

Why Governments Want a Central Bank-Issued Digital Currency

On January 20, 2016, People’s Bank of China (PBoC) released an announcement on its website about its digital currency conference. At the conference, the PBoC urged its digital currency team to speed up effort and release its own digital currency quickly. Similarly, Bank of England, Bank of Canada, and some other central banks also expressed similar intentions to or claimed that they had considered issuing their own digital currencies. Since its creation, Bitcoin and other digital currencies have inspired the issuance of many private-issued and denationalized digital currencies. Now, it looks like that the central bank-issued digital currency is also becoming a global trend.

Why do central banks, which already fully control the issuance of currencies, need to bother with its own digital currency? Well, this question is both interesting and important. To answer it, we need first to understand some basics, the Digital Currency 101:

Unlike Internet banking and third-party payment services using traditional electronic payment tools to facilitate fiat money transmission, digital currencies represent a new class of technology. They are developed out of a number of brand new and groundbreaking technologies — they are not tools to transmit money; they are arguably money themselves.

Among them, one particular kind utilizes modern cryptography, earning its name crypto-currency. Bitcoin is an example of this kind of digital currency. After its creation, the idea inspired and led to many similar systems. Some commercial banks and central banks also work on their own digital currencies.

Carl Icahn: Here's why I'm supporting Trump for president

A Donald Trump presidency would see a more robust business climate through fewer regulations and an economy that would grow faster with more people working, according to Carl Icahn's view of the political world.

Icahn has been public with his Trump support, and elaborated Tuesday on why he is backing the billionaire businessman. "If you look ahead four years or three years even, if Trump gets elected this economy will be a lot better of than if Hillary is elected," Icahn said at the Delivering Alpha conference presented by CNBC and Institutional Investor.

"There's a lot of problems I think what she wants to bring in — more government and bigger government," he added. Icahn spoke at length about business regulation in particular, relating an anecdote in which he butted heads with environmental restrictions.

Clinton, he said, professes to support businesses but then talks about increasing taxes and regulation. "Trump, on the other hand, will say, hey I'm going to change the regulatory agencies," Icahn said. Wall Street has been shoveling money into the Clinton campaign, and recently some high-profile names have given her public support on the belief that the Democrat will create a more stable economy.

Toy makers have been spying on kids across the country

Now parents can’t even trust Dora the Explorer or SpongeBob SquarePants. Media giants and popular toy makers have been spying on kids across the country — by using ads on child-friendly websites such as Nick Jr. and Barbie.com to illegally track their online activities and interests, state Attorney General Eric Schneiderman said Tuesday.

The companies — Viacom, Mattel, Hasbro and JumpStart — have agreed to pay fines totaling $835,000 after a two-year investigation, dubbed “Operation Child Tracker,” found that they had allowed advertisers to post ads with tracking technology.

“We used to worry about our children wandering into bad neighborhoods, now our children live online,” Schneiderman said. “Many of the sites that are home to some of our most popular TV shows, toys, were littered with technology that can be use to track every move a child makes on that site.”

Schneiderman said that many of the ads that were used to keep tabs on the kids were embedded on several child-friendly sites, including Viacom’s Nick Jr. and Nickelodeon; Mattel’s Barbie, Hot Wheels and American Girl; and Hasbro’s My Little Pony and Nerf websites.

Walmart Patents Rolling Army Of Autonomous RoboCarts

In the last few years, Walmart has had problems with security and with keeping its shelves stocked, but of which it was able to fix by adding or re-allocating staff. One way that it could solve that problem is by having robots perform some tasks that robots can handle, and a patent that Walmart recently filed indicates that carts and merchandise that move themselves around may be coming to your local store. RoboCart?

Carts that gather themselves up would be a good or bad thing, depending on whether that’s your job, how you feel about that job in general, and what the weather’s like today.

Business Insider says that the system could have “terrifying” implications for workers, and it could if used to replace workers instead of to replace parking lot attendants or forklifts.

These carts wouldn’t just put themselves away, though: the devices would be connected to a central computer and use cameras and sensors to navigate stores and lots, driving themselves to customers who “hail” them.

A Historical Gold Reversal Just Occurred. Here’s What it Means...

Jim Rickards contact “Goldfinger,” a gold industry insider, first clued us into an important gold flow reversal happening. You might recall their live broadcast. In the months just before that meeting in Zurich with Goldfinger, over 170 tons of gold flowed back into London. Instead of coming out of London, into Switzerland, and then heading over to China and India, China and India slowed down their imports and gold starting to flow back into London.

Since then, the U.S. has become a significant gold importer, if you can believe it. Gold is flowing from vaults in London, Switzerland and even Dubai to destinations in the U.S. (If you’re wondering, there are no gold mines in Dubai; it’s all warehouse gold.) In May, the U.S. imported more than 50 times the monthly average amount of gold, as compared to the past. The most interesting thing?

This year, investor demand was the largest component of gold demand for two consecutive quarters (Q1 and Q2) – the first time this has ever happened. This means that more and more U.S. investors are diversifying their assets into gold. They are looking for ways to protect themselves from the monetary tricks that central banks are experimenting with around the world.

We’re familiar with those tricks here at the Daily Reckoning. The biggest two are the war on cash and negative interest rates. The truth is governments don’t want people holding currency on the sidelines of the economy. Governments desperately want people to spend their money as fast as they make it. They know that the global economy is fundamentally weak, even as they try to convince the rest of us otherwise.

Keiser Report: US Elections Toxic Soap Opera

Report: Government Failing to Verify Obamacare Eligibility

The federal government is failing to verify enrollment and eligibility information for individuals enrolled on Obamacare exchanges or on Obamacare’s Medicaid expansion, according to two reports by the Government Accountability Office (GAO). Individuals who did not meet the eligibility requirements were still being approved, resulting in billions of dollars in payments by the government to fraudulent individuals

GAO performed undercover testing and created fictitious accounts for 2015 and 2016 to check if applicants were being properly verified. GAO tested enrollment verification on both the federal and state exchanges. In both cases, GAO found insufficient verification of its fictitious applicants and determined that the marketplaces still remain vulnerable to fraud.

With its passage, Obamacare created two new government programs: exchanges for private insurance and the expansion of Medicaid. In order for enrollees to be eligible for subsidies or Obamacare’s Medicaid expansion, applicants must meet basic eligibility requirements. To be eligible, an applicant must provide their Social Security number, proof of citizenship, household income, and family size. This information is then verified by an electronic verification system or approved by HHS.

In 2015, GAO created ten fictitious accounts that did not meet the eligibility requirements and therefore, should not have been approved. In four of these accounts, the GAO used Social Security numbers that had never even been issued. The other applications were duplicately enrolled or received coverage by claiming that their employer-provided care did not meet the minimum coverage requirements.

The Economy Is Tanking

The FOMC can raise interest rates any time it desires, without prior approval from anyone outside the Fed. Accordingly, the ncreased hype primarily has to be aimed at manipulating the various markets, such as propping the U.S. dollar. Separately, it remains highly unusual, and it is not politic, for the FederalReserve to change monetary policy immediately before a presidential election. – John Williams, Shadowstats.com

The March non-farm employment report originally reported that 215,000 jobs were created (ignore the number of workers who left the labor force). But five months later the BLS released “benchmark” revisions which took that original number down by 150,000. However, the BLS reports a 74,000 upward revision to Government payrolls, which means that non-Government payrolls were down 240,000 in March. So much for the strong jobs recovery…

A report out on August 19th that received no attention in the financial media showed that Class 8 (heavy duty) truck orders fell 20% from June and 58% year over year. This is after hitting a four-year low in June. The big drop was blamed on a high rate of cancellations. This is consistent with regional Fed manufacturing reports out two weeks ago that showed big drops in new orders. Again, the economy is starting contract – in some areas rather quickly. Heavy trucking is one of the “heart monitors” of economic activity.

Another datapoint that you might not have seen because it was not reported in the mainstream financial media: the delinquency rate for CMBS – commercial mortgage-backed securities – rose for the 5th month in a row in July. The rise attributed to “another slew of balloon defaults.” Balloon defaults occur when the mortgagee is unable to make payments on mortgages that are designed with low up-front payments that reset to higher payments at a certain point in the life of the mortgage. This reflects an increasing inability of tenants in office, retail and multi-family real estate to make their monthly payments.

Doctors Now Spend More Time on Paperwork Than Patients

You may be the one on the exam table, but it’s your doctor who has a headache. According to a recently published study in the Annals of Internal Medicine, for every hour a doctor spends actually treating patients, she spends two hours doing paperwork. If that seems a little backward, it should. One healthcare reform undertaken in recent years is the effort to switch doctors from paper records to the electronic health record system (known as EHR).

Unfortunately, this system was developed by bureaucrats, not doctors, and as a result it doesn’t work particularly well – meaning that doctors are now spending more time creating records of care than they spend providing care (the thing they spent years learning how to do.)

This troubling trend is even worse than it seems, too. Not only are physicians spending more time outside of the exam room doing paperwork, that paperwork is also cutting into actual patient exam time – limiting doctor-patient interaction, which could decrease the quality of care received. Even when doctors are in the exam room with patients, they only spend about half (52.9%) of the time examining patients, but spend a whopping 37% of the appointment doing paperwork.

These kinds of bureaucratic demands on both doctors’ and patients’ time are the new status quo under Obamacare. The president’s healthcare law created nearly countless new regulations, requirements, and processes – but did nothing change the number of practicing physicians.

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