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Monday 11.21.2016

Trump and Gold: The Look Ahead

On Election Night, Nov. 8, gold prices rocketed up by over $50 per ounce at one point, to $1,335 per ounce. This was as news spread about the likely come-from-behind victory of Donald Trump over Hillary Clinton. Asian stock markets tumbled as panic selling took hold.

By the morning of Wednesday, Nov. 9, Trump was president-elect. Then — and this struck me as odd — by the time Clinton gave her belated concession speech, gold prices were giving up gains. After Clinton conceded, gold prices began to retreat below the previous day’s starting point. Global stock markets commenced a strong rally.

Now at the end of this week, gold trades at $1,212, which is below pre-Brexit levels. Silver is almost at pre-Brexit levels, under $17 per ounce. Meanwhile, broad stock markets have been whipping around.

Obviously, markets were surprised when Trump won the election. Trump’s win was not what most people expected — not in the mainstream media. Even people in the Trump camp were dubious about his odds. Of course, my partner Jim Rickards as much as predicted that Trump would win.

Black Friday is dying a slow death

Black Friday is losing its relevancy to US shoppers. The holiday, which takes place the day after Thanksgiving, has historically been the biggest shopping day of the year in the US.

But over the last several years, shopper traffic in stores on Black Friday has been falling with many retailers like Walmart, Target, and Amazon kicking off their holiday discounts online several weeks in advance.

Foot traffic in stores this year is expected to fall by about 3.5% on Black Friday compared to last year, according to data from the location tracking service Foursquare. That's coming on the heels of several years of declines.

Last year, about 102 million shoppers hit stores over the Thanksgiving holiday weekend, down from 147 million in 2012, according to the National Retail Federation. That doesn't mean people aren't shopping during the holidays anymore. They just aren't saving their purchases for Black Friday, or for Cyber Monday, for that matter. Many are choosing to shop online, rather than in stores.

Wal-Mart tackles food safety with trial of Blockchain

If you shop at Wal-Mart, you might be buying packaged produce unlike any ever sold in a U.S. store.

The sliced apples or cut broccoli — the merchant won’t say what’s involved exactly — are being used to test blockchain, a new database technology. If successful, the trial could change how Wal-Mart Stores Inc., which serves some 260 million customers a week, monitors food and takes action when something goes wrong. That could spur big leaps in food safety, cut costs and save lives.

Like most merchants, the world’s largest retailer struggles to identify and remove food that’s been recalled. When a customer becomes ill, it can take days to identify the product, shipment and vendor. With the blockchain, Wal-Mart will be able to obtain crucial data from a single receipt, including suppliers, details on how and where food was grown and who inspected it. The database extends information from the pallet to the individual package.

“It gives them an ability to have an accounting from origin to completion,”said Marshal Cohen, an analyst at researcher NPD Group Inc. “If there’s an issue with an outbreak of E. coli, this gives them an ability to immediately find where it came from. That’s the difference between days and minutes.”

Crisis at the Federal Reserve. The End of the Washington Consensus? Nomi Prins

80% of Americans Plan to Shop on Thanksgiving Day

While there are lots of complaints about stores being open on Thanksgiving Day, Americans vote with their wallets more than their feet. Half of U.S. consumers surveyed recently plan to shop online on the holiday while 15% said they would shop only in stores, 19% plan to shop both online and in stores, and just 16% said they don’t shop on Thanksgiving Day.

The survey was conducted on behalf of BFAds.net, a website that collects and posts retailers’ Black Friday advertising supplements.

Because Black Friday has been stretched to a week-long (or longer) event, nearly a third of shoppers (30%) say they plan to begin their searches for the perfect gift before Thanksgiving and 26% said they plan to begin on Thanksgiving Day while 44% will wait until Black Friday.

More than half (51%) said they plan to spend the same amount as last year and 27% said they plan to spend more.

Are US states ready for the next recession?

There will be another recession. The only question is when. Bank of America warns one could start as soon as next year. Colorado’s most recent revenue report includes a section entitled “ Predicting the Next Recession.” Arizona’s legislative economists are worried about one coming in the next two years. But no state has built a recession into their budget forecast yet. And they may not be prepared for one.

Only 23 states and the District of Columbia (DC) had higher per capita real Gross Domestic Product in 2014 than when the national economy’s peaked in 2007. And due to various combinations of slow economic growth, legislated tax cuts, and a collapse in energy prices, overall state tax revenues remain below historic averages and have not recovered pre-recession peaks in about half of the states.

And the trend is likely to continue: Median growth of nominal state general fund revenues over the next few years is expected to be about 3.5 percent. Several states are struggling to pay for current levels of government services, much less greater needs due to demographic changes or likely cuts in real federal spending.

How will states manage? The most effective way for state governments to weather a recession is by building up their rainy day funds. Ideally states would add to these reserve funds in fat years so they can maintain critical services in lean ones. These funds helped states weather the 2001 economic slump, but the Great Recession of 2007-2009 overwhelmed the reserves, leaving most state rainy day funds drained.

Facebook to Buy Back Shares for the First Time

Facebook Inc. said it will buy back as much as $6 billion in shares, its first repurchase program, in a bid to appease shareholders awaiting the results of big investments in potentially risky new growth areas.

The buyback involves Class A common stock and will start in the first quarter of 2017, the company said in a regulatory filing. Facebook has $26 billion in cash and marketable securities and is deploying some of that for buybacks while still planning to increase its spending on growing the business.

Facebook shares rose 1 percent in after-hours trading Friday, following the news. The company joins a growing group of big U.S. technology firms using buybacks to keep shareholders happy. The boom in digital advertising has left Facebook and Alphabet Inc.’s Google with billions in cash and investors often complain if that’s not being put to profitable use.

“Facebook is very efficient with its capital and very responsible with how it uses that capital,” said Brian Wieser, an analyst at Pivotal Research Group, citing multibillion dollar acquisitions of WhatsApp and Oculus in 2014. "Although some people took issue with their choices at the time, they clearly saw value.”

Office of the Comptroller of the Currency slaps serious sanctions on Wells Fargo as fake account fallout continues

The Office of the Comptroller of the Currency slapped a series of sanctions on Wells Fargo that were previously excluded from its settlement with the megabank over the fake account scandal that recently shrouded the bank in controversy.

Back in September, the OCC, along with the Consumer Financial Protection Bureau and the city and county of Los Angeles, fined Wells Fargo $185 million for more than 5,000 of the bank’s former employees opening more than 2 million fake accounts in order to get sales bonuses.

The OCC portion of that fine was $50 million. But for currently unknown reasons, the OCC announced late Friday that it is placing several new sanctions on Wells Fargo that were previously excluded from its settlement with the bank.

Chief among those sanctions is that the bank is now required to ask the OCC for approval if it wants to make a change to its board of directors or its senior executive officers. Wells Fargo is also now prohibited from providing “golden parachute” payments to any departing executives or board members.

Obama Blocks Drilling Off West Coast, Arctic Waters In Last Month Of Presidency

As President Barack Obama nears the end of his second term, he issued a new drilling plan to restrict oil and gas extraction activities off two American shores: the waters of the Arctic near Alaska and the Pacific Coast of California, Washington, and Oregon.

The Department of Interior’s 2017-2022 leasing plan blocks drilling activities in the Chukchi and Beaufort Seas near northern Alaska, while limiting petroleum development on the Cook Islands, according to Reuters.

Environmentalists had been concerned that an oil and gas presence in the area would jeopardize the lives of endangered whales as well as walruses and seals. According to the Interior Department, the “balanced” drilling plan still leaves around 70 percent of the United States’ recoverable offshore reserves open for business. The available sites are located mostly in the Gulf of Mexico, which saw a six-month moratorium on drilling in 2010 after the five million-barrel BP spill.

The natural disaster caused environmental regulators to create stricter rules to operate in the Gulf, which the U.S. shares with its southern neighbor.

Goldman Sachs just ran its first-ever ads trying to sell you something

Goldman Sachs just ran a series of groundbreaking advertisements.

The ads are for Marcus, the firm's first consumer lending platform. It's an online tool that offers fixed-rate, no-fee personal loans of up to $30,000 for two- to six-year periods.

While Goldman Sachs has done brand-focused advertising in the past, this is its first foray into consumer product advertising.

Marcus is targeted at Americans with more than $10,000 in credit card debt. The ads, below, appear to be geared to middle-class families. The ads are running on Facebook, Hulu, Pandora, and YouTube. Goldman also launched a digital savings account on GSBank.com in April, offering customers a 1.05% interest rate on their deposits, which can be as little as $1.

India’s currency move is loaded with risks

One week after India’s sudden declaration that 500- and 1,000-rupee notes were no longer legal tender, the economy is in chaos. And that’s perhaps because the policy was designed as much to shock and awe observers with the government’s command of the Indian economy as to control India’s “black money” problem. What seemed at first to be a masterstroke by Prime Minister Narendra Modi now looks like a grave miscalculation.

Modi is beginning to sound like he may agree. His recent speeches on the subject have been frankly bizarre. In one, he seemed to laugh at those inconvenienced by the ban; in another, he broke down while speaking of the “sacrifices” he’d made for India, and warned that he might be assassinated by “forces” desperate to protect their “loot”.

What’s changed in a week? Well, for one, it’s become clear that the government was simply too cavalier in its planning. Now that 86 per cent of India’s currency is no longer valid, the central bank has struggled to print replacement denominations — and the new notes are the wrong size for existing ATMs. Modi’s asked people to be patient for 50 days, but the process could take as long as four months.

You have to wonder if Modi truly sought expert advice, or relied once again on a small and trusted set of politicians to determine policy. India’s simply too big and complex for shock and awe. Large parts of the rural economy use cash for 80 per cent of transactions and have been hard-hit.

Gerald Gelente-2017 Predictions-MSM Gone and Financial Market Panic Coming

Could You Live on $16,000 a Year? Here's Why You Might Have To

We're told repeatedly how important it is to save independently for retirement, but a lot of us still aren't listening. An estimated 33% of Americans have no money at all saved for retirement, but an even more frightening statistic is the fact that 30% of those 55 and older are in the same boat. And a big reason why so many of us aren't saving boils down to Social Security.

In fact, according to the National Academy of Social Insurance, Social Security is the sole source of income for almost 25% of Americans 65 and older. But while it's true that Social Security helps countless seniors stay afloat financially in retirement, there's a real danger in relying on it too heavily. And if we don't start taking matters into our own hands, a lot of us will risk coming up short when retirement rolls around.

The problem with banking on Social Security is that your benefits are only designed to replace about 40% of your pre-retirement income. This isn't just an educated estimate; the Social Security Administration even says so itself.

Now you may be expecting your living costs to go down once you retire -- so much so that you'll be able to survive on Social Security alone -- but in reality, that's not likely to happen. For one thing, you're going to have a lot more free time on your hands, which means you might wind up spending extra on leisure and entertainment. But more importantly, you're going to have healthcare to worry about, and that's where so many seniors get thrown for a loop.

German Chancellor Will Seek A Fourth Term

German Chancellor Angela Merkel says she'll seek another term in the office she's held since 2005, holding a news conference Sunday that ends speculation at a time of intense change in the European Union.

Merkel, 62, made it official in a news conference held by her party, the Christian Democratic Union. "I told the CDU that I was ready to stand again," she said," according to Deutsche Welle. "This election will be even more difficult than those we have had before as we are facing a strong polarization."

Those words echo what Merkel said this past week, when President Obama paid his final visit both to Germany, the country he visited as a candidate, and to Merkel, the only leader of a major Western power who was in office when Obama was elected.

Merkel and Obama spoke about the need to find unity, and to reach those who've been marginalized by political and economic change.

600 Layoffs Planned At Pennsylvania Unemployment Centers

The Pennsylvania Labor and Industry Department announced late Thursday plans to lay off 600 employees. Many work at seven call centers across the state that help the unemployed -- including one in Lackawanna County.

The State Department of Labor and Industry says the 600 layoffs are needed after the state senate failed to vote on legislation that would have provided money that the call centers needed across the state.

Exactly how many of those layoffs -- if any -- will be based in Lackawanna County has not yet been released -- but state leaders say the impact is beyond disappointing -- it's disgraceful. It was business as usual Thursday at the unemployment compensation call center in Taylor. Employees were busy answering calls trying to help get people back on their feet. This facility and six others like it across the state are now in jeopardy.

"it's just unfortunate that we have to have this contention when it can be easily avoided" Said State Senator John Blake (D) 22nd District. Tuesday night, The state senate failed to vote on legislation that would have put more than 57-million dollars into the system next year.

Keiser Report: Meme Wars

Italy’s Crisis Turns into a Multi-Headed Hydra

Bank stocks have surged just about everywhere since Trump’s election, with one exception: Italy. In the last month only one large Italian bank has seen its shares rise, and that’s the 500-year old bank at the center of Italy’s banking crisis, Monte dei Paschi di Siena, whose nearly worthless shares jumped to €0.24.

Shares of Italy’s other large banks have suffered heavy losses. Over the past week alone, shares of Italy’s largest bank, Unicredit, plunged 15%, as did the shares of Banca Popular and UBI Banca. Shares of Italy’s second largest bank, Intesa Sanpaolo, fell just under 10%.

The recent losses compound what’s been a miserable year for Italy’s banking stocks. The best performing stock is the investment bank Mediobanca, which is down a mere 24% for 2016. During the same period, Unicredit has shed over 60%, UBI Banca 65%, Banco Popolare 80%, and Monte dei Paschi 85%.

It’s not just banks’ shares that are flashing all the wrong signals. UniCredit’s five-year credit default swap surged to 221.2 basis points on Friday, meaning it now costs €221,200 to insure €10 million of UniCredit’s debt against default over five years.

Deutsche Bank Turmoil Shows Risks of Weakening Bank Capital Standards

Deutsche Bank, a venerable 146-year-old bank whose very name symbolizes the German financial system, has recently found itself in considerable turmoil. The kicker came in September when the Department of Justice slapped it with a US$14 billion fine for alleged wrongdoing during the financial crisis. But Deutsche Bank was already being buffeted by a string of bad news. Its stock price has slumped over the past year due to a decline in investment banking and dim prospects for its commercial banking business.

This has led to speculation about whether the German government will have to bail it out and, if it doesn’t, whether markets will soon experience another “Lehman moment” – referring to how the collapse of the U.S. investment bank sparked a global financial meltdown in 2008.

As I see it, these concerns obscure the much deeper problem that afflicts the European banking sector and that a bailout alone will do nothing to resolve: a lack of capital. It also offers a stark warning for U.S. regulators amid talk of changes to banking rules – especially Dodd-Frank – under the new administration. While some changes to the U.S. financial system may be worthwhile, easing capital standards would be a mistake and make another financial crisis much more likely.

Instead, regulators on both sides of the Atlantic need to make sure there’s no question their banks are able to withstand a shock – whether a billion-dollar fine or something much more severe.

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