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Friday 12.23.2016

Seeking Sweetgreen Salad? Don’t Bother Bringing Cash.

If you’re looking for a swanky, sustainably-sourced salad for lunch… don’t bother bringing your wallet. Sweetgreen doesn’t want your money, at least not the paper kind; it prefers you pay digitally. Period.

That’s the change coming to the coastal fast-casual lunch chain in early 2017, Business Insider reports. The 60 salad-serving locations will nearly all stop accepting cash payments on Jan. 18.

Instead, customers will be asked to use credit cards or — of course — the store’s own app, which basically everyone seems to be unrolling one of these days.

Sweetgreen — which operates largely in greater Los Angeles, metro DC, New York City, Boston, and Philadelphia — says it’s all in the name of simplification. And it’s true: removing cash from the equation does make things easier. It means employees don’t have to count or handle money, customers don’t have to fish around looking for it, and there’s no risk of theft for currency that isn’t there.

It's Official: Italy Will Nationalize Monte Paschi

So far, so expected. After earlier announcing the failure to attract any anchor investors for a private capital raise, Monte Paschi has announced that it will officially ask the Italian government for a "precuationary capital increase" - in other words a bailout. The funds will come from the newly decreed EUR20 billion bailout fund, and as Bloomberg reports will not trigger a "bail-in."

This is the third bailout in three years and reportedly the biggest nationalization in Italian history. As Bloomberg reports, Italy will plow as much as 20 billion euros ($21 billion) into the country’s banks after Banca Monte dei Paschi di Siena SpA failed to secure its future by raising funds from investors, and other lenders could follow.

Finance Minister Pier Carlo Padoan told reporters after a cabinet meeting in Rome that he expected Monte Paschi to ask for aid. "We will see if other banks ask for aid,” Padoan said at the press conference. Italian Prime Minister Paolo Gentiloni said EU officials agreed with Italy’s plan to provide support to the country’s banking system.

And sure enough, once the bailout decree was approved, Monte Paschi, the world’s oldest lender, late Thursday abandoned plans to raise 5 billion euros from the market. The bank said it was scrapping the entire capital plan, including the sale of bad loans and the debt for equity swap, and confirmed in a statement that it will ask Italy for a “precautionary capital increase.”

The Case for a Flat Tax

Trump asks Boeing to price out a comparable jet to compete with F-35 — and Lockheed Martin's stock is tanking

In response to a series of cost overruns and other development issues for the F-35 fighter jet, President-elect Donald Trump said on Thursday he has asked Boeing to "price-out a comparable F-18 Super Hornet."

Trump's request — announced via tweet — came a day after meeting separately with the CEOs from Lockheed Martin and Boeing to discuss bringing the "costs down" on the F-35 fifth-generation stealth jet and the next fleet of presidential aircraft.

Boeing's response — also announced via tweet — accepted the invitation to work with the Trump administration to "affordably meet US military requirements."

On December 12, Trump said the cost for Lockheed Martin's fifth-generation stealth F-35 Lightning II jet was also "out of control." The message sent Lockheed Martin's stock down from $251 at the opening bell to $245.50, before it rebounded to a little more than $253 a share. Shares of Lockheed Martin fell 2.0% to $247.75 after hours, while Boeing shares rose 0.7% to $158.52.

Why Silver Price Manipulation Will End

The one thing silver investors want to know, is when will the manipulation of the silver price finally end. And who can blame then. It becomes extremely frustrating to watch the silver price fade lower and lower, especially as the Dow Jones Index gets ready to surpass the 20,000 level.

Furthermore, precious metals sentiment continues to head down the toilet and into the cesspool, while the financial networks like CNBC get ready to pass out “Go 25,000 Dow Jones”baseball caps. However, the broader markets are in serious trouble, pointed out by Wolf Richter’s article, What The Heck’s Happening To Our Shale Buyback Boom. In that article he posted this chart and stated the following:

Share buybacks in the third quarter plunged 28% year-over-year, to $115.6 billion, the biggest year-over-year dive since Q3 2009, according to FactSet. It was the second quarter in a row of declines, from the glorious Q1 this year, when buybacks had reached $168 billion, behind only Q3 2007 before it all came apart.

So, it looks as if the Dow Jones Index is most certainly well beyond BUBBLE TERRITORY. Of course, this won’t stop those with “Sugar Plums Dancing In The Heads & Dollar Signs In The Eyeballs” from jumping onto the runaway stock market train-wreck.

Sen. Pat Toomey: Dodd-Frank Is A Disaster

US Financial Giant State Street Tests Blockchain System

American financial services giant State Street has tested a Blockchain system that it hopes can be used to streamline the securities lending process as the financial industry accelerates efforts to adopt the emerging technology.

The software, which was tested this year over the course of seven months, could be chosen as one of the company’s Blockchain projects to be implemented in 2017, Hu Liang, senior managing director of the Emerging Technologies Center at State Street told reporter Anna Irrera in a report at Reuters.

“The aim is to enhance the operational aspect of securities lending,” Liang said. “In a lot of cases there is no automated linkage to say which account it (the collateral) should go back to.” The system would reduce manual intervention involved with the process, make it faster, and create a better record for regulatory reporting purposes, Liang said.

The report went on to note that the Blockchain system that it tested could transform the collateral posted by an investor to borrow securities from State Street’s clients into a digital token that could be used for other transactions and that this could create a digital, immutable record of how the collateral had been used and would make it easier and quicker for State Street to return the collateral to the borrower’s account once their lending position had been unwound.

Barclays sued by US over billions of dollars in toxic mortgages

A federal lawsuit accuses Barclays of defrauding investors who bought mortgage securities from the bank before they blew up during the financial crisis. The suit, filed by the U.S. prosecutor in Brooklyn on Thursday, claims that the bank "caused billions of dollars of losses to investors."

It alleges that 36 pools of mortgages sold by Barclays (BCSPRA) between 2005 and 2007 totaling tens of billions of dollars were "full of mortgages it knew were likely to fail, all while telling investors that the mortgages backing the securities were sound," the prosecutor's office said in a statement.

Two bank executives were named in the suit: Paul K. Menefee, who served as Barclays' head banker for subprime residential mortgage backed securities, and John T. Carroll, who served as Barclays' head trader for subprime loan acquisitions.

Barclays' shares closed down nearly 2% in New York. In a statement, the bank said it "considers that the claims made in the complaint are disconnected from the facts," and will seek to have the suit dismissed. Barclays, which is headquartered in London, was one of many banks whose mortgage practices were blamed for contributing to the financial crisis.

Retailers go into 2017 with too many stores

U.S. retailers have a problem they can’t easily resolve: They have too many stores. And even though they’ve already announced slews of store closings, it’s increasingly likely they’ll have to shutter even more over the next few years. That’s especially the case as consumers keep shifting their spending online, which has left the U.S. awash in unwanted retail space, or “overstored.”

According to real estate information firm CoStar, nearly 1 billion square foot of retail space will be “rationalized” in the coming years through store closures and conversions to other uses. Many retailers also are seeking rent reductions as their productivity has slumped from an industry average of $330 in sales per square foot from $350 per square foot a decade ago.

The level of “overstoring” may only get worse. Retail analyst Jan Rogers Kniffen expects about half of all retail sales to be online by 2030, a huge increase from current figure of about 10 percent.

“A lot of these retailers are still in denial,” said Brian Yarbrough, a retail analyst at Edward Jones. “I think the Kohl’s (KSS), the J.C. Penneys (JCP) of the world, they’re in denial. At some point, there’s probably not a need for 2,400 Kohl’s and J.C. Penney’s across the United States. There’s probably not a need for 5,800 Walmart (WMT) Supercenters.”

Dimon: You Can't Just Throw Money at Big Problems

U.S. and China on Collision Course

China’s capital and currency markets are on a collision course with the U.S., and by extension, the entire world. Economists are fond of saying if something can’t go on forever, it won’t. That truism applies to China. Huge profits will be made by those who see this China train wreck coming and act in time.

The idea of economic stress in China sounds strange to most ears. China has come from the chaos of the Cultural Revolution to the world’s largest economy measured on a purchasing power parity basis in just 35 years. Even using nominal GDP, my preferred metric, it is the world’s second largest economy.

China’s economy grew over 12% per year in 2006-2008, and again in 2010. Even at the depths of the global financial crisis in 2009, annual Chinese growth was still over 6%. Chinese growth ran between 8% and 6.7% from 2011 to 2016. These growth rates are extraordinary compared to the 0% to 2% annual growth achieved by the major developed economies since 2007.

But, beneath that glossy surface all is not well. Much of China’s growth was completely artificial. It would not be counted if China were subject to more rigorous accounting standards.

Calpers Rings Pension Warning Bell

It's increasingly clear that pensions can't rely on investment returns to pad their coffers the way they used to.

The biggest U.S. pension fund appears to recognize this. The chief investment officer of the $303 billion California Public Employees' Retirement System just recommended that it lower its annual assumed rate of return to 7 percent from 7.5 percent, which will require workers to contribute more money to the plan.

This is a good sign because it finally shows some grasp of reality. Unfortunately it points to a substantial amount of pain ahead for workers, who will inevitably have to pay more into their pensions in the very near future. And that pain could be even worse because expectation of a 7 percent annualized return is still too high.

Calpers is often thought of as a trailblazer for other public pensions, which collectively had a 7.5 percent assumed rate of return on their assets as of 2015. The California fund is big, but it pales in comparison to the estimated $3.6 trillion of assets in state and local government retirement systems as of 2015, according to the National Association of State Retirement Administrators. If all of these funds were to reduce their return assumptions by a mere half percentage point, as Calpers is doing, it would likely require employees to offset the difference by billions of dollars a year.

Strongest Gold “Buy” Signal In 16 Years

When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one-so long as there are no restraints on trade or on the movement of capital. – Alan Greenspan, “Gold And Economic Freedom,” 1966

Anyone who was involved in the financial markets during Greenspan’s tenure as Chairman of the Federal Reserve would be shocked to see that comment above coming from Greenspan. He was, after all, the king of the printing press until his successor, Ben Bernanke took over the role of chief money and credit creator.

While it might not show up in the Fed’s “M” accounts, which are various measures of the “money supply,” Greenspan’s Fed shepherded in an era of unprecedented growth in systemic debt – private and Government – and unprecedented decline in credit standards. By the end of Greenspan’s reign of monetary terror, anyone with no more than two nickels to rub together could qualify for a credit card or mortgage.

The graph above shows total debt outstanding system-wide in the U.S. during Greenspan’s Fed. The level debt increased 400%. GDP? Not so much. Real GDP is said to have grown about 85%, but this metric is overstated by the amount that the Government underestimates the true inflation rate and by gimmicked changes to the GDP calculation for purposes of political expediency.

Chinese money moving to US commercial property

Interest in U.S. commercial real estate is perking up, particularly from China, as expectations of pro-growth policies from President-elect Donald Trump spark demand for dollar-denominated assets.

"(Investors) are seeing the U.S.commercial real estate marketplace as really standing out on a global basis," said Hessam Nadji, president and chief executive at commercial real estate firm Marcus and Millichap.

"It's not being overbuilt; it's been very well balanced in this particular cycle in terms of loans that are not going up, the leverage that was very well balanced. They're at much lower risk at this stage of recovery than we've seen in the past," he told CNBC's The Rundown.

Concerns over the dollar's appreciation are also prompting some motivation for capital allocation into the U.S. "particularly because the Chinese economy is slowing" and as the yield profile of commercial real estate is competitive, Nadji added.

Uber Ships Self-Driving Cars to Arizona

A few days of regulatory tussles were enough for Uber Technologies Inc. to pull its fleet of self-driving cars from the streets of San Francisco and send them instead to friendlier territory in Arizona.

The California Department of Motor Vehicles banned Uber’s self-driving cars from San Francisco on Wednesday, just days after they first deployed. In response, Uber picked up and moved out.

“Our cars departed for Arizona this morning by truck,” Uber said Thursday in an e-mail. “We’ll be expanding our self-driving pilot there in the next few weeks, and we’re excited to have the support of Governor (Doug) Ducey

Ducey wooed Uber on social media Wednesday evening, when the ride-hailing company pulled its self-driving test from San Francisco. “California may not want you; but AZ does!” he wrote on Twitter. The next morning, Uber’s fleet was headed his way.

Stock Market on 'Sugar High;' Gold to Average $1,300: Jeff Christian

Happy Days Aren't Here Again as Economy Shows Autumn Weakness

The economy is growing, consumers and business are spending, but happy days are not here again. That is, if you define happy days as strong economic growth.

Lots of data were dumped today and they tell largely the same story. Consumer spending was up in November, but if you adjust for inflation, it wasn’t anything special. The key factor was a major slowdown in durable goods consumption, driven by a softening in vehicle sales.

But it should be kept in mind that the sales pace was still robust, just not as huge as in October. It looks like consumption will be up only moderately in the final quarter of the year and that will likely keep overall growth from getting anywhere near what we had in the third quarter.

Looking forward, household incomes went nowhere. Workers may be hoping that wage and salary gains will accelerate, but they actually went backward in November.

U.S. Economy Trails Markets in Growth

Stock prices may have soared since the November election, but the U.S. economy is ending 2016 on an anemic note.

Measures of economic vitality including income growth, consumer spending and inflation weakened last month following a short-lived spurt.

Household spending rose just 0.2% in November from the month before, a slowdown in growth from the previous two months, while incomes flatlined, the Commerce Department said Thursday. Inflation readings, which had perked up, didn't budge last month, and demand for factory-made goods remained soft.

For now, that leaves the U.S. economy in the middling trajectory that has marked the seven-year expansion. "Underlying support for the consumer sector remains fragile at best," said Lindsey Piegza, economist at Stifel Nicolaus & Co. "The reality the consumer is facing at this point is still modest wage gains and a continued loss of momentum in income growth."

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