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Friday 09.16.2016

CenturyLink plans to lay off up to 3,500

CenturyLink announced plans to lay off as much as 8 percent of its workforce companywide by the end of the year. Annmarie Sartor, spokeswoman for the telecommunications service provider, said the announcement came in a companywide memo from CenturyLink CEO Glenn Post on Wednesday.

The company currently has about 43,000 employees worldwide. A 7-8 percent workforce reduction would be about 3,500 employees companywide. Sartor said the company will first entertain voluntary separations before involuntary layoffs.

In his memo, Post said the layoffs are related to decline in revenue in the legacy business of landline telephone service.

"We all understand the pressure caused by the decline in our legacy revenues — it creates a $600 million negative impact on our business each year. While we continue to see positive growth in our strategic products, the profit margins of these strategic products and services are considerably lower than those associated with the legacy revenue we are losing," Post wrote.

Bridgewater to lay off employees in 'renovation'

Bridgewater Associates, the world's largest hedge fund by assets, has announced a firm-wide "renovation" that will include employee layoffs, according to someone familiar with the matter.

In a letter to clients, officials at the $150 billion-asset company said it was "digging into the areas of inefficiency to improve them" as part of a "renovation to improve efficiencies at Bridgewater." That process will involve "significant changes to people, processes, and technologies," it added. At a town hall meeting earlier Thursday, Bridgewater executives warned that those changes would include layoffs. Business Insider published the letter, and reported on the plans, at midday Thursday.

A Bridgewater spokeswoman couldn't comment on the scope of the planned layoffs at the 1,700-person company, which has grown from a staff of just 150 in 2003. According to the letter, however, most of the planned renovation would occur outside the company's investments division.

This has been a mixed year for Bridgewater, which is in the midst of a broader leadership transition. One of the Westport, Connecticut firm's flagship funds is down more than 9 percent, and the other is up 13 percent through Sept. 9, according to someone familiar with the results. A third fund, established last year to blend the flagship funds' strategies into a single vehicle, this person has added, is flat through that same time period.

Bernanke Urges Use Of Negative Rates When Next Recession Strikes

Two months after Bernanke's unexpected trip to Japan failed to unleash the "helicopter money" many expected his visit to the BOJ would deliver, Bernanke is back with another shocking policy appeal, this time not as a result of a trip to the Pacific Rim, but in a post on his Brookings Institute blog, titled "Modifying the Fed’s policy framework: Does a higher inflation target beat negative interest rates?"

The post, when one cuts out the noise, is nothing short of praise for NIRP as an alternative to inflation targeting, and a strong suggestion that it should be implemented in the US if and when the US economy slides into recession next.

Bernanke starts off by saying that while much of the recent "shift" in unconventional thinking has been to advocate a higher inflation target, he believes that negative rates present an as good if not better option. The former Fed chairman says that "when the next recession arrives, there may be limited room for the interest-rate cuts that have traditionally been central banks’ primary tool for sustaining employment and keeping inflation near target. That concerning possibility has led to calls for a new monetary policy framework, including by Fed insiders like John Williams, president of the San Francisco Fed. In particular, Williams has joined Olivier Blanchard and other prominent economists in proposing that the Fed consider raising its target for inflation, currently 2 percent. If the Fed targeted a higher average level of inflation, the reasoning goes, nominal interest rates would also tend to be higher, leaving more room for rate cuts when needed. "

Here Bernanke expresses his surprise that some of his "erudite", Ivy-educated peers have already dismissed the use of negative rates in the future. We assume he has purposefully ignored the repeated, ever louder complaints by Deutsche Bank and Credit Suisse as well as virtually every pension fund in the world, lamenting that they are slowly going out of business due to the twilight zone of unorthodox monetary policy: "Some advocates of a higher inflation target have been dismissive of the use of negative short-term interest rates, an alternative means of increasing “space” for monetary easing. For example, in a recent interview in which he advocated reconsideration of the Fed’s inflation target, Williams said: “Negative rates are still at the bottom of the stack in terms of net effectiveness.” Williams’s colleague on the Federal Open Market Committee, Eric Rosengren, also has suggested that the Fed may need to set higher inflation targets in the future while asserting that negative rates should be viewed as a last resort. My sense is that Williams’s and Rosengren’s negative view of negative rates is broadly shared on the FOMC."

Donald Trump Says the Fed Is Being Controlled Politically

NBCUniversal to cut 200 jobs in DreamWorks Animation takeover

Less than a month after completing its takeover of DreamWorks Animation, NBCUniversal announced plans to eliminate about 200 jobs at the Glendale operation of the former standalone studio.

“These changes are focused in the corporate overhead groups as well as distribution and consumer products, areas where we can fully integrate operations with NBCUniversal,” Universal Filmed Entertainment Chairman Jeff Shell said in an email to employees Thursday.

Shell said about 200 positions would be eliminated at the studio, which is known for such blockbuster films as “Shrek” and “Kung Fu Panda.” Shell is overseeing the integration of DreamWorks into his Universal film unit. Universal executives declined to specify the percentage of the headcount reduction at DreamWorks Animation. However, at the end of last year, DreamWorks employed nearly 2,300 people, according to regulatory filings. That means Thursday’s cuts amount to roughly 10% of DreamWorks’ workforce.

Employees whose jobs are being eliminated will be be notified this week. Dozens are expected to remain with the company for a few months as part of the transition. “These are difficult but necessary moves as we work to integrate our organizations and we will be as generous as possible to those who will be leaving the company,” Shell said.

Home flipping reaches 6-year high

Home flipping just reached its highest level since 2010 as more investors entered the market in the second quarter, according to the U.S. Home Flipping Report by ATTOM Data Solutions, a source for comprehensive housing data and the new parent company of RealtyTrac.

Home flipping increased to 51,434 single-family homes and condos in the second quarter this year. That’s up 14% just from last quarter, and 3% from last year, according to the report. A home flip is defined as a property that is sold in an arms-length sale for the second time in a 12-month period based on publicly recorded sales and deed data. The data is collected from over 950 counties and accounts for more than 80% of the U.S. population.

“Home flipping is becoming more accessible for smaller operators thanks to an increasingly competitive lending environment with more loan options for real estate investors, who are also benefitting from the historically low mortgage interest rates,” said Daren Blomquist, ATTOM Data Solutions senior vice president.

“That favorable lending environment for flippers has helped to fuel the recent flipping frenzy we’ve seen over the past five quarters,” Blomquist said. Homes flipped in the second quarter made up 5.5% of total home sales. This is down from 6.7% of total home sales last quarter, but up from 5.4% in the second quarter of 2015. The total number of investors that completed at least one home flip increased to 39,775, the highest number of home flippers since 2007.

General Electric shutting East Houston manufacturing operations

General Electric said Monday that it would shut down its turbine manufacturing operations at its East Houston complex in Channelview and cut an undetermined number of jobs. GE said it will keep the plant open to house a unit that services turbines, and maintain some office jobs for engineering and projects operations. About 500 people work at the facility, according to the most recent estimates, but GE declined to disclose how many worked specifically for the manufacturing operations. GE officials said some of the workers could be transferred to other plants, but again declined to provide numbers

GE sends its gas turbines to the Channelview plant, where they’re built into packaging as part of the manufacturing process. GE officials said the extended downturn in the energy industry has hurt demand for the small turbines and generators used by the oil and gas industry for exploration and production. This is not the first time GE has cut jobs at the the plant; last year, GE said it would cut its Channelview workforce by about 100 jobs, shrinking the workforce to 500 from 600.

“The decision to restructure is based on the current environment as many oil and gas customers continue to delay projects and decisions and we’re experiencing a dramatic drop-off in orders commitments for this year,” GE said in a statement. “The restructuring is in no way a negative reflection of our workforce.”

E said it is moving some of the work to other locations, which it did not disclose.

Google-backed blockchain start-up Ripple raises $55 million from big banks

Ripple, a Google-backed start-up that uses blockchain technology to settle financial transactions between some of the world's biggest banks, has raised $55 million.

The latest finance round involves Standard Chartered, Accenture Ventures, SCB Digital Ventures, the venture arm of Siam Commercial Bank, and Japan's SBI Holdings. Additional investors include Santander Innoventures, the venture units of CME Group and Seagate Technology, and Venture 51.

The latest funding round has brought some large strategic corporate partners onboard with its existing base of investors which include GV, Google's venture arm, Andressen Horowitz, IDG Capital Partners, and AME Cloud Ventures. To date, the company has raised over $93 million in total funding.

Ripple's focus is on providing this technology to banks looking to make cross-border payments more efficient. At the moment, an international payment may take a few days to make with a very high cost. Ripple said that its technology could give banks a 33 percent reduction in their operating costs during this process and allow lenders to move money "in seconds".

Deutsche Bank is getting walloped

Deutsche Bank shares are crashing after The Wall Street Journal reported that it has been asked to pay $14 billion to resolve a probe into mortgage securities.

Deutsche Bank shares slumped in after-hours trading in New York, falling more than 7%. The report, from Aruna Viswanatha, Jenny Strasburg and Eyk Henning, said the US Justice Department proposed a "preliminary" figure for Deutsche Bank to settle a series of mortgage-securities probes.

The number is far beyond Deutsche Bank's own expectations, according to The Wall Street Journal.

Deutsche Bank said in its second quarter earnings that it had 5.5 billion euros ($6.2 billion) in litigation reserves set aside. Deutsche Bank said it expects to settle the matter at a much lower amount.

White House says refugee resettlements will go on, even if governors object

President Obama’s plan to increase the number of refugees allowed into the U.S. won't be sidetracked by governors who oppose resettling the refugees in their states, a White House official said Thursday.

The administration plans to accept 110,000 refugees in fiscal 2017, which begins Oct. 1. That's a 29% increase over the 85,000 accepted this year and a 57% increase over the number allowed into the country annually between 2013 and 2015.

About 30 governors last year objected to the resettlement program after the terrorist attacks in Paris because they feared refugees — especially those from war-torn Syria — posed security risks. Those governors should take comfort in the federal government’s record of screening out refugee applicants with criminal or terrorist connections, said Avril Haines, principal deputy national security adviser at the White House. The U.S. has admitted 840,000 refugees into the country since Sept. 11, 2001.

“And the reality is, a tiny fraction of a percent have ever been arrested or removed for an issue related to terrorism,” Haines said. “That is the track record people should look at.”

The Slow Unraveling of Brazil, Explained in 2 Minutes

Auto Collision Ahead: Motor Vehicle Production +0.5%, Motor Vehicle Sales -4.4% Year-Over-Year

In the third poor economic report today, we learned industrial production declined 0.4% vs. an Econoday Consensus of -0.2%. Diving into the Industrial Production and Capacity Utilization – G.17 Federal Reserve Report we also learned July was revised from +0.7 to +0.6 and manufacturing from +0.5 to +0.4%. The standout pair of numbers is industrial production at -0.4% vs. motor vehicle production at +0.5%.

There was some life in the factory sector during July but it proved brief, at least for production. Held down by a 0.4 percent decline in the manufacturing component, industrial production also fell 0.4 percent in data for August. But motor vehicles continue to be a plus in the report, rising 0.5 percent and offsetting a 0.5 percent decline in hi-tech production.

And mining is an increasing plus in the report, emerging from deep weakness with a second straight gain and a solid one at plus 1.0 percent. Utility production, which had up in prior months, fell back 1.4 percent in August. Total capacity utilization edged 4 tenths lower to 75.5 percent.

This report isn’t as weak as the headline readings suggest but, given weakness in other data including this morning’s Philly Fed and Empire State reports, won’t build much confidence that the factory sector will contribute much to the nation’s third-quarter growth.

You Will Be Poor

There has been a progression through each iteration of monetary theft. A trial balloon launches, usually from academia, which proposes an “innovation” contrary to reigning practice and orthodoxy. A curmudgeonly minority reject it; the majority, securing their places on the intellectual fashion forefront, excoriate the old and after a suitable time for faux consideration and discussion, embrace the new.

The public, insufficiently appreciative of the arcane language, abstruse reasoning, and self-evident erudition and brilliance of the experts, sometimes presents an obstacle. It was hostile towards the US’s first foray into monetary theft: central banking. The anti-central bank contingent won battles for 137 years, but lost the war in 1913. J.P. Morgan and cronies laid the intellectual groundwork: conferences, scholarly papers, legislative proposals, and a Greek chorus of the day’s one-percenters singing at the top of their lungs that America needed to join the civilized world and establish its own central bank.

If you understand the main purpose of central banks, then notwithstanding obfuscatory “Fedspeak,” endless media drivel, and academics’ Greek-letter-laden equations, you know all you need to know about these larcenous institutions. They exist to make it easier for governments to steal, and everything else is window dressing. Gold is finite and requires real resources to find, mine, and mint; central banks’ fiat debt can be produced in infinite quantities at virtually zero cost and exchanged for the government’s fiat debt.

Substitute central bank “notes” for gold and the resources available to the government expand dramatically. It can, in conjunction with the central bank, conjure its own money. Couple a central bank with 1913’s other “innovation”—the income tax—and lovers of government had the wherewithal for their fondest dreams, one of which was American empire. World War I, the US’s first involvement in Europe’s wars, followed close after 1913’s depredations, notwithstanding President Wilson’s vow to stay out in his 1916 reelection campaign.

Venezuela solves starvation riot problem by making it illegal to buy too much food

Remember when Venezuelan President Nicolas Maduro went to give a speech and the starving peasants of his country chased him out of town? That clearly caught their leader’s attention and he’s finally taken steps to ensure that the people aren’t in such a perilous condition anymore. You can now be thrown in jail if you’re caught buying too much food. One prime example is Alexis Camascaro, who attempted to get in line at a grocery store at four in morning, hoping to find something left to eat on the shelves.

Camascaro never made it inside. Truckloads of Venezuelan troops arrived in the darkness, arresting him and nearly 30 others seemingly pulled from the queue at random, according to his lawyer. Camascaro, 50, was charged with violating laws against interfering “directly or indirectly” with the production, transportation or sale of food. He has been in jail for three months, awaiting a hearing.

“I went to see the prosecutors and explained that he was just buying some food for his family. He’s not a bachaquero,” said Lucía Mata, Camascaro’s attorney, using the Venezuelan term for someone who buys scarce, price-capped or government-subsidized goods to resell on the black market.

While this rarely happens in a democracy, there are examples of times when we’ve put limits on the purchase and movement of goods. The gas rationing in the seventies is one prime example. During times of great duress, such as the recovery from a flood, hurricane or other natural disaster, profiteering from things like fresh water and non-perishable foods can also be prosecuted. But that’s really not what’s going on in Venezuela.

Goldman Sachs Crushes Hopes Of Oil Price Recovery

Goldman Sachs has been extremely pessimistic about the oil market over the last year and a half, and the latest from their head of commodity research, Jeff Currie, is no exception. According to Currie, crude will continue to trade within the US$45-50 band over the next 12 months. Any improvement above US$50 is highly unlikely.

The analyst noted that the primary reason for the gloomy forecast is the simple lack of any upside potential for oil at present. He also suggested that the market may have already balanced itself at the current price levels, comparing the overall environment to that in the early 1990s when a barrel of crude sold for US$20.

Currie told Bloomberg that OPEC’s meeting in Algeria, scheduled for September 27, when the cartel will discuss a potential freeze with Russia, will not have any notable impact on oil prices, whatever the outcome. Shale, he said, has taken the upper hand, because production in the shale patch can be ramped up or reduced much quicker than conventional oil. This development, according to Currie, has taken much of the leverage that previously was at the disposal of conventional oil producers.

Currie’s remarks come on the heels of the latest Oil Market Report of the International Energy Agency, which warned that the growth in demand for crude will be slower than previously forecast this year. The IEA added that the supply will continue to be excessive through the end of the first half of 2017 at least.

Lunatics & Economy

Disney Cuts 250 Jobs in Consumer Products and Digital Unit

Disney cut 5 percent of its consumer products and digital media staff on Wednesday, or about 250 jobs, a spokesman said, the latest in a series of belt-tightening moves by the world’s largest entertainment conglomerate.

While small in a broad sense — Disney has more than 180,000 employees worldwide — pocket-size layoffs have been frequent at the company in recent months. In May, more than 300 workers lost their jobs when Disney pulled the plug on Infinity, a video game and toy line. In July, 30 people were let go by Maker Studios, a Disney-owned video business. Walt Disney Parks and Resorts has also made cuts, including a downsizing at its Imagineering research and development unit in early August, a move that the company said was tied to the completion of Shanghai Disneyland.

A portion of the new layoffs have hit video game workers, as Disney continues to shift its game approach to a licensing model and away from internal development, according to Brian Nelson, a Disney spokesman. A group of affected employees worked at a Bellevue, Wash., facility that supported the company’s Marvel: Avengers Alliance mobile and social network games. The games were shut down last week after a sequel failed to catch on, a relatively routine occurrence in this fast-changing corner of the industry.

Additional cuts were the result of streamlining at the Glendale, Calif., headquarters of Disney Consumer Products and Interactive Media. Disney combined the two businesses into a single operation last year, in part to save money by eliminating overlapping departments, including marketing and human resources.

Larry Summers: Banks no safer now than they were before the crisis

Big banks are no safer now than they were before the financial crisis, according to a new analysis by a Harvard duo that includes former White House economic advisor Larry Summers.

Not only does the paper assert that the possibility of a too-big-to-fail scenario still looms, but they also said the increased regulatory environment actually has played a part in keeping the system endangered. "We find that a substantial part of the reason banks have become riskier and effectively more leveraged is a decline in their franchise value," the researchers wrote in a white paper for the Brookings Institution. They added that "it appears plausible that a large part of the reason for declines in franchise value is regulatory activity and the prospect of future regulation."

In essence, the paper argues that the regulatory pressure through Dodd-Frank and other measures has made banks a tougher investment. The paper is co-authored by Natasha Sarin and was scheduled for presentation at a conference Thursday, which happens to be the eighth anniversary of Lehman Brothers' bankruptcy filing, a crucial moment in the crisis. Summers has served under multiple presidents and headed the National Economic Council for President Barack Obama .

The two authors note that heightened regulations and "draconian" stress tests have caused banks to increase their capital levels substantially but also could reduce their ability to raise equity during times of crisis. That would be pivotal, considering that required capital levels "have historically not had much predictive power for bank failures."

Inside the Fed Tool Kit

The US economy is slowing perceptively. The Fed has created a mess. We’ve had a full year, 4 consecutive quarters, with average growth of about 1.2% and with some revisions that may even go lower. That’s awful.

First of all, that’s extremely close to recession. Second, it’s way below the Federal Reserve’s (Fed) projections of about 2.5%. Third, it’s way below potential of 3.5%. This is not just weak growth, it’s extraordinary weak, and dangerously close to recession. What should the Fed be doing about that? One thing they might want to do is cut interest rates. They can only cut them 25 basis points without going negative.

Negative interest rates are another thing we’ve got to at least put into the mix. They could do one interest rate cut. They could do more quantitative easing. However, they probably won’t do quantitative easing until they cut the 25 points that are there now.

The sequence of Fed easing is, if they need it, first forward guidance. This is where they promise not to raise rates for a long period of time, then comes one rate cut. Followed by that comes more forward guidance – and now we’re back to zero. Then the pattern begins again, where they promise to not to raise rates for another period of time, and then possibly another round of quantitative easing (QE4). I think the Fed will do all those things before they get to negative rates.

Can banking be Uber-ed?

When he moved to Pittsburgh in 2004 for graduate school, Joshua Reich was so perplexed about having to write a check to pay for a utility bill, he sought the help of a neighbor. “I had never before in my life written a check,” the Australian entrepreneur says. It wasn’t just the checks that he found cumbersome about banking in the United States. Many other practices, to him, seemed designed to confuse customers out of billions of dollars of fees. “It seemed like you have to play all these games to be in control of your money,” recalls Mr. Reich.

Within five years, Reich and his grad school friend Shamir Karkal had launched an online banking software called Simple, featuring a sleek website and mobile app, budgeting tools, and a promise of transparency and no fees. (It will provide a check if needed). Simple is at the forefront of a movement to revolutionize the way people bank, save for their retirement, pay for things, and borrow money.

But despite what appears to be a transformation of financial services, propped by nearly $11 billion of venture capital investment globally in 2015, a radical overhaul of US banking is unlikely, say many industry observers. At least not in way that the taxi and hotel industries have been upended by blazing newcomers.

“We always get the question of what's going to be the Uber or Airbnb moment in this space, but the difference in the markets is tremendous in financial services,” says Amy Nauiokas, co-founder and president of Anthemis Group, a venture capital investment firm and advisor to banks.

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