Britain Votes to Exit the EU!
The vote is a huge slap in the face for the West’s political elite. The Brexit has happened.
The United Kingdom has voted to leave the European Union after 43 years, in a resounding revolt against its political elite that puts question marks not just over the future direction of Britain, but of Europe and the even the global economic order.
With over three-quarters of the vote counted, the Leave campaign leads by over 4 percentage points, giving it a virtually unassailable lead. While Prime Minister David Cameron, who led the Remain campaign, has yet to comment, Nigel Farage, who anti-EU Independence Party, has already claimed victory, telling supporters that June 23 would go down as the country’s “Independence Day.”
“This will be a victory for real people, for ordinary people, for decent people,” Farage, who has led a campaign heavy on anti-immigrant sentiment and on resentment against the transfer of powers from Westminster to Brussels. “We have fought against the multinationals, we have fought against the big merchant banks, we have fought against Big Politics, we’ve fought against lies, corruption and deceit, and today honesty, decency and belief in nation—I believe now—is going to win.”
The day Brexit pushed the markets into freefall
11 September 2001. 15 September 2008. To that list of huge stock market plunges, it looks as if historians will soon add 24 June 2016: the day the markets went into freefall when Britain voted to leave the European Union.
The City wasn’t even waiting for the final result to be announced. It was selling sterling long before the sun came up, driving the pound down to levels against the dollar not seen for 30 years.
The response was hardly a surprise. Markets in the final few days of the campaign had been rising in anticipation of a late swing to the remain side, a view confirmed by the last flurry of opinion polls. Shares and the pound were primed for a collapse in the event of a leave vote.
Earlier in the week, the legendary speculator, George Soros, predicted that Brexit would lead to a Black Friday in which the pound would lose 20% of its value. Sterling was nearly halfway towards meeting that forecast before dawn broke over the trading rooms of Canary Wharf. Expect action from the Bank of England to calm the markets. Having highlighted the risks of a leave vote, it will now be the job of Threadneedle Street and the Treasury to show that they are in charge of events. That may be difficult in the short term, because while the overnight sell-off was in part the result of traders being caught with their trousers down, it was not the only factor.
Deutsche Bank to Cut 3,000 Jobs in Germany
Deutsche Bank said Thursday it will cut 3,000 jobs and shut a quarter of its branches in Germany as part of its five-year restructuring plan.
More than 80% of the layoffs will be in its private and commercial clients division, which Deutsche Bank said it is revamping to “deliver high-quality service while expanding new forms of digital services.” The bank will start closing down 188 of its smaller branches in Germany before the end of the year, ultimately leaving it with 535 branches.
“This is an important step in the delivery of [the restructuring plan] and in making our bank successful again,” Deutsche Bank CEO John Cryan said in a message to employees.
“This has not been an easy decision for us,” he added. “However, we have to bring down costs while also reorganizing how we work. If we do not, Deutsche Bank will be unable to operate profitably or sustainably in an environment of low interest rates and increasingly strict regulation.” In October, Germany’s largest bank launched “Strategy 2020” to streamline its business and strengthen its balance sheet after years of meager returns and high legal costs. Deutsche last year posted its first annual loss since 2008.
Asia's millionaires now control more wealth than North America's
The wealth of the world is no longer concentrated in the West. North America now ranks second to Asia in terms of wealth controlled by millionaires, according to finance firm Capgemini's "World Wealth Report", released this week. Over the next decade, the wealthy in Asia could surpass the combined wealth of those in Europe, Latin America, the Middle East, and Africa.
Asian millionaires controlled a combined $17.4 trillion in 2015, while millionaires in North America held $16.6 trillion, according to the report.
The soaring wealth of high net worth individuals (HNWI) in Asia came despite slowing economic growth in China this year. Though China’s growth domestic product increased by 6.9 percent in 2015, debt also increased to almost 250 percent of China’s GDP, according to Bloomberg. Japan’s economy also slowed somewhat. The Organization for Economic Co-operation and Development predicts Japan’s 2016 economic growth will be 0.7 percent, and will slow further to 0.4 percent in 2017.
Despite those recent slowdowns, the general trend of the Asian economy, especially in the past ten years, has been one of positive growth. Compared to the rest of the world, economies in Asia, which include many developing countries, are generally growing faster.
How Much Do Uber Drivers Actually Earn?
Minimum wage laws don’t apply to drivers for ride-hailing apps. Since they’re independent contractors and must cover all of their vehicle expenses themselves, it’s difficult to figure out how much a driver makes at a glance without knowing what their expenses are. However, it turns out that Uber ran these numbers before a recent price cut, and provided raw data to Buzzfeed after the company’s calculations were leaked.
Data from drivers in Detroit, Denver, and Houston based on actual trip data and some assumptions about their expenses shows, according to Buzzfeed’s calculations, that drivers don’t earn the $17/hour that had previously been cited based on old fare rates. The average pay that a driver in any of the three cities took home was around $13.25 per hour, in markets that are major cities but don’t have exceptionally high cost of living.
In Detroit, drivers netted $8.77 per hour, less than the local minimum wage. They took in an estimated $12.70 an hour before expenses, but costs like gasoline, insurance, and depreciation on their cars gobbled up 30% of their pay.
In Houston, drivers took in $14.75 per hour, and took home $10.75 per hour of that. One experienced driver in that city recounted his missteps while learning how to work the system, then explained that he took in about $100 for almost twelve hours of work.
SCOTUS tie blocks Obama's immigration plan
Uh-oh. Is the stock market a bubble again?
Will the term "well above" turn out to be Janet Yellen's "irrational exuberance?" The Federal Reserve noted in its most recent monetary policy report earlier this week that valuations for stocks "have increased to a level well above their median of the past three decades."
It brings back memories of former Fed chief Alan Greenspan talking about how he thought stocks looked frothy during the tech bubble two decades ago.
Greenspan made the "irrational exuberance" comment in December 1996 -- more than three years before the market went into a tailspin. Some argue that Fed policies under Greenspan helped inflate the bubble in the first place. And once again, there are Fed critics who think that Yellen (and her predecessor Ben Bernanke) should look in the mirror before complaining about frothy stock prices.
"She helped caused it and now she's talking about it? It's like we're in a parallel universe," said David Bechtel, principal at Barrow Funds. It's a valid point. The Fed has raised interest rates only once since Yellen took over as chair.
Bank of America Is Paying $415 Million For Using Customers' Cash for Its Own Trades
The bank admitted to wrongdoing. Bank of America Merrill Lynch agreed to pay about $415 million and admit to wrongdoing in a move to settle allegations that it had misused customer assets and failed to safeguard its clients securities.
According to a Thursday press release from the Securities and Exchange Commission, Bank of America’s brokerage arm used customer cash that should have been deposited in a reserve account between 2009 and 2012 to finance the bank’s own trading activity.
As a result, Bank of America’s customers could have been “exposed to a massive shortfall” if the bank’s bets had failed, according to the SEC. A third-party creditor for example, could have filed a claim for the customers’ assets.
The bank held roughly $58 billion per day of customer securities in an account subject to interest. If the bank failed, the customers might have been unable to withdraw those assets.
Dodd, Frank blast ruling that MetLife not too big to fail
A federal court's striking down of the government's designation of insurer MetLife Inc as "too-big-to-fail" could undermine efforts to head off another financial crisis, authors of the landmark Dodd-Frank Wall Street reform law said.
In a brief filed on Thursday with a federal appeals court, former Senator Chris Dodd, former Representative Barney Frank and other Democratic party leaders said the designation was necessary to bring a key nonbank financial institution under an effective regulatory regime.
Signed by 20 current and former lawmakers, the brief opposes U.S. District Court Judge Rosemary Collyer's order in March, now under appeal, rescinding the government's 2014 designation of MetLife as a systematically important financial institution. Such a designation would reflect regulators' concern that its failure could hurt the U.S. financial system.
Collyer said the designation by the Financial Stability Oversight Council (FSOC), a group of federal regulatory heads, had been "arbitrary and capricious." She said the council never adequately assessed the risk of Metlife's failure and neglected to perform a cost-benefit analysis of applying the designation.
Fed’s Williams: Low ‘natural’ interest rates aren’t unique to the U.S.
The “very low” so-called natural rate of interest isn’t unique to the U.S., San Francisco Fed President John Williams said Thursday.
The natural, or neutral, rate of interest, is the level of interest rates that would keep the economy in balance, without holding down growth or sparking inflation. But while observers have lately been consumed with the question of whether the Federal Reserve will raise rates in the U.S. — and the effect that might have on the economy and markets — a new paper co-wrote by Williams suggests that low rates may be due to deep structural factors like low productivity that aren't easily addressed by policy makers, said Thomas Simons, money market economist at Jefferies.
Williams, using a model he first helped develop in 2003, said the natural rate appears to have also declined sharply in Canada, the eurozone, and the United Kingdom. “We find that large declines in trend GDP growth and natural rates of interest have occurred over the past 25 years in all four economies,” the paper said.
Former Treasury Secretary Lawrence Summers has argued the low natural rate is evidence of secular stagnation and or a lack of demand for capital. Economists used to believe that this rate was in the range of 2-3%. When added to 2% inflation, that suggests benchmark interest rates would be in the 4-5% range.
Poll: Concern about terrorist attack at highest level since 2003
Americans are more likely to think terrorist attacks in the U.S. are imminent now than at any point since 2003, according to a CNN/ORC Poll conducted after a shooting in Orlando that ranks as the worst terrorist attack on U.S. soil since 9/11.
Overall, 71% say further acts of terrorism are very or somewhat likely in the United States over the next several weeks. Concerns about a terror attack in the U.S. haven't been that high since March 2003, in the days after the U.S. began its war with Iraq. Nearly one-quarter of Americans, 24%, consider an attack "very likely," and except for a survey conducted just after Osama bin Laden's death in May 2011, that's the highest share to say so since November 2001.
Americans' concerns about domestic terror are more focused on so-called "lone-wolf" attacks carried out by individuals who say they have been inspired by a terrorist group rather than attacks organized and supported by terrorist groups themselves.
Nearly three-quarters of Americans say individual attacks are a greater threat than attacks organized by terrorist groups, just 23% see organized attacks as the bigger threat. Although majorities across party lines agree that lone-wolf attacks are a bigger danger than organized ones, Republicans are a bit less likely to say individual attacks are the larger threat. Among Republicans, 68% see individual attacks as a bigger threat vs. 75% each among Democrats and independents.
Please Don’t Pop My Bubble!
So ride your bubble of choice up–stocks, bonds, housing, bat guano, take your pick–but it’s best to keep your thumb on the sell button.
One person’s bubble is another person’s “fair market value.” What is clearly an outrageously overvalued asset perched at nosebleed levels of central-bank fueled speculative euphoria is to the owner an asset at “fair market value.”
But beneath the euphoric confidence that valuations can only drift higher forever and ever is the latent fear that something could stick a pin in “my bubble”— that is, whatever bubblicious asset we happen to own and treasure as a source of our financial wealth could be popped, destroying not just our financial bubble but our psychological bubble of faith in permanent manias.
Consider housing prices, which are clearly in an echo-bubble of the Great Housing Bubble of 2000-2007. The psychological underpinning of all bubbles and echo bubbles is on display here. In the first bubble, those benefiting from the stupendous price increases are not just euphoric at the surge in unearned wealth–they believe the hype with all their hearts and minds that the bubble is not a bubble at all, it’s all just “fair market value” at work.
The Amount Of Stuff Being Bought, Sold And Shipped Around The U.S. Hits The Lowest Level In 6 Years
When less stuff is being bought, sold and shipped around the country with each passing month, how in the world can the U.S. economy be in “good shape”? Unlike official government statistics which are often based largely on projections, assumptions and numbers seemingly made up out of thin air, the Cass Freight index is based on real transactions conducted by real shipping companies. And what the Cass Freight Index is telling us about the state of the U.S. economy in 2016 lines up perfectly with all of the other statistics that are clearly indicating that we have now shifted into recession mode.
If you are not familiar with the Cass Freight Index, here is a definition of the index from the official Cass website…
Since 1995, the Cass Freight Index™ has been a trusted measure of North American freight volumes and expenditures. Our monthly Cass Freight Index Report provides valuable insight into freight trends as they relate to other economic and supply chain indicators and the overall economy.
Data within the Index includes all domestic freight modes and is derived from $25 billion in freight transactions processed by Cass annually on behalf of its client base of hundreds of large shippers. These companies represent a broad sampling of industries including consumer packaged goods, food, automotive, chemical, OEM, retail and heavy equipment. Annual freight volume per organization ranges from $1 million to over $1 billion. The diversity of shippers and aggregate volume provide a statistically valid representation of North American shipping activity.
You Might Be On The Terrorist Watch List
Google's new robot can do the dishes
One of Google's robots is officially housebroken. Boston Dynamics, the Google-owned robotics company, has released viral video for years. But the robots have almost always performed their feats outdoors or in a laboratory. In a new video released Thursday, Boston Dynamics presented SpotMini, which safely performed a variety of tasks around a home.
SpotMini walked under a dining room table, brought a man on a couch a drink, climbed stairs and loaded a glass into a dishwasher. And unlike most Boston Dynamics robots, SpotMini is electric, rather than relying on hydraulics, which makes it suited for the home.
"You wouldn't want to drip hydraulic oil on your carpet," said Jerry Pratt, a senior research scientist at the Institute for Human & Machine Cognition.
The timing and nature of the video is notable given a March report from Bloomberg that Google (GOOGL, Tech30) had put Boston Dynamics up for sale, as it is not expected to deliver a marketable product in the next few years. "This video is saying, 'Look we can do these things, it's not hard,'" said Georgia Tech engineering professor Aaron D. Ames, who researches robotics. "It's really a demonstration of the transferability of fundamental ideas, which is sometimes hard for the public and CEOs and executives to grasp."
House approves $1.1 billion deal to combat Zika virus
The House voted early Thursday to approve a bill to provide $1.1 billion to combat the Zika virus, but Democrats vowed to derail the legislation in the Senate because it includes $750 million in budget cuts to other health care programs.
The House voted 239-171 to pass the bill at shortly after 3 a.m. as Democrats continued their unrelated "sit-in" on the House floor to push for a vote on gun control measures in the wake of the mass shootings in Orlando.
House Appropriations Committee Chairman Hal Rogers, R-Ky., pushed to get the Zika bill passed this week, before House members adjourned for a recess that will last through Independence Day. The House had been scheduled to work through Friday, but the Democrats' sit-in prompted them to adjourn early Thursday after voting on the Zika bill.
"Mosquito season is upon us; these dollars must get out the door now to help control the spread of the Zika virus, and continue longer-term efforts to stop this disease, such as vaccine and treatment development and deployment," Rogers said.
The Oil Glut Is Over, Says World’s Most Powerful Oil Man
Newly appointed Saudi Oil Minister Khalid Al-Falih declared the oil glut over during a visit to Saudi Aramco facilities in Houston, Texas, today. Speaking to the Houston Chronicle about the oil crisis the and the supply glut, Al-Falih said, “We are out of it,” and noted that we would continue to see gradual upward movement in the price of oil.
“The oversupply has disappeared. We just have to carry the overhang of inventory for a while until the system works it out,” the oil minister was quoted as saying.
Others are also expressing bullish sentiments. Raymond James & Associates is forecasting that West Texas Intermediate (WTI) could hit targets between US$70 and US$80 by the end of next year. Their rational is that even though prices are rising and this tempts U.S. producers to start pumping again and revive the supply glut, they will not be able to do this immediately.
The Energy Information Administration (EIA) today reported a 900,000 barrel draw on U.S. crude inventories, but that still leaves a 530.6-million-barrel stockpile that will take some time to chip away at, according to the Saudi oil minister.
Obama Admin Frees Bin Laden’s Bodyguard From Prison
The Obama administration has released from the Guantanamo Bay prison an al Qaeda terrorist who served as terror mastermind Osama Bin Laden’s personal bodyguard, according to an announcement by the Defense Department.
Abdel Malik Ahmed Abdel Wahab Al Rahabi, a top terror operative who had planned to participate in the 9/11 attacks and who received training to be a suicide bomber, was freed from Gitmo and transferred to Montenegro.
Al Rahabi is just the latest accused terrorist to be released from prison by the Obama administration as it pursues an end-of-administration effort to clear out Gitmo and shut it down.
The release was condemned by some in Congress who have opposed the administration’s efforts to shutter Gitmo.
Rangel: No guns for my constituents but congressmen 'deserve' and 'need' protection from guns
Americans Plan to Keep Their 4th of July Spending Under Control This Year
More Americans plan to celebrate the 4th of July this year, but it seems they’ll be keeping their holiday spending in check.
According to an annual survey from the National Retail Federation, consumers will spend an average of $71.34 per household on food for Independence Day barbecues and picnics. This is a mild increase from last year, when consumers reportedly spent an average of $71.23 per household on food celebrations.
According to the survey, an estimated 214 million people plan to celebrate the 4th of July and are expected to spend about $6.8 billion on holiday festivities, up 1.4% from last year when, according to the NRF’s 2015 survey, more than 156 million consumers planned to do so.
The NRF’s 2016 survey, conducted by Prosper Insights and Analytics, surveyed 6,811 consumers in early June. The results have a margin of error of plus or minus 1.2 percentage points. Of those respondents who said they will celebrate, 65% plan to go to a barbecue, picnic or cookout, 43% plan to attend a community celebration or watch fireworks, and 12% plan to see a parade.
Big U.S. banks have enough capital to withstand severe stress: Fed
All 33 U.S. banks that underwent regulatory stress tests this year were able to withstand severe economic and market conditions while staying above minimum required capital levels, the U.S. Federal Reserve said on Thursday.
Overall, big banks would suffer $385 billion in loan losses over a period of nine quarters under the most severe scenario, the Fed said. A key capital ratio measuring Tier 1 common equity as a portion of risk-weighted assets would drop to a low of 8.4 percent, in aggregate - well above the minimum set by regulators.
However, the results released on Thursday - part of a test known as "DFAST" - only offer a glance of big banks' capital pictures under stress. On June 29, the Fed will release results of a more comprehensive test, known as "CCAR," which will include whether or not banks can buy back as much stock and pay out as many dividends as they had planned.
"DFAST is sort of like a dress rehearsal for the CCAR," said Ernie Patrikis, a partner at the White & Case law firm and a former bank regulatory official at the Federal Reserve Bank of New York.
Slowdown in home sales ends spring home-buying season
The summer is here and the spring homebuying season is closing down with a monthly slowdown in new home sales. Sales of new single-family homes in May decreased month-over-month, but were up annually, according to a report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
New home sales decreased by 6% monthly to a seasonally adjusted annual rate of 551,000 in May, according to the report. This is down from April’s rate of 586,000.
“New home sales decreased 6% in May, but much of the decrease was due to April’s large jump rather than a trended decrease,” Trulia Chief Economist Ralph McLaughlin said. “To put it into perspective, May’s figure of 551,000 is the second largest annual rate over the past year, eclipsed only by last month’s revised figure of 586,000.”
On the other hand, new home sales are still up from last year by 8.7%. May 2015’s seasonally adjusted annual rate sat at 507,000. This is in contrast to the existing home sales, which jumped in May to their highest increase in almost 10 years, according to a recent report by the National Association of Realtors.