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Tueday 06.28.2016

Former Fed President : The Fed should cut rates because of Brexit

Narayana Kocherlakota thinks the Fed is going the wrong way and Brexit proves it.

In a column on Bloomberg View Monday, the former Minneapolis Federal Reserve president said that instead of considering raising interest rates at their July meeting, the FOMC should cut rates instead. The reason? Brex

"Britain's vote to exit the European Union and the reaction in global markets offer important lessons for the Federal Reserve," wrote Kocherlakota. "It should be easing policy in the near term."

Kocherlakota said that the UK's decision to leave the European Union means that uncertainty will reign over markets for the foreseeable future. This can weigh on economic activity and employment, thus, the Fed should cut rates in order to support the labor market and shaky economy.

The Never-Ending Fiasco Of Fiat Money

Gold is Perfect Money. People want and need gold for all kinds of reasons—industrial applications, jewelry, investments, and, yes, even for monetary purposes. As malleable as this precious metal may be, the bottom line is that gold really is money. In fact, it’s the ultimate means of payment.

Former Federal Reserve chairman Alan Greenspan summed it best when he said in 2014: “Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.” History bears this out. Money has taken on many guises over the centuries, but precious metals have always been the preferred format, and gold and silver especially. And for very good reason: A medium of exchange has to have certain physical properties. It must be scarce, homogeneous, durable, mintable, portable, and it has be intrinsically valuable. That’s why we still say that something immensely valuable is worth its weight in gold.

Pardon the pun, but gold and silver fit the bill. Their high value per unit of weight is undeniable, and they are supremely money-like in all other respects. It’s no wonder that they have been market players’ go-to choice of money.

Gold was replaced by fiat money for political rather than for economic reasons. What, you may ask, is fiat money then? Well, the US dollar, the euro, the Chinese renminbi, the Japanese yen and the Swiss franc are all fiat monies. Fiat money is simply paper that has been made legal tender by government decree. All fiat monies have three things in common: For one, the state (or its agent, the central bank) has the monopoly on its production. For the other, it is produced by way of bank credit expansion; in other words, it’s literally created out of thin air.

Yellen cancels Portugal trip amid Brexit fallout

Janet Yellen has canceled a planned trip to Portugal this week amid international market instability resulting from the Brexit vote, a Federal Reserve official confirmed Monday morning.

Yellen, the central bank's chairwoman, was supposed to take part in a panel Wednesday with Bank of England governor Mark Carney at a forum hosted by the European Central Bank.

Instead, she will return to Washington following a meeting of the Bank of International Settlements in Basel, Switzerland, that took place this weekend. The Bank of International Settlements is an institution created for coordination between central banks.

Yellen and other Fed officials have been concerned about the effects of the United Kingdom's vote to leave the European Union, which has roiled foreign exchange, bond and stock markets. The Fed released a statement Friday in the immediate aftermath of the vote that it was "carefully monitoring" developments and prepared to act if necessary.

The Post-Brexit Meltdown

The End Game Of Bubble Finance——Political Revolt

During Friday’s bloodbath I heard a CNBC anchor lady assuring her (scant) remaining audience that Brexit wasn’t a big sweat. That’s because it is purportedly a political crisis, not a financial one.

Presumably in the rarified canyons of Wall Street, politics doesn’t matter much. After all, when things get desperate enough, Washington caves and does “whatever it takes” to get the stock averages moving upward again. Here’s a news flash. That’s all about to change.

The era of Bubble Finance was enabled by a political abdication nearly 50 years ago. But as Donald Trump rightly observed in the wake of Brexit, the voters are about to take back their governments, meaning that the financial elites of the world are in for a rude awakening.

To be sure, the apparent lesson of the first TARP vote when the bailout was rejected by the House in September 2008 was that politics didn’t matter so much. Wall Street’s 800 point hissy fit was all it took to prostrate the politicians. Indeed, the presumptive free market party then domiciled in the White House quickly shed its Adam Smith ties and forced the congressional rubes from the red states to walk the plank a second time in order to reverse the decision.

Time to Raise Cash and Buy Gold, Folks

If you were thinking this morning that it's become ridiculously tough to trade markets these days while waking up to the confounding disaster of the Brexit vote, you'd have my wild-eyed, amazed support.

While I've been negotiating markets, and not just oil markets, for most of my adult life, I just cannot compete against self-made economic disasters that no one in their right mind could see coming.

I remember the catastrophic warnings of the proposed government shutdown in 2013, with its promised missed U.S. Treasury payments, which thankfully never came to be. Of course, the argument then was that such an outcome of disaster from missed bond premiums was nothing more than egg-headed fear-mongering, touted by economists who had managed to get everything wrong about the financial crisis anyway.

Unfortunately for Britain and the rest of us, such egg-headed warnings are being currently played out, with a drop in the pound not seen since Reagan and a drop in European and our own stock markets not seen since the aforementioned crisis of 2008. Worse is the future warnings of ever more volatility, as other European nations measure whether to follow jolly old England out the EU door, destroying six decades of work of common markets for goods and labor -- and, incidentally, keeping the peace for more than 70 years. I saw the polls and while they looked fairly even for Brexit, I trusted in Ladbrokes odds (and my own disbelief at self-immolation) against Leave at 4-1 to assure me that my portfolio was safe on Thursday -- safe enough to not even need options protection.

Greenspan Calls Brexit a ‘Terrible Outcome’

U.K. policy makers miscalculated and made a “terrible mistake” in holding a referendum on whether to quit the European Union, in which voters opted to leave the bloc, former Federal Reserve Chairman Alan Greenspan said.

That decision led to a “terrible outcome in all respects,” Greenspan, 90, said in an interview with Bloomberg Surveillance on Monday in Washington. “It didn’t have to happen.”

The U.K. stunned the world last week after voting to leave the EU after more than four decades, a move that sent financial markets into turmoil. The pound on Monday extended its drop to touch the lowest against the dollar since 1985, while central bankers around the world have pledged to support liquidity.

It’s now likely that Scotland, whose majority of voters wanted to stay in the EU, will have another referendum on its own independence, Greenspan said. He predicted such a vote would be successful, and Northern Ireland would “probably” go the same way. Greenspan said he did not have sympathy for the idea that the U.K. would be better off outside the EU, despite the problems the bloc faces in a structure where countries with different economies and cultures share the same currency.

Chinese owned Waldorf Astoria hotel to convert rooms into condos

One of New York City's iconic hotels is slated to become condos. Chinese insurance company Anbang Insurance Group reportedly plans to convert as many as three-quarters of the Waldorf Astoria's rooms into condos, according to The Wall Street Journal. Hundreds of hotel jobs would be lost with the transformation, the newspaper said.

Anbang didn't immediately return a request for comment. The $1 billion redevelopment would mark a new era for the hotel, which opened in 1931 and whose construction was hailed by President Hoover as "an exhibition of courage and confidence to the whole nation." Situated on an entire city block on Manhattan's Park Avenue, the hotel became a byword for opulence and style, and has hosted celebrities such as the actress Grace Kelly and singer Frank Sinatra. Anbang bought the property last year for $1.95 billion.

Despite its place in American cultural history, the Waldorf Astoria has come under criticism from travelers who say the rooms are overdue for an upgrade. One reviewer on a travel site said he believed the hotel was "trading on its recommendation" and would urge fellow travelers to look elsewhere for lodging.

Converting the hotel into condominiums could help Anbang not only recoup its purchase price, but make a tidy profit as well. One analyst has estimated that a conversion to condos could raise as much as $4 billion in sales, the Journal noted.

This Will Push The Gold Market Over The Edge

This could be the year that the mainstream investor finally pushes the gold market over the edge. While a fraction of investors continue to acquire a lot of physical gold, the mainstream investor is the key to driving the gold market and price going forward.

Why? Because the diehard precious metal investors don’t have the sort of leverage as do the mainstream investors, which account for 99% of the market. I have stated several times in articles and interviews that it will be the surge of gold buying by the mainstream investor that will finally overwhelm the gold market.

This next chart shows just how much leverage the mainstream investor has on the gold market. When the Dow Jones Index fell a lousy 2,000 points during the first quarter of 2016, mainstream investors flooded into Gold ETF’s & Funds. This continued into the second quarter, including the surge in buying after the BREXIT “Leave Vote” this past Friday:

According to the data put out by Nick Laird at Sharelynx.com, total transparent global gold holdings increased nearly 20 million oz (Moz) since the beginning of 2016. Nearly half of that figure, 9.7 Moz (supposedly) went into the GLD ETF. This is an amazing amount of gold as it represents 41% of total global mine supply.

The United States Of Europe: Germany And France Hatch A Plan To Create An EU Superstate

If you believe that the Brexit vote is going to kill the idea of a “United States of Europe”, you might want to think again. In fact, it appears that the decision by the British people to leave the European Union is only going to accelerate the process of creating an EU superstate. As you will see below, one of the largest newspapers in the UK is reporting that the foreign ministers of France and Germany have drafted “a blueprint to effectively do away with individual member states”. So even though men like George Soros are warning that the eventual dissolution of the European Union is “practically irreversible” after the Brexit vote, the truth is that the globalists are not about to give up so easily.

For a very long time, advocates of increased European integration have dreamed of going all the way and creating a true “United States of Europe”, but Britain was always one of the stumbling blocks that stood in the way.

But now that Britain is out and there is great fear that the entire European project may be in jeopardy, there seems to be a rush to go for broke and try to complete the job of European integration. The Express is one of the biggest news organizations in the UK, and they are reporting that the foreign ministers of France and Germany already have a blueprint “to effectively do away with individual member states”…

The foreign ministers of France and Germany are due to reveal a blueprint to effectively do away with individual member states in what is being described as an “ultimatum”. Under the radical proposals EU countries will lose the right to have their own army, criminal law, taxation system or central bank, with all those powers being transferred to Brussels. Controversially member states would also lose what few controls they have left over their own borders, including the procedure for admitting and relocating refugees.

Some Bad And Some Worse News For Stock Buybacks

For those 17-year-old hedge fund managers used to BTFD on hopes corporate buybacks will "have their back" and provide the bid on which momentum-chasing HFT algos will piggyback, we have some bad news and some worse news.

The bad news is that we are entering yet another quiet period for buybacks. This means that for the next 45 days, the biggest - and supposedly only - buyer of stocks will be mostly out of the market, and bank buyback desks will not be able to provide much needed support during distressed (read: more sellers than buyers) times.

The worse news is that even without the buyback blackout period, following months of surging stock repurchasing activity by corporate treasurers...buybacks have now ground to a virtual halt.

According to TrimTabs, stock buyback announcements by U.S. companies have fallen sharply, sending a longer-term negative signal for U.S. equities. “Corporate America announced $2.8 trillion in stock buybacks in the past five years, and these buybacks have provided a key source of fuel for the bull market,” said David Santschi, chief executive officer of TrimTabs. “Corporate actions this year suggest this support is going to diminish.”

Brexit: Global Economic Fallout | Peter Schiff

Homeownership In The U.S. Has Plummeted, But Not By Choice

The U.S. housing market is bouncing back, but its recovery hasn’t done much for the millions of Americans who want to be homeowners. The homeownership rate is at its lowest in nearly 50 years, falling to 63.7 percent in 2015. It’s a “decade-long slide” that “is unprecedented in American history,” according to an annual report released Wednesday by Harvard University’s Joint Center for Housing Studies.

All those former homeowners had to go somewhere, and renters now make up a larger portion of households since the 1960s. The boom is part of what's driving the housing recovery, according to “The State of the Nation’s Housing," the report from JCHS.

Some of the rental demand might be attributed to factors like a renewed interest in city living, where renting is more prevalent, and larger demographic shifts, like people waiting longer to get married and have kids. But overall, surveys show that the housing crisis hasn’t changed the fact that Americans overwhelmingly own homes or want to, the report authors write.

The report says the housing market has substantially recovered, and points to encouraging signs for the near future as incomes, sale prices, construction and household growth increase. But while there were more home sales in 2015 than the previous year, there are still very few people buying.

US Customs wants to collect social media account names at the border

Your Twitter handle may soon be part of the US visa process. Yesterday, US Customs and Border Protection entered a new proposal into the federal register, suggesting a new field in which persons entering the country can declare their various social media accounts and screen names. The information wouldn’t be mandatory, but the proposed field would still provide customs officials with an unprecedented window into the online life of travelers. The process already includes fingerprinting, an in-person interview, and numerous database checks.

The proposal focuses on arrival / departure forms commonly collected from non-citizens at the US border, as well as the electronic form used for anyone entering the country under a visa waiver. Under the proposed changes, those forms would include a new optional data field prompting visitors to "please enter information associated with your online presence," followed by open fields for specific platforms and screen names.

It’s unclear from the proposal how thoroughly officials will examine the social profiles, although it’s clear they will be used for investigative purposes. "Collecting social media data will enhance the existing investigative process and provide DHS greater clarity and visibility to possible nefarious activity and connections," the announcement reads.

The public has 60 days to comment on the new proposal before it will be formally considered. Comments can be mailed to Customs and Border Protection at its Washington office.

Millennials Whine & Pine for BREXIT Do-Over

Why Japan will pay a big price for Britain’s vote to leave the E.U.

Britain’s decision to leave the European Union has sent stock markets and currencies across the globe somersaulting. But the changes are particularly pronounced and worrying in Japan, where Brexit has caused the yen to strengthen more than any other major currency and where the Nikkei 225 last Friday plunged more than any index outside of Europe, its worst drop in five years.

In the 24 hours after Brexit, Japan lost nearly the same amount of wealth as after the 2011 nuclear meltdown that threatened to leave a wide part of the country uninhabitable. (The Nikkei bounced back a little Monday, rising 2.39 percent.)

Last week’s British referendum vote created a surge of global uncertainty not seen since the 2008 financial crisis. But where many countries are most concerned about new trade barriers and political instability across Europe, Japan is bracing for the Brexit pain because of its currency, which tends to strengthen any time investors worry about the world’s path. And Japan, to put it bluntly, does not want a strong yen.

Countries typically have a degree of control over the value of their currencies. But there’s just one problem: Economists fear Japan is nearly out of tools to fight back and deflate the yen. The story of how the world’s third-largest economy arrived in such a vulnerable place is directly linked to its strategy over the past few years, when Japan — like many advanced countries — was using every last policy tool just to muddle along, in this case by keeping its currency as weak as possible.

European Banks Get Crushed, Worst 2-Day Plunge Ever, Italian Banks to Get Taxpayer Bailout, Contagion Hits US Banks

European bank stocks just experienced their worst two-day plunge ever in the post-Brexit fallout that rained down on the already blooming European banking crisis.

Healthy big banks would get over Brexit and the political turmoil it is spawning, particularly non-UK banks. But there are no healthy big banks in Europe. And non-UK banks are crashing just as hard, and some harder. This is about a banking crisis morphing into a financial crisis.

These bank stocks got crushed on Friday. And they got crushed again today. Italian banks have been reduced to penny stocks. Spanish banks are getting closer. Commerzbank, Germany’s second largest bank, and still partially owned by the German government as a consequence of the last bailout, is well on the way.

Deutsche Bank’s infamous CoCo bonds deserve a special word. These hybrid bonds that are just above equity on the capital totem pole had spiraled down, with the 6% CoCos hitting 70 cents on the euro in February. At that point, they and all other Deutsche Bank bonds were propped up by government verbiage and bank money. The bank ingeniously announced it would buy back its own bonds! Like all these transparent market manipulations, the market ate it up, and even the CoCo bonds jumped to 87 cents on the euro. But that didn’t last long. They have since lost 11.5%, including today’s 3.7% plunge to 77 cents on the euro.

Before Robots Rise Up, They’ll Make Your Pizza

In the back kitchen of the newest pizzeria in Mountain View, California, Marta works tirelessly, spreading marinara sauce on uncooked pies. She doesn’t complain, takes no breaks, and has never needed a sick day. She works for free.

Marta is one of two robots working at Zume Pizza, a secretive food delivery startup trying to make a more profitable pizza through machines. It’s also created special delivery trucks that will finish cooking pizzas during the journey to hungry customers if approved by the Santa Clara County Department of Environmental Health. Right now, Zume is only feeding people in Mountain View, but it has ambitions to dominate the $9.7 billion pizza delivery industry.

“We are going to be the Amazon of food,” said Zume’s co-founder and executive chairman, Alex Garden. Garden, 41, is the former president of Zynga Studios. Before that, he was a general manager of Microsoft’s Xbox Live. Garden launched Zume in stealth mode last June, when he began quietly recruiting engineers under a pseudonym and building his patented trucks in an unmarked Mountain View garage.

In September, he brought on Julia Collins, a 37-year-old restaurant veteran. She became CEO and a co-founder. Collins was previously the vice president and CEO of Harlem Jazz Enterprises, the holding company for Minton’s, a historic Harlem eatery. In October, Zume began working closely with Swiss robot maker, ABB, and a global crew of mechanical, electrical and software engineers. In April, the startup sold its first cyborg-constructed pie to an unsuspecting customer in Mountain View.

4th of July Fails - Americans Don't Know Why We Celebrate Fourth of July!

The Missing Men

Something is rotten in the U.S. economy. Poor men without a college degree are disappearing from the labor force. The share of prime-age men (ages 25-54) who are neither working nor looking for work has doubled since the 1970s.

The U.S.’s labor participation rate for this group of men is lower than every country in the OECD except for Israel (an outlier, because of the high number of non-working Orthodox Jewish men) and Italy (an economic omnishambles). Today, one in six prime-age men in America are either unemployed or out of the workforce altogether—about 10 million men.

So, this is the 10-million-man question: Where did all these guys go? According to a report from White House economists released last week, non-working prime-age men skew young, are less likely to be parents, are disproportionately black and less educated, and are concentrated in the South.

In the last few years, several writers and economists have suggested that many of them are in school, on disability, or in prison. More optimistically, some said that men are more likely to help their spouses with raising children and cleaning the house. But upon investigation, none of these answers fully explains the disappearance of prime-age men.

NEWS to Disturb the Comfortable...

We don't tell you what to think,

but we give you something to think about.