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Tuesday 12.20.2016

Hedge fund managers busted in $1Billion fraud scheme

A hedge-fund honcho with ties to disgraced city correction-union boss Norman Seabrook tried to flee to Israel with his family after perpetuating a $1 billion fraud, according to a federal indictment unsealed Monday.

Mark Nordlicht, the chief investment officer for Platinum Partners, sent a desperate e-mail Dec. 13, 2015, to an unnamed accomplice, identified in court papers as “Co-Conspirator 1,” stating, “Am on my way to jfk with kids for their 6 pm flight it Israel. [Co-Conspirator 2] ducking my calls … [My wife] is literally making me get on an Israel flight if we don’t connect and agree on what we are doing,” the indictment charges.

“Co-Conspirator 1” had earlier e-mailed Nordlicht, saying, “Don’t forget books. Assume we are not coming to ny[.] Just to be safe. Depends on Miami[.] we can fly straight [sic] to Europe from Miami on Tuesday[.] Take passport,” the papers allege. Nordlicht was busted at his New Rochelle home and slapped with a slew of charges, including securities fraud and conspiracy to commit wire fraud.

Six other executives were also arrested, including David Levy, Platinum Partners’ co-chief investment officer, and Uri Landesman, the former president of the firm’s signature fund. Brooklyn US Attorney Robert Capers and Andrew Ceresney, the director of enforcement at the US Securities and Exchange Commission, will announce the charges against the six suspects at a news conference later Monday.

GM to Temporarily Close 5 Factories as Car Inventory Builds

General Motors will temporarily close five factories next month as it tries to reduce a growing inventory of cars on dealer lots. The factories will close anywhere from one to three weeks due to the continuing U.S. market shift toward trucks and SUVs, spokeswoman Dayna Hart said. Just over 10,000 workers will be idled.

The company's Detroit-Hamtramck factory and Fairfax Assembly plant in Kansas City, Kansas, each will be shut down for three weeks, while a plant in Lansing, Michigan, will be down for two weeks. Factories in Lordstown, Ohio, and Bowling Green, Kentucky, each will be idled for one week.

The factories make most cars in the General Motors lineup including the Chevrolet Cruze, Camaro, Corvette, Malibu, Volt and Impala; the Cadillac CT6, CTS and ATS; and the Buick Lacrosse. Last month almost 62 percent of total U.S. vehicle sales were trucks and SUVs.

Buyers are snapping up SUVs largely because they like the high seating position and the ability to haul things. Gasoline prices around $2 per gallon have helped the sales, but SUVs also have become more fuel efficient in the past five years.

Yellen: The class of 2016 is entering the strongest job market in nearly a decade

Federal Reserve Chair Janet Yellen on Monday took another victory lap for the US labor market. At the University of Baltimore's commencement, Yellen said that although there are still challenges, the jobs market is the strongest it has been in nearly a decade.

"The short version of what I have to say is that while I expect workers will continue to face some challenges in the coming years, I believe, for two reasons, that the job prospects and career opportunities for new graduates at this time are very good," Yellen said.

She cited the unemployment rate of 4.6% — a pre-recession low — and wage growth for younger workers. A report the Fed released earlier on Monday showed that young people were optimistic about their job prospects even though they faced higher unemployment rates than the rest of the population.

Yellen is receiving an honorary doctor of laws degree from UB. She said the graduates will likely find jobs and earn more because they finished school. Although technology has made some jobs redundant, it's also raised demand for tech-based jobs, and can help improve worker productivity, Yellen added.

32 percent of US millennials still living with their parents

Demographic shifts in marital status, level of education and employment have transformed the way young adults in the U.S. are living. A Pew Research Center analysis of census data highlights the implications of these changes in young adults’ living arrangements.

In 2014, adults aged between 18 and 34 were more likely to be living in their parents’ home than with a spouse or partner in their own household. This turn of events is caused primarily by the dramatic drop of young U.S. Americans who are choosing to settle down romantically before age 35.

The study found that 31.6 percent of young adults were living with a spouse or partner in their own household, while 32.1 percent preferred living with their parents. Up to 14 percent of young adults were heading up a household in which they lived alone, were a single parent or lived with one or more roommates. The remaining 22 percent lived in the home of another family member or a non-relative, or in group quarters (for example college dormitories).

Among young adults, living arrangements differ significantly by gender. For men between 18 and 34, living at home with parents is the dominant living arrangement. For their part, young women are more likely to be living with a spouse or romantic partner. This is mainly because women are more likely than men to be single parents living with their children.

Boeing's commercial jets unit to cut jobs in 2017

Boeing Co's (BA.N) commercial airplanes unit said on Monday it would reduce its workforce in 2017, adding to the about 8 percent jobs the company has cut since the beginning of 2016. The company is offering a voluntary layoff program in early 2017, adding that involuntary layoffs may occur in some cases, Boeing Commercial Airplanes (BCA) said in an internal memo.

This year's job cuts include a 10 percent reduction of executives and managers. BCA said it would focus on reducing non-labor costs next year amid a tough competitive environment for its aircraft business.

Boeing said last week that it would cut production of its twin-aisle 777 jetliner to five a month in August 2017, a 40 percent reduction from the current rate of 8.3 a month, as it spends more to produce new models.

Reuters reported in February that Boeing was considering layoffs of airplane engineers.

Home Depot Co-Founder: I’m excited about Trump’s cabinet

Car buyers paid a record-high $34,077 on average in 2016

Did you buy a new car this year? If you answered "yes", chances are good that you paid around $34,077 for it, when all was said and done. That figure is the average transaction price for new cars sold in 2016, and it marks an all-time high according to Edmunds.com.

In worse news for shoppers, the upward trend shows no sign of slowing. Average prices have climbed 2.7 percent since last year and a whopping 12.6 percent since 2011. Edmunds expects the figure to climb by roughly $1,000 over the course of next year, hitting $35,000 by December 2017.

Why such a sharp increase? It's largely because of strong demand for pickups and SUVs, which now make up 62 percent of the U.S. market. Customers have flocked to those bigger, pricier models in recent years.

Low fuel prices, which means that filling up the tanks of those less-efficient vehicles isn't as painful as it was just a few years ago, when the average price of gas hovered around $4.00 a gallon. The gradually improving U.S. economy, which has driven up demand for work vehicles for construction, deliveries, and such. Lower interest rates, longer loans, and increased interest in leasing, all of which have encouraged consumers to buy as much car as they can afford (or possibly more).

Siel Corp., call center to lay off more than 800 employees

The Nashville, Tenn., based company just set up the customer service center in Pompano Beach in September 2015, when it said it was hiring 1,000 employees. Dahlia Baker, CRA program director in Pompano Beach, said she placed 76 local workers at the call center whose primary client was Capital One. "I've been sending people there since June," she said. "I didn't hear anything [about the layoff]. That's a big downsizing."

The company wasn't awarded any financial incentives but did benefit from recruiting services through CareerSource Broward, which placed 380 workers with Sitel over 2015 and 2016, according to Tony Ash, vice president of communications and business relations at the county's workforce agency.

"It was shocking to us," Ash said about Site's layoff, though he added that call centers are among the industries with historically high turnover.

Ash said the agency is reaching out to do a "rapid response" with workers who lose their jobs, to ensure they're aware of CareerSource Broward's services for jobs and training. The company also issued a layoff notice in Alabama, where it is closing its call center in Covington County, which employed more than 500 people, according to multiple news reports.

Australia Looking Into Cancelling the $100 Bill

The Australian federal government is planning a full assault on the black or underground economy by appointing a taskforce who will consider the future of the $100 note and bans on cash payments over a certain level. Australia, like everyone else, is facing a monetary crisis whereby the current system of taxes and social programs with pensions are colliding and will simply collapse. This idea of perpetual borrowing cannot be sustained. Instead of reforming the system, they prefer to attack the people, as always — we are just the enemy.

The Australian black economy of unrecorded economic activity that is untaxed by government is estimated to be worth $21bn or 1.5% of gross domestic product. Even if they got all the taxes that they think they deserve, it would still not solve any problems. We are simply doomed and the longer governments postpone real reform, the worse the collapse will be.

Former KPMG Global Chairman Michael Andrew will head the new underground economy taskforce, which I suspect is one reason to think twice about KPMG. It will also include the Australian Tax Office, Reserve Bank of Australia, the Australian Securities and Investment Commission, the Australian Transaction Reports and Analysis Center, and immigration and human services departments.

They plan on considering the continued use of the $100 note of which there are $30bn in circulation. They are also looking to France, a fantastic role model, where the government banned cash payments of over €1,000.

IMF chief Christine Lagarde guilty in arbitration case involving flamboyant tycoon's $425M payout

Christine Lagarde, the head of the International Monetary Fund, was found guilty by a French court of negligence on Monday in a case involving the French state handing $425 million in taxpayer money to a tycoon close to the president in 2008.

CBS News’ Elaine Cobbe reports Lagarde, who was not in court to hear the verdict, will escape punishment, and the guilty verdict will not appear on her record. The well-respected head of the IMF has denied wrongdoing in the case, which dates to her time in the French government when she was economy and finance minister.

The trial took place before the Court of Justice of the Republic, a special body that tries government ministers for alleged wrongdoing while in office. The court is made up of three professional magistrates from the highest French court, including its president, and 12 members of Parliament, from opposition and majority parties.

The trial put Lagarde, 60, in jeopardy of facing up to a year in prison and a 15,000-euro ($16,000) fine if convicted of negligence. Lagarde’s conviction may raise concern about her ability to remain IMF boss. The Washington-based institution’s credibility was already shaken when her predecessor, Dominique Strauss-Kahn, also a French citizen, was forced to resign amid a wave sexual assault and sexual impropriety allegations in 2011. A previous IMF chief, Rodrigo Rato, faced allegations of fraud in Spain after the bank he led as chairman had the biggest collapse in Spanish history..

Obama Adjusts Prison Terms For 153 Inmates, Pardons 78

UK-based financial services firm looks to blockchain for FX trades

As Banking Technology reported earlier this year, ICAP’s post trade risk and information division completed a proof of technology test case for blockchain – so its interest is not entirely new.

In the latest development, ICAP, which will be renamed NEX Group from January, will “supply the code to customers in March so institutional investors can more transparently track and value deals in the spot market, which trades $1.7 trillion a day”.

As always in the world of fintech, competitors are up to something similar. Central securities depositary Euroclear and its US-based partner Paxos, have finished a two-week blockchain pilot for more than 600 test deals in the London bullion market. Both projects are major steps in blockchain gaining traction and acceptance in this arena.

According to the Financial Times, ICAP, with US technology group Axoni, will use its Traiana subsidiary, which acts as a messaging hub for $2 trillion of FX, fixed income and swaps deals. “It is set to become a key part of NEX as it sheds the brokers that built ICAP and focuses on digital market infrastructure”.

Half of American workers aren't using all their vacation days

If you can't remember the last time you took a vacation, you're not alone. More than half of U.S. workers who are offered paid vacation days won't use them all this year, according to a new report from Bankrate.com. Workers are leaving a median of seven vacation days on the table.

The excuses for not taking company-provided time off varied: some workers blamed having too much work, others said they enjoyed their work, while others report they can't afford a vacation or fear they might lose their job.

But not using paid vacation days is like leaving money on the table and can backfire on someone trying to be a standout employee. "If you don't take your time off, you can get burned out more easily and faster," said Sarah Berger, personal finance expert at Bankrate. "You can get sick and your relationships can suffer if you don't strike that work-life balance that will help you excel at work and in your career."

But for some workers, letting days to go unused is a strategic move -- 35% of those surveyed said they plan to roll over days to cover a big vacation or life event next year. Younger workers are more likely to let vacation days go unused. Close to 60% of workers aged 18 to 25 report they won't use all of their allotted vacation days this year, while 25% won't use any of their time off.

Trump Can't Stop This Bubble From Bursting, Nor Should He Try

As Investors Flee Gold Central Banks Are Buying

It has been a tough year to be a gold investor. The price of the yellow metal has whipsawed throughout the year on the back of changing interest rate expectations and political uncertainty. Indeed, as uncertainty grew throughout the first half of 2016 the price of gold pushed steadily higher from around $1,075 an ounce at the beginning of the year to a high of just under $1,400 an ounce after the Brexit vote.

However, over the past six months as uncertainty has faded and the global economy has surprised to the upside, the price of gold has collapsed, falling to a low of $1,136 an ounce at close on Friday.

According to HSBC investment demand for gold has also collapsed during the second half of 2016. The 84 global gold exchange traded funds tracked by the bank’s commodities analysts reported a decline in gold holdings of 3.9 million ounces during November, the highest monthly outflow since May 2013. The gold price declined by 7% in November 2016, compared to a 5% drop in May 2013. SPDR, the largest gold ETF globally, shed 1.9 million ounces of gold during November, contributing close to half of the total ETF outflows for the period. Still, on a net basis ETF buying for the year is 20.3 million ounces, the largest annual ETF gain since 2010.

While investors were net sellers of gold during November, HSBC’s research also shows that central banks are gobbling up excess supply. The bank tracks gold holdings as reported in arrears by the International Monetary Fund’s International Financial Statistics on a monthly and annual basis with a focus on the top ten gold holders who represent c79% of global holdings. Per data from the World Gold Council, global central banks accumulated a net 33.7t of gold in October vs.13.7t in September, the highest since January 2016’s 35.5t. Russia was the largest buyer accumulating 40.4t, closely followed by Qatar at 6.2t and China at 4.04t. Russia remains the largest gold buyer in 2016, increasing gold holdings by c168.5t to date, and substantially ahead of China, which has accumulated c80.3t of gold so far.

Economists Doubt Fed Will Hike 3 Times in 2017

The Federal Reserve will wait six months before raising interest rates again, a Financial Times survey of economists has found. The FT survey found that policymakers will maintain a cautious approach to tightening policy until they see the economic package President-elect Donald Trump has promised.

The Fed last week raised interest rates by a quarter point, only its second rate hike since the Great Recession and a year since the previous increase. Policy makers signaled as many as three increases in 2017 as the Trump administration takes over with promises to boost growth through tax cuts, spending and deregulation.

Officials will raise the Fed's key short-term rate just twice in 2017, starting with a move in June, an FT survey of 31 Wall Street economists found. "Global growth will improve next year but remain under its long term trend," said Gregory Daco, an economist with Oxford Economics. "Trump's policies, and the expectation of them, will be pivotal to global developments."

However, the FT survey found that economists expect the gloss Trump can add to U.S. growth next year and in 2018 to be modest. The U.S. will grow an additional 0.2 percentage points in 2017 thanks to a stimulus package from Trump, putting overall expansion at 2.2 percent, economists project. In 2018, Trump's contribution will be 0.4 percentage points, pushing GDP growth to 2.3 percent.

Here's Why Every Mall is Doomed

A nasty retreat in retail stocks is threatening to steal your Christmas gains… The great retail comeback is beginning to look shaky just weeks after posting a huge post-election breakout. Some of the biggest names in the sector are now starting to roll over.

If you’re stuck in any of these plays, you’ll have to act fast. If the breakdown we’re seeing is the real deal, it’s more proof that shopping malls are dying much faster than anyone anticipated. As the collapse accelerates, it threatens to shake the entire retail sector to its core…

Let’s face facts—retail hasn’t exactly been one of the friendliest investments of 2016. Heck, even one of the smartest investors in the world lost a pile of cash on a mall stock this year… I’m talking about Greenlight Capital’s David Einhorn. Dave’s a billionaire—and he didn’t acquire his cash stash by accident. His fund has returned nearly 17% annually to investors since its inception in 1996.

But Einhorn’s having another rough year. His fund took a big stake in struggling retailer Macy’s (NYSE:M) in late 2015 only to watch shares implode nearly 30% before ditching the position altogether just six months later. Sure, Macy’s was burning piles of cash and closing stores left and right. The former peddler of Donald J. Trump branded shirts and ties just couldn’t compete with the Amazon juggernaut. But the chain looked like it was getting its act together earlier this year. Shares started recovering as the company cut costs and closed underperforming stores.

The War on Cash and then on Gold

The global financial system continues to groan under the strain of the accumulated weight of trillions of dollars worth of debt and derivatives, which have built up to even more fantastic levels than those that precipitated the near collapse in 2008, thanks to the policy of solving liquidity problems near-term by creating even more debt and derivatives, Quantitative Easing being the most obvious example. However, while the majority consider the situation to be hopeless, there is actually “light at the end of the tunnel”.

If only a way could be found to freely tap the funds of savers at will, by imposing duties or taxes on bank accounts, with the additional option to appropriate savers’ funds on occasion as required, then the systemic liquidity problems will be solved. Banks need never fear solvency problems again and they can simply fall back on the account holder’s funds to meet any obligations. There are in fact already names for these restorative operations, they are called “bails-ins” and NIRP (Negative Interest Rate Policy).

Unfortunately, any immediate attempt to implement bail-ins and NIRP on a large scale will backfire because, faced with being charged significant sums for the privilege of keeping their money in the bank, savers will simply withdraw their funds and keep them as cash at home, or maybe even invest in Precious Metals. It is therefore imperative that these escape routes are blocked off.

We have already seen an interesting “trial balloon” in recent years with respect to bails-ins. This was the celebrated Cyprus bail-in. When Cyprus banks were about to go belly up a couple of years ago, they saved themselves by raiding customers’ accounts, which is more palatably described as a bail-in. The reaction of global savers to this action by the Cyprus banks was one of horror and revulsion and they made it plain that they weren’t going to stand idly by and watch banks plunder their funds – they would withdraw them as cash if any such threat should appear over the horizon. This reaction set the great minds of the banking community to work on how to stop savers withdrawing their funds in the face of these threats.

Report: U.S. government spent $100 million from 2010 to 2014 to spy on you

During the Bush years, liberal voters, celebrities and politicians decried the villainous acts of the federal government spying on the American people. The Patriot Act was generally disliked by many throughout the presidency of George W. Bush. When President Barack Obama renewed and expanded the surveillance of the American people, the left suddenly became quiet – similar to the wars under the incumbent president.

Now that Donald Trump is president will there be a sudden uprising and opposition to being spied upon? Let’s hope so. According to a new report from the House Committee on Oversight and Government Reform (HOGR), the U.S. government extracted nearly $100 million from the taxpayers so the government could spy on those same taxpayers. The report found that more than $95 million was spent on 434 devices across the country in order to clandestinely transform their mobile devices into real-time tracking devices.

Between 2010 and 2014, the Department of Justice (DOJ) spent roughly $71 million on 310 cell-site simulators, which are also identified as Stingrays, devices that impersonate a cellphone tower. The Department of Homeland Security (DHS) spent close to $25 million on 124 Stingrays.

With this information in hand, the report urges Congress to adopt laws that restricts use of the Stingray, citing the First and Fourth Amendment. “While law enforcement agencies should be able to utilize technology as a tool to help officers be safe and accomplish their missions, absent proper oversight and safeguards, the domestic use of cell-site simulators may well infringe upon the constitutional rights of citizens to be free from unreasonable searches and seizures, as well as the right to free association,” the report said.

French court convicts IMF’s Christine Lagarde

Free Cash in Finland. Must Be Jobless.

No one would confuse this frigid corner of northern Finland with Silicon Valley. Notched in low pine forests just 100 miles below the Arctic Circle, Oulu seems more likely to achieve dominance at herding reindeer than at nurturing technology start-ups.

But this city has roots as a hub for wireless communications, and keen aspirations in innovation. It also has thousands of skilled engineers in need of work. Many were laid off by Nokia, the Finnish company once synonymous with mobile telephones and more recently at risk of fading into oblivion.

While entrepreneurs are eager to put these people to work, the rules of Finland's generous social safety net effectively discourage this. Jobless people generally cannot earn additional income while collecting unemployment benefits or they risk losing that assistance. For laid-off workers from Nokia, simply collecting a guaranteed unemployment check often presents a better financial proposition than taking a leap with a start-up in Finland, where a shaky technology industry is trying to find its footing again.

Now, the Finnish government is exploring how to change that calculus, initiating an experiment in a form of social welfare: universal basic income. Early next year, the government plans to randomly select roughly 2,000 unemployed people — from white-collar coders to blue-collar construction workers. It will give them benefits automatically, absent bureaucratic hassle and minus penalties for amassing extra income.

Documents show U.S. has approved sale of Chicago Stock Exchange to Chinese firm

The sale of the Chicago Stock Exchange to a Chinese investment group has been approved, according to U.S. Treasury documents. The sale was approved by the Committee on Foreign Investment in the United States (CFIUS) to a Chinese group led by Chongqing Casin Enterprise Group despite the objections of several U.S. lawmakers who cited concerns about the level of influence the Chinese state might gain over the Chicago exchange, Reuters reported.

The deal is still under review by the U.S. Securities and Exchange Commission. If it also approves the deal, it would be the first sale of a U.S. exchange to investors from China.

Last February, a group of 46 U.S. lawmakers asked CFIUS to examine the deal. They included Rep. Robert Pittenger, a North Carolina Republican on the Financial Services Committee and the Congressional-Executive Commission on China.

Pittenger warned that China, which has been accused of corporate espionage, would have access to the data of U.S. companies who use the exchange. “This raises serious questions about the long-term integrity of our markets and confidence in the security of our trading systems, as the ability to undermine capital flows in any potential conflict would be devastating. This transaction should not have been approved,” said U.S.-China Economic and Security Review Commissioner Michael Wessel.

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