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Monday 09.26.2016

Ex-employees hit Wells Fargo with $2.6B class action suit

Two former Wells Fargo employees have filed a class action law suit in California seeking at least $2.6 billion for workers who tried to meet aggressive sales quotas without engaging in fraud and were later demoted, forced to resign or fired.

The suit on behalf of people who worked for Wells Fargo in California over the past 10 years, including current employees, focuses on those who followed the rules and were penalized for not meeting sales quotas.

“Wells Fargo fired or demoted employees who failed to meet unrealistic quotas while at the same time providing promotions to employees who met these quotas by opening fraudulent accounts,” the former employees charges in court papers filed on Thursday in a Los Angeles state court.

Wells Fargo has fired some 5,300 employees for opening as many as 2 million accounts in customers’ names without their authorization. On Sept. 8, a federal regulator and LA prosecutor announced a $185 million settlement with Wells.

A legendary investor thinks driverless cars will raise the price of oil

It should come as no surprise that the rise of electric vehicles has broad implications for the price of oil.

Now, you'd think that as more of the cars on the road are powered by batteries rather than petrol, demand for oil will slide. And in the long-term, that maybe true.

In the short term, however, electric vehicles could actually lead to a spike in the oil price, according to Dwight Anderson, the legendary commodities investor and cofounder of hedge fund Ospraie Management.

In an interview with RealVisionTV published earlier this month, Anderson said: "So that EV side is going to be something that is really going to affect demand growth in crude next decade, and I actually think it could have the odd effect of keeping crude oil prices higher for longer at the tail end of this decade into early next."

2 Obamacare Outcomes That are Nothing Short of Shocking

It's been six and a half years since the Affordable Care Act was signed into law by President Obama, and over that time we've had no shortage of pundits predicting how well or poorly it'd perform. I even threw my hat in the ring in April 2013, offering up a handful of ways I believed Obamacare, as the ACA is more commonly known, would succeed, Opens a New Window. and a number of ways I expected the law would fail to live up to its billing Opens a New Window. .

As we look back at nearly three years of implementation (the individual mandate went into effect on Jan. 1, 2014), a number of the prospective positives and negatives have indeed come true.

In the plus column, millions of lower-income individuals and families that had previously been shut out of getting healthcare now have access to medical care. Medicaid expansion in 31 states accounts for about half of all Obamacare-related enrollment, and it's played a vital role in lowering the uninsured rate in the U.S. to just 8.6% in the first quarter of 2016 according to the Centers for Disease Control and Prevention. That's a new all-time low. Obamacare has also been a godsend for persons with pre-existing conditions who were shut out of the healthcare system prior to the ACA's implementation.

As expected, hospitals were also prime beneficiaries of Obamacare. Having more people insured meant less in the way of doubtful provisions, or, in layman's terms, fewer uncollectible accounts. For fiscal 2013, the nation's two largest hospital operators, HCA Holdings (NYSE: HCA) and Tenet Healthcare (NYSE: THC), lost 10.3% and 7.9% of their revenue to doubtful provisions. As of their fiscal 2015 full-year report, HCA Holdings' doubtful provisions had dropped to just 9% of revenue, and Tenet's was down to 7.2%. The extra cash could allow these hospital giants to expand and purchase new equipment, which is good news all around.

Reasons the middle class is in serious trouble

The United States is often thought of as a country built upon the backbone of working- and middle-class Americans. But truth be told, the middle class is stuck in neutral, if not outright disappearing.

According to an analysis released by Pew Research Center earlier this year, 203 of the 229 major U.S. metropolitan areas it surveyed between 2000 and 2014 showed a decline in middle-class families. In other words, families are either ascending the rungs of the socioeconomic ladder into more specialized jobs with higher income, or they're falling into lower-income groups. This is a nationwide trend that's pretty much been ongoing for at least the past three decades.

What's really wrong with the middle class likely boils down to these seven issues. One of the biggest challenges for middle-class families is they've watched their wages grow on a nominal basis but stay relatively stagnant on an inflation-adjusted basis. Based on data provided by the Bureau of Labor Statistics and interpreted by the Pew Research Center, nominal wages for average hourly workers jumped better than 700% between 1964 and 2014 to $20.67 an hour. However, when factoring in the effects of inflation over those 50 years, real wages grew by less than 8%.

Meanwhile, the cost to attend college or get medical care is handily outpacing wage growth. Between 2005 and 2015, medical care inflation outpaced the consumer price index (a measure of inflation that wage growth is often tied to) in all but one year. College tuition costs have jumped even faster, with a nominal increase observed between 1978 and 2008 of 1,120%. A college degree can be vital to obtaining a well-paying job and having advancement opportunities, while access to medical care can lead to a healthier and longer life. Both access to college and medical care are being challenged by their rapid rates of inflation relative to wage growth.

Does It Really Matter If Trump Or Clinton Wins? A Recession Is Already On The Horizon

There are always two sides to the argument, especially in economics and politics. Consider for a moment the likelihood that either Hillary Clinton or Donald Trump will assume the presidency at a time of record stimulus measures, not only from the U.S. Federal Reserve but from central banks across the world. Does this really backstop or prevent any threat to the economy?

Sven Henrich, Northmantrader.com's founder, was a guest on CNBC on Friday and offered the opposing side of the story. Henrich quickly pointed out that either Clinton or Trump will assume the presidency while corporations are sitting on record-high debt as companies are borrowing more and more money to buy back their own stock and finance pension gaps.

"Companies are really not investing in future expansion, we are seeing negative private investment growth, weak capital investment, and we just saw now August leading indicators down," Henrich said.

Henrich added that consumer confidence fell to its lowest levels since December. Meanwhile, the consumer price index is rising in all the wrong places, namely medical expenses and rent. Henrich further stated that all of these factors are merely "seeds" being planted and will result into the next recession.

Why more young men are playing video games instead of working

They're less likely to have a job, more likely to live at home with their parents – and happier than ever.

A recent unpublished study from researchers at Princeton University, the University of Rochester, and the University of Chicago found that more young men, particularly those who don't have college degrees, are living at home, working part-time or not at all, and regularly playing video games. But the prevalence of this lifestyle isn't due to a lack of jobs or difficult economy – rather, many young men are consciously choosing video games over work.

And, surveys show, rates of happiness among this demographic are rising. "[H]appiness surveys actually indicate that they are quite content compared to their peers, making it hard to argue that some sort of constraint, like they are miserable because they can’t find a job, is causing them to play video games," researcher Erik Hurst, an economist at the University of Chicago, said in a university interview.

One in five men between the ages of 21 and 30 with less than a bachelor's degree reported not working at all in 2014 – more than double than the 9.5 percent who reported not working in 2000. These young men have replaced 75 percent of the time they used to spend working with time on the computer, mostly spent playing video games, the new study found. Between 2004 and 2007, this group spent an average of 3.4 hours a week playing video games. By 2014, that time had risen to 8.6 hours.

The Obama Gun "Super Owner" - New Study Finds 50% Of Guns Owned By Just 3% Of Population

It seems as if the tide has changed as the U.S. imported a record amount of gold from Switzerland in July. Normally, the flow of gold from the United States has been heading toward Switzerland. For example, when the U.S. exported a record 691 metric tons (mt) of gold in 2013, Switzerland received 284 mt, which accounted for 41% of the total. Compare that to the paltry 3 metric tons of gold imported from Switzerland that very same year.

However, something has changed in the market dynamics as the U.S. imported a record 23.8 mt of gold from Switzerland in July:

As I stated in my previous article, WHAT’S GOING ON?? Record Swiss Gold Flow Into The United States: the Swiss exported 20.7 mt of gold in May 2016, up considerably from its monthly average 0.4 mt. Even though gold imports from Switzerland declined the next month to only 13.1 mt in June, they were still much higher than their monthly average going back until Jan. 2015.

But, as we can see… U.S. gold imports from Switzerland jumped 82% in July to 23.8 mt compared to June. There has been speculation in the precious metals community as to why the Swiss are now exported gold to the United States. While many theories seem plausible, the one that makes the most sense is that investors in Europe who have their gold stored in Switzerland are moving it to the United States to protect it from the implications of negative interest rates.

The Obama Gun "Super Owner" - New Study Finds 50% Of Guns Owned By Just 3% Of Population

A recent Harvard study of the demographics of gun ownership in the United States yielded a fairly shocking discovery, namely the emergence of the Obama gun "Super Owner." The study, entitled "The Stock and Flow of US Firearms: Results from the 2015 National Firearms Survey", was conducted by the Harvard School of Public Health and found that just 14% of all gun owners, or 7.6mm adults and 3% of the total U.S. population, possessed 50% of all guns owned by civilians in the country. Moreover, with a total stock of 270mm civilian-owned guns in the U.S., that implies that these "super owners" possess an average of nearly 18 guns per person.

Gun owning respondents owned an average of 4.85 firearms (range: 1-140); the median gun owner reported owning approximately two guns. As can be seen in Figure 3, approximately half (48%) of gun owners report owning 1 or 2 guns, accounting for 14% of the total US gun stock, while those who own 10 or more guns (8% of all gun owners), own 39% of the gun stock. Put another way, one half of the gun stock (~130 million guns) is owned by approximately 86% of gun owners, while the other half is owned by 14% of gun owners (14% of gun owners equals 7.6 million adults, or 3% of the adult US population).

Another startling discovery in the data, though "oddly" not highlighted in the report, is that the surge in gun ownership per capita seemed to coincide with the start of the Obama presidency and growing rhetoric over new gun regulations.

Over the past 20 years, gun ownership per U.S. adult hovered around 1 from 1993 through 2007 but then surged starting in 2008 as an Obama presidency became increasingly likely.

Earthquakes & Economy

Deutsche Bank’s Monumental Mess—Merkel Says No State Aid, Depositor Bail-In Coming Up?

The €72 trillion (notional) derivatives mess known as Deutsche Bank remains under severe pressure. It’s market cap is $17.43 billion. It has no earnings and pays no dividend.

On April 23, Deutsche Bank was Fined $2.5 Billion over LIBOR rate rigging. Twenty-one people face criminal charges following a seven-year investigation. On September 16, the US Department of Justice Fined Deutsche Bank $14B for mortgage securities fraud leading up to the 2007-2009 global meltdown.

Chancellor Angela Merkel has ruled out any state assistance for Deutsche Bank AG in the year heading into the national election in September 2017, Focus magazine reported, citing unidentified government officials.

The German leader also declined to step into the Frankfurt-based bank’s legal imbroglio with the U.S. Justice Department, which may seek as much as $14 billion in sanctions against Deutsche Bank’s mortgage-backed securities business, the magazine said. A German government spokesman declined to comment on the report Saturday. A Deutsche Bank spokeswoman also wouldn’t comment.

Swiss voters reject a 10% hike in retirement benefits

A majority of Swiss voters Sunday rejected a 10% increase in government retirement benefits, a rare move for a country to turn down such a raise through a referendum.

Nearly 60% of voters turned down the controversial measure launched by trade unions and left-wing parties, who claimed that a hike in benefits would compensate for low interest rates on savings that will reduce retiree income in coming years.

Most political parties and even some senior citizen organizations opposed the increase, arguing that it would cost an additional $4 billion a year, which would likely be footed by younger workers.

The referendum’s backers said the pension plan — similar to Social Security in the United States — could be financed by an additional 0.8% contribution to the retirement fund, split between the employer and employee. That would be in addition to the current monthly contribution of 10.25% from a person's salary.

Voting booth selfies are at the center of a federal case

UPS Testing Drones for Use In Its Package Delivery System

One of the world's largest package delivery companies is stepping up efforts to integrate drones into its system. UPS has partnered with robot-maker CyPhy Works to test the use of drones to make commercial deliveries to remote or difficult-to-access locations.

The companies began testing the drones on Thursday, when they launched one from the seaside town of Marblehead. The drone flew on a programmed route for 3 miles over the Atlantic Ocean to deliver an inhaler at Children's Island.

The successful landing was greeted by jubilant shouts from CyPhy Works and UPS employees on the island to witness the test. "I thought it was fantastic," said John Dodero, UPS vice president for industrial engineering.

CyPhy Works founder Helen Greiner, who previously co-founded robot-maker iRobot, said the drone tests with UPS allow her company to gather engineering and cost information and then work with UPS to look at where drones can add the most value to UPS' extensive network.

Robots Won’t Take Your Job—Just Parts Of It

"The problem with new tech is it’s really easy to imagine the jobs it will destroy," Andreessen Horowitz's Chris Dixon recently told Product Hunt, "but really hard to imagine the jobs it will create." But it isn't quite that black and white.

Many of the first "new" jobs automation will create will actually be similar to the ones it does away with. That's because, rather than destroying entire roles, it’s much more likely to chip away at certain work-related tasks. Many (though not all) positions will remain, but certain aspects of those positions will change, requiring workers to adapt to different, often higher-level activities in order to stay competitive.

That can be nerve-wracking, but it doesn’t exactly spell doom for your career. Here’s a look at three different positions and how they’ll likely evolve (quite possibly with you still in them) as automation progresses.

After analyzing over 2,000 different activities within 800 occupations, McKinsey researcher Michael Chui concluded that the jobs at greatest risk of automation involve routine manual work or predictable data collection and processing. So at least for the foreseeable future, positions that require managing or developing people, applying expertise to decision making, and using emotional intelligence in interactions with the public all appear relatively safe.

Jonathan Cahn-We Are at a Dangerous Point

Only 17 percent of California homes affordable to teachers: A typical California home costs $200,000 more than an average teacher can afford.

California’s housing affordability is once again in an unreachable level for most working professionals. You get Taco Tuesday baby boomers jawboning their children to purchase a modest home but that turns out to be a rundown crap shack costing $700,000. So many California adults live at home with mom and dad since rents are also high. Redfin put together some data showing that only 17 percent of homes in California are affordable to an average teacher with an annual salary of $73,536.

When looking at the data you will see that the coast is becoming an even more expensive enclave and many homes are being bought by investors, foreigner buyers, and dual income households. The last group is the one that is in the position for a large shock since they are buying in many cases to pop out a brood and largely don’t factor in the cost of childcare once the little ones come into the world. But like most things in California, people live on the absolute financial edge and that edge just got much closer.

Your typical California home now costs for $500,000. That is $200,000 more than your typical teacher can afford. Rents eat up a lot for many workers so coming out with that fantastical down payment that makes the numbers work so beautifully is largely done by the bank of mom and dad. Of course this is doable for a professional working couple. There is no doubt about that. You can also get six-pack abs but it takes wicked discipline on diet and working out and that is something most don’t have.

The typical shack costs $700,000 in an area that has OK schools and looks like a toddler’s rendering of a home. So that 20 percent down payment is $140,000. House humping beer belly HGTV fanatics act as if this was super easy to come by, especially for broke Millennials.

Finance Is Ruining America

Few places in the country illustrate the divide between the haves and the have-nots more than the county of Fairfield, Connecticut. Drive around the city of Bridgeport and, amid the tracts of middle-class homes, you’ll see burned-out houses, empty factories, and abandoned buildings that line the main street. Nearby, in the wealthier part of the county, there are towns of mansions with leafy grounds, swimming pools, and big iron gates.

Bridgeport, an old manufacturing town all but abandoned by industry, and Greenwich, a headquarters to hedge funds and billionaires, may be in the same county, and a few exits apart from each other on I-95, but their residents live in different worlds. The average income of the top 1 percent of people in the Bridgeport-Stamford-Norwalk metropolitan area, which consists of all of Fairfield County plus a few towns in neighboring New Haven County, is $6 million dollars—73 times the average of the bottom 99 percent—according to a report released by the Economic Policy Institute (EPI) in June. This makes the area one of the most unequal in the country; nationally, the top 1 percent makes 25 times more than the average of the bottom 99 percent.

In some ways, this is a mathematical artifact: Any place where rich people live will have greater inequality, since incomes can go up practically infinitely but they can only fall so low. Yet what’s troubling is that the well-off’s rise seems to be providing no upward pull for those at the bottom. From 2009 to 2013, the incomes of the top 1 percent in Connecticut grew 17.2 percent, while the incomes of everyone else dropped 1.6 percent. As wealth grows in Connecticut, the state’s biggest city, Bridgeport, is left behind. The poverty rate in Bridgeport has increased from 18 percent to 20 percent from 2007 to 2015, according to a report from the nonprofit Connecticut Voices for Children.

That leads to a crucial question: Why? Why are the sky-high incomes at the top not pulling up those at the bottom? And is it possible that the struggles faced by those in Bridgeport are somewhat caused by the good fortunes of those who live in Greenwich?

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