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Wednesday 12.28.2016

Recession, market correction next year, expect rate cuts: Rickards

The Federal Reserve hiked interest rates just two weeks ago for the second time in a decade, but it will soon be cutting them again, said Jim Rickards on Tuesday.

Speaking to CNBC's Squawk Box, the director of The James Rickards Project said a stock market correction is coming as President-elect Donald Trump's economic stimulus plans will not pan out, causing a "head-on collision" between perception and reality.

"When the reality of no stimulus catches up with the perception of stimulus plus the Fed tightening: that's the train wreck. Either we're going to have a recession or a stock market correction," he said.

The markets have been rallying on the back of Trump's win as investors bet on tax cuts and fiscal spending under the new administration. However, "the stimulus is not going to come" as Trump's proposed tax cuts will hit government revenue while the Congress is likely to block his stimulus plans as the U.S. is already $20 trillion in debt, Rickards added.

US Consumer Confidence Jumps to Highest Level Since 2001

Consumer confidence climbed in December to the highest level since August 2001 as Americans were more upbeat about the outlook than at any time in the last 13 years, according to a report on December 27 from the Conference Board.

Confidence index increased to 113.7 (forecast was 109) from a revised 109.4 in November Measure of consumer expectations for the next six months rose to 105.5, the highest since December 2003, from 94.4.

Present conditions index fell to 126.1 from 132 Share of Americans expecting better business conditions six months from now rose to 23.6%, the highest since February 2011, from 16.4%.

American households are expecting a Donald Trump administration to deliver. They are more upbeat about the prospects for the economy, labor market and their incomes, according to the Conference Board’s report. The results corroborate surveys by the University of Michigan and the National Federation of Independent Business, which showed jumps in household and business sentiment on Trump’s pledges to boost jobs, cut taxes and ease regulations.

“Financial Lockdown … ATMs Went Dry”: 3 Police States Banning Cash To Control The People

Is it any coincidence that the financial crises, and the subsequent restrictions, follow the general chaos and upheaval that surround hotspots and conflict zones? The European Union has once again been confronted with a major terror attack, and is coming down harsh on cash, gold and other valuables as a response. Due to its supposed connection to financing terrorism, cash and gold are being closely monitored and seized as it flows into the EU.

Meanwhile, economic crisis is driving extremely tight cash control measures in Venezuela, India and other parts of the developing world. In the name of combating illicit financial activities, these countries have banned nearly all of the currency, while placing a very short leash around their already impoverished populations.

The United States, too, is under a great deal of economic pressure. Enormous mounts of debt, rising interest rates and a number of massive bursting bubbles, could explode into a major crisis. While there are already fairly tight restrictions on transferring, withdrawing or crossing borders with large amounts of cash, even greater restrictions may be coming.

Earlier in 2016, former Treasury Secretary Larry Summers, an architect of the last banking crisis, penned an op-ed called “It’s time to kill the $100 bill.”

Delta to cancel order for 18 Boeing 787 Dreamliner aircraft

Delta Air Lines Inc (DAL.N) said on Tuesday that in agreement with Boeing Co (BA.N) it would cancel an order for 18 787 Dreamliner aircraft, which it assumed as a part of its merger with Northwest Airlines.

The order is valued at more than $4 billion at current list prices. Delta, in its statement, did not disclose specific terms of the agreement. The airline, which acquired Northwest in 2008 for $2.6 billion in shares, said it would continue to take delivery of 737-900ER aircraft through 2019.

Delta declined to comment beyond its statement. The cancellation comes as Delta and other top U.S. airlines seek to slow flight capacity growth and in some instances shrink existing service in response to falling airfares.

Airlines like Norwegian Air Shuttle ASA (NWC.OL) from outside the United States are adding flights that Delta says have exceeded passenger demand and hurt unit revenue.

Government Debt And Credit Bubble – No Hope For Humanity

The global financial numbers don`t make sense, governments and central banks cannot add to their balance sheets in an infinite manner, and expect global growth to buck the current downtrend. Moreover, who is left to buy now, where is the incremental buyer in the financial system? We have a Global Financial Ponzi Scheme, the numbers just don`t add up, financial gimmicks with no basic structural finance soundness underneath, are a house made of cards and doomed to crash, this is where we are at currently in global finance. The Global Financial System is the Real Big Short, it is the Biggest Short we have ever seen in the history of Financial Markets!

We have met the endgame, the can has been kicked as far down the road, the inevitable rubber meets the road reality day is here, now pay up. You cannot lower interest rates any lower, you cannot borrow any more, you cannot add any more to central bank`s balance sheets, governments cannot borrow anymore money through unsound deficit financing. Now rates are going up, inflation is going up, as there has been too much money printing, currency devaluation, and central bank inspired fiat capital created chasing too few real goods in the global economy. And Moreover, you cannot “Trade War” your way to prosperity through these populous movements which are a reflection of the reality on the ground of the Global Zero Sum Game of a few Winners and a lot of Net Losers. The reality is that at this point structural changes need to be made that respects finance principles and basic capitalistic models.

Since politicians and central bankers are too weak and incompetent to do anything but kick the can down the road creating further debt, credit and asset bubble “Days or Reckoning” the only true Reality Check and form of discipline comes via a Global Recession and Financial Market Crash. This is the Forced Reset Option that occurred in the second half of 2007!

Who is going to regulate Central Banks and Governments because they have done far more harm to the stability of capitalism and financial markets than any investment bank, hedge fund, or financial institution in the history of financial markets. Until we have systemic changes in many areas, and no I don`t think Donald Trump is the savior, just like President Obama wasn`t, we are going to struggle mightily as a society both locally and globally. At this point, there is still no light at the end of the tunnel, There is No Hope for Humanity!

Yale's Shiller: Trump Win Could Usher in Boom for US Housing

Donald Trump’s unexpected victory in the November U.S. presidential election could prove a pivotal moment for the U.S. housing market, according to economist and Nobel laureate Robert Shiller.

“I think we’re at a turning point. The numbers that we’re reporting today are October, before the Trump election, and everything looks different now,” he told Bloomberg Television’s Alix Steel and David Westin. “There might be a Trump boom coming.”

S&P CoreLogic Case-Shiller data released earlier on Tuesday showed that home prices in 20 U.S. cities maintained a steady pace of increases in October, rising by 5.1 percent, while a gauge of nationwide property values rose by the most since mid-2014.

Shiller, a professor of economics at Yale University, said that this trend might continue, or it might accelerate. “I’m not forecasting a boom. I find it very hard to forecast at this point in our history because it’s such an important change in government and we just don’t know where it’s going,” he said. “I want to see Trump’s actual policies and see how successful he is in getting them through.”

Is this the end of Obamacare?

UPS Expecting To Send 1.3M Packages Back To Retailers On ‘National Returns Day’

If you’re the kind of person who likes keeping track of arbitrary holidays, here’s one more to add to your list: Jan. 5, known as “National Returns Day,” or, “The Day You Send That Horrorshow Of A Sweater Back From The Fiery Chasm From Whence It Came.”

It’s going to be quite a busy day for shipping companies, as UPS says it’s expecting to ship more than 1.3 million packages filled with unwanted holiday items back to retailers: record e-commerce sales are pushing up returns this year and peaking on Thursday, Jan. 5, UPS said in a statement today.

In addition to the million or so packages expected on that day, UPS says it will ship more than 5.8 million packages in the first full week of the new year. These numbers are up from last year, when shoppers returned more than 1 million packages on National Returns Day and five million packages in the first week of January.

According to a UPS study, between 2012 and 2016, online shoppers reported fewer issues paying paying for returns shipping (decreasing from 66% to 50%), paying restocking fees (decreasing from 43% to 27%), and experiencing a delay in receiving credits or refunds (decreasing from 41% to 27%).

Outsourced: In A Twist, Some San Francisco Tech Jobs Are Moving To India

In San Francisco, companies will pay six-figure salaries to entry-level tech workers from all over the world. So this might come as a surprise: A public university there is laying off some of its own IT staff and sending their jobs to a contractor with headquarters in India.

Until recently, Hank Nguyen's daughter wanted to follow in his footsteps and work in tech. Last spring, she was accepted into the University of California system. "She was inclined to take computer science and engineering," Nguyen says. But then the letters started arriving. The first was a hefty tuition bill. At about the same time, Nguyen got a layoff notice.

His employer, the University of California San Francisco, or UCSF, was outsourcing his job. Nguyen was stunned. How would he pay for his daughter's education? Would there be tech jobs for her when she graduates? "I'm unsure about everything now," Nguyen says. "And she's unsure as well."

Nguyen came to the U.S. from Vietnam. He thought tech would provide a stable, middle class life. So he learned how to do backend IT work, to handle servers and keep networks running. Now, Nguyen and several dozen others at UCSF are training their replacements. "I'm speechless," Nguyen says. "How can they do this to us?" UCSF has 565 full-time workers focused on core IT services. It is cutting nearly 100 IT jobs, full-time workers, contractors and unfilled positions.

Keiser Report: Risk & Reward

Italy will need $7B to salvage world’s oldest bank

The Italian government is likely to put in around 6.5 billion euros ($6.8 billion) to rescue the country’s third biggest lender Monte dei Paschi di Siena, more than initially expected, sources close to the matter said on Tuesday.

The higher cost of the state rescue is due to the fact that the European Central Bank has revised the bank’s capital shortfall to 8.8 billion euros from a previous estimate of 5 billion euros.

The bank requested government support — in the form of a precautionary recapitalization by the state — last week after its plan to raise 5 billion euros from private investors flopped.

A 6.5 billion euro capital injection would give the Italian government a stake of around 70 percent in the lender. The remaining 2.3 billion euros should come from the conversion into shares of subordinated bonds held by institutional investors, as required by new European rules for dealing with bank crises.

Russian hacking warrants sanctions, cybersecurity CEO says

The U.S. has the capability to retaliate against Russian hackers — and it probably should, one cybersecurity CEO said.

The FBI, CIA and some other intelligence officials have pinpointed Russian hackers as a source of interference in the 2016 U.S. presidential election. While U.S. president Barack Obama has called for a "thoughtful, methodical" response, simply "naming and shaming" Russia might not be sufficient, said George Kurtz, co-founder and CEO of cybersecurity firm CrowdStrike.

"I don't know that it's enough," Kurtz told CNBC's "Squawk on the Street" on Tuesday. "I think sanctions are warranted here."

CrowdStrike released some of the first research tying Russian intelligence sources to the hacking of the Democratic National Committee. WikiLeaks revealed more than 19,000 pages of hacked emails from the Democratic National Committee earlier this year, uncovering messages that seemed to dismiss Sen. Bernie Sanders and other details that ultimately prompted the resignation of DNC chair Debbie Wasserman Schultz.

Venezuela says to cut 95,000 bpd crude output in OPEC deal

Venezuela said on Tuesday it will cut 95,000 barrels per day of oil production in the New Year in fulfillment of a producers' deal to reduce global output and strengthen prices.

Jan. 1 marks the start of the pact by the Organization of the Petroleum Exporting Countries and several non-OPEC producers to lower production by almost 1.8 million bpd.

"Without prejudicing its international contractual obligations, from Jan. 1 2017, (state oil company) PDVSA and/or its subsidiaries will implement a reduction in the volumes of its main crude sale contracts, all in conformity with existing terms and conditions," the Energy Ministry said.

Venezuela, a price hawk within OPEC and one of the nations worst affected by a fall in crude revenue since mid-2014, currently produces just over 2.4 million barrels of crude and condensates per day, according to ministry data.

David Collum: We've Got A Recession Coming

Whether or not you've had time yet to plow your way through David Collum's excellent 2016 Year in Review, our annual podcast with Dave always brings additional color to light -- and this year's is no exception.

Any model based on an assumed 7.5% return is doomed. As you get low returns, our pensions get in trouble. And whenever the returns shoot above the norm they say "Well, this is excess." And they scoop it up. So every time they are above water they scoop it up. How? They stop contributing. They start using the money for other stuff. Think of a sine wave oscillating about the mean -- even if you guessed the mean correctly, if every time it is on the high side you skim it you'll never get the mean; and that's what the pension managers have done. And companies just stop contributing to pension plans and started calling the retained funds "profits", which causes equities to go up and makes the thing get out of whack.

We've got a recession coming, one of the full-blown kind. And I don’t know what will happen. My prediction is that it is going to be a bad one. But what a lot of people don’t realize is that is when things start unwinding, counter party risk kicks in and faulty business models start showing up as bad and they start collapsing.

All the accounting problems that built up behind the scenes so that the people cook the books to get their bonuses up and they made these crazy assumptions -- under the protective cloak of a recession, CEOs can get away with announcing anything because they say Hey, don’t look at me. It’s a recession. So they write down huge blocks of cost.

Will Trump continue to role back banking regulations?

Why “Princeton Math” Never Adds Up

How many times have you watched some talking head from either academia or government and thought “What they’re saying just doesn’t seem to add up?” Yet, you questioned your own gut reaction with far more intensity than you ever questioned the premise or statements made because of one simple factor: They have some form of “Ivy League” credential?

There was a time where this had some (and I use that term very loosely) form of validity. Today? It may prove to be an outright dangerous folly. Here are a just a few examples:

Whether you’re in business, or just trying to keep up with what the economy may, or may not, be doing as to help you in considerations about where you might, or might not, position yourself in business or employment. One of the once generally accepted gauges as to help in that formulation was the Unemployment rate, coupled with not only what type of employment was being created, but also, that which appeared to be resilient.

Doing this today in a cursory fashion might lead you down a path to disaster. Doing this coupled with listening to the once “Chairman of the Council of Economic Advisers” (2011 -13) and now residing at Princeton University may lead you to total economic ruin. For if you thought he knew what he was touting?

Hewlett-Packard's Split: The Massive Layoffs Have Paid Off

Once, Hewlett Packard Enterprise Company (HPE) and HP Inc. were part of the same company, the pioneer Hewlett-Packard. But since November 2015, they have been two separate publicly traded companies.

That’s the date when HP Inc. retained the printing and PC business divisions, while HPE retained the technology solutions divisions.

HP’s split into two separate companies fueled a great buzz in social media: layoffs, a lot of layoffs, and a lot of talk about efficiency, flexibility, and profit margins.

Now, there’s evidence that the split and the layoffs that have followed have improved margins for both companies—see tables. But they still have to improve revenues, and overall profits, as the innovation trait of the old HP has yet to return.

What the Fed Rate Hike Means for Your Money in 2017

Interest rates are going up, and the time to prepare yourself and your money is now. The Federal Reserve raised interest rates on December 14 for only the second time in a decade. You probably saw some headlines about mortgage rates or credit card costs and then went back to furious holiday preparation or clicked on another story about Donald Trump. After all, what’s a quarter point? Well, you have time to correct that mistake, but not a lot of it.

The announcement that should have caught your eye wasn’t about the Fed funds target rate ticking up from 0.5% to 0.75% (yawn). No, something much more dramatic happened that day. Federal Reserve officials said they expected three more rate hikes in 2017. And two or three in 2018 and three in 2019.

So let’s review: two rate hikes in a decade, three rate hikes in 2017. That’s news. So now we’re looking at a jump to 1.25% next year. While you probably shouldn’t fret about a 0.25% increase in car loan costs or even credit card rates, you should definitely be thinking about what a continuously rising interest rate environment might mean for you and your money.

Now is really the time to take stock of what you need your money to do for you in 2017 and make adjustments accordingly. There is no guarantee that rates will rise another 0.75% next year — Fed Chair Janet Yellen herself said the Fed would need to take a wait-and-see approach as President-elect Donald Trump implements his economic plan. But clearly Yellen was yelling to anyone who would listen that the price of money will be going up soon. You should listen to her.

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