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Thursday 02.02.2017

No Fed rate hike in first meeting of Trump era

America's central bank didn't raise its key interest rate Wednesday at the end of its two-day meeting. The decision was widely expected by investors and economists. Fed officials are committed to raising interest rates slowly. The Fed said in a statement that it "expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace."

But President Trump's policies may force the Fed to move faster. Trump's plan for a major infrastructure bill could ramp up demand for U.S. goods. That could quickly push up inflation, which has been sleepy in recent years. Faster inflation means a faster pace of rate hikes. Right now the Fed is forecasting three rate hikes in 2017. It raised rates once each in 2015 and 2016 -- the first rate increases in a decade.

If the Fed starts raising rates faster, that would affect millions of Americans seeking home mortgages, auto loans and paying off credit card debt. It could also trigger volatility in global financial markets -- investors expected "slow and steady" for years. Any surprise from the Fed likely would not go over well. Trump and Republicans may force the Fed's hand in other ways.

Trump is mulling a 20% tax on Mexican imports to pay for the border wall. Trade experts say goods imported from Mexico -- from cars to avocados -- would become significantly more expensive, triggering inflation.

The Federal Reserve has squandered an opportunity, former Dallas Fed advisor says

If the Federal Reserve wants to hike rates three times this year, as it has said it wants to do, it needs to get moving soon, a former advisor to the Dallas Federal Reserve told CNBC on Wednesday.

In fact, she believes the central bank should have been stronger in its statement on Wednesday to prepare investors for a possible increase during its next meeting in March.

"In order for them to really move the needle on expectations for March, Janet Yellen herself is going to have to come out in the next few weeks and be much, much more hawkish," Danielle DiMartino Booth said in an interview with "Power Lunch."

"I think they squandered this opportunity." At the conclusion of its two-day meeting on Wednesday, the Federal Open Market Committee said it is not raising rates, but noted that optimism is growing among the business community and consumers. It also said it expected inflation to rise to 2 percent.

ADP Payrolls Strength Supports Trump Bump and Higher Labor Department Expectations

If economists and investors were looking for confirmation that the post-election rally was going to turn into real growth in economic readings, look no further than the January ADP Employment Report. January’s payrolls grew by a whopping 246,000, according to that report.

Bloomberg had a consensus estimate of 168,000, and its Econoday range was only 160,000 to 185,000. So payroll growth was sharply higher than every single economist and pundit was calling for. Also, December’s payrolls were revised down to 151,000 from 153,000 initially reported.

To further put this large jobs growth in perspective: the last reading from ADP that was this high was the 261,000 seen in June of 2016 and the 303,000 from December of 2015.

Some investors and economists will point out that this only confirms strong jobs trends for what will come from the Trump pro-growth policies. Others will discount any ties to new expected policies that have yet to unfold and come into play. Despite how each side feels on that notion, that disparity is what makes an economic and financial ball game.

U.S. Steel CEO On Job Creation

Greece Back In The Headlines As Debt Set To Balloon

After a few months of relative calm, Greece is back in the headlines as the country moves towards another showdown with its bailout creditors. Greece’s new troubles come after a report from the IMF suggesting that a Greek debt could explode to 275% of GDP by 2060 was leaked to the press. After the leak, yields on Greek short-dated bonds spiked 300 basis points on Monday putting them on track for their biggest one-day jump since July 2015, while 10-year bond yields rose to their highest in almost three months.

Despite this latest wobble from Greece, the Eurozone as a whole appears to be in recovery mode. Data published over the past two days shows the Eurozone economy is growing and unemployment is falling rapidly. On Tuesday, European Union statistics agency Eurostat said inflation across the 19 country bloc jumped to an annual 1.8% in January while economic growth inched up to 0.5% for the fourth quarter, and 1.7% for 2016 as a whole. Unemployment across the region fell to 9.6%, the lowest unemployment rate since May 2009.

But it seems these economic improvements do not extend to basketcase Greece. The country’s debt, which is around 180% of GDP at present, shows no sign of being brought under control and current rates the new IMF report suggests the country’s financing needs will represent 62% of GDP by 2060.

Greece and its creditors are currently locked in refinancing discussions with the IMF and Greece’s euro area creditors demanding the country introduce a law triggering austerity measures if the country fails to maintain a budget surplus before interest payments of 3.5 percent of GDP. Greek Finance Minister Euclid Tsakalotos last week rejected that demand as “unacceptable.”

Identity Theft Hit an All-Time High in 2016

Despite years of battling by the financial industry and a massive change in the way Americans use debit and credit cards, the rate of identity theft soared during 2016, a new report has found. In fact, it hit an all-time high.

An estimated 15.4 million consumers were hit with some kind of ID theft last year, according to Javelin Strategy & Research, up from 13.1 million the year before.

The report begins ominously: “2016 will be remembered as a banner year for fraudsters, as numerous measures of identity fraud reached new heights.” Fraud losses totaled $16 billion, the report found.

About 1 in every 16 U.S. adults were victims of ID theft last year (6.15%) — and the incidence rate jumped some 16% year over year. This despite 2016 being the first full year that brick-and-mortar retailers were forced to accept more secure EMV chip cards or face liability consequences.

Stocks to Decline Without Quick Tax Reform

President Donald Trump’s honeymoon period with investors is ending as the tax cuts and regulatory changes he promised during the election get pushed aside by worries over immigration and national security.

Larry Kudlow, a Newsmax Insider and economist who advised the Trump campaign, said the administration needs to get back to work on reforming the tax code or stocks and the economy may suffer.

“If you don't get the business tax cuts until late in the year, I think it's going to damage the stock market,” he said in an interview on CNBC. “It's going to damage the economy because people are going to postpone activities.”

Stocks are showing signs of stalling out. After rising about 7.5 percent to record highs after the election, the S&P 500 this week fell back to levels first reached six weeks ago. Trump's order last week to temporarily ban refugees and immigrants from seven Middle Eastern countries was criticized by foreign leaders and politicians from the Democratic and Republican parties, while his supporters approve of the measure, according to Time magazine. In response to former President Barack Obama's criticism, The Wall Street Journal's editorial page said, "Syrian refugees became a global crisis in large part because Mr. Obama did almost nothing for five years as President to stop the civil war, much less help refugees."

FedEx CEO: America's Infrastructure Is Deteriorating

Federal Reserve Policy: The Cash Menagerie

“Yes, I have tricks in my pocket, I have things up my sleeve. But I am the opposite of a stage magician. He gives you the illusion that has the appearance of truth. I give you truth in the pleasant disguise of illusion.”

The next time you happen to find yourself at 111 West 44th Street in New York’s theater district, make it a point to gaze up at the haunting image of the illuminated sign for The Glass Menagerie, the play that launched the career of America’s greatest playwright. Maybe you too will recall the unsettling opening lines written in 1944 by Tennessee Williams, spoken by his protagonist, Tom Wingfield. Tom’s words promised to deliver the sort of truths few of us covet, though the play’s entertainment value has clearly withstood the test of time.

If you’re of the rip-the-Band-aid-off philosophy on facing life’s unpleasant realities, pivot on your heel and look across the street, to 110 West 44th Street. Your eyes will be immediately drawn to the less mesmerizing, but equally inescapable, signage gracing the edifice of that building, the U.S. debt clock, that live, unrelenting tally that is marching towards $20 trillion, be we all damned. One must wonder if Broadway’s denizens see the theater in having these two facades stare one another down, as if taunting the other to wax more fatalistic.

This week, Federal Reserve policymakers will release a policy statement that paints an illusion of prosperity in cold monetarist verbiage that feigns the appearance of truth. The doves’ message will be uncharacteristically hawkish. They will flap their wings about accelerating underlying growth and inflation. They will allude to the time being upon us to normalize interest rates, to come in from a long, brutal winter of artifice.

$1.5 billion airport hub, Amazon is closer to having its own parallel transport infrastructure

The breezy 2016 strategic plan of the Cincinnati/Northern Kentucky International Airport features a quote attributed to Abraham Lincoln: “The best way to predict your future is to create it.” Amazon appears to have taken that to heart.

The mammoth online retailer this week announced it will build a hub for close to $1.5 billion at the airport—which is based in the American midwest—as an investment to serve the growing fleet of Prime Air cargo planes it unveiled last year. Its new air cargo hub will help Amazon quickly scoop up and deliver goods goods from 11 nearby warehouses and distribute them across the US.

The hub is the latest sign that Amazon is collapsing the supply chain that gets the millions of goods it sells on its website to consumers—a strategy that can reduce Amazon’s shipping costs, payments that often end up in the hands of traditional shipping companies, like FedEx and United Parcel Service.

Amazon late last year made its first drone delivery, 13 minutes after the order was placed. It isn’t yet clear how drones deliveries could become viable in big cities, but Amazon, is still prepping for a future where unmanned drones drop items off to customers. In 2016, the US government awarded it a patent for a floating, Zeppelin-like warehouse that spits out delivery drones.

US auto sales seen lower in January

U.S. auto sales appear to have lagged in January, although the slowdown could be temporary.

January is typically the weakest month of the year for U.S. auto sales. But strong consumer confidence, low gas prices and good deals on new vehicles should help sales speed up once the weather warms and buyers get their tax refunds. While sales aren't expected to top last year's record of 17.55 million, they're still expected to come in at historically high levels.

One X-factor is President Donald Trump. Promised tax cuts and infrastructure spending could increase demand for new vehicles. But his threatened taxes on vehicles imported from Mexico could make some new cars more expensive. Mexico imported nearly 2 million vehicles to the U.S. last year.

"If prices go up there has to be some sort of impact," said Alec Gutierrez, an analyst with Kelley Blue Book. "This is a price-sensitive industry." Sales at General Motors, which sells the most vehicles in the U.S., fell 3.8 percent from last January, while Ford's sales were down 1 percent. Toyota and Fiat Chrysler both saw 11-percent declines. Nissan's sales rose 6 percent thanks to strong truck and SUV sales, while Volkswagen's sales jumped 17 percent as the sting from its diesel cheating scandal began to fade.

The "war on cash" heats up in the EU

Obamacare Is A Terrible Jobs Progam

As congressional Republicans embark on their promise to repeal and replace President Obama’s signature Affordable Care Act, they are being overwhelmed by claims that imply it’s a jobs program. Scholars affiliated with the Milken Institute School of Public Health at George Washington University estimate Obamacare repeal would kill 2.6 million jobs by 2019. Almost a million jobs would be lost from health services, while the balance would be lost in construction, real estate, retail, finance, and insurance. - See more at: http://healthblog.ncpa.org/obamacare-is-a-terrible-jobs-progam/#sthash.3MaYPWBK.NDlb25hH.dpuf

Unfortunately, such research relies on the so-called “multiplier effect,” a politically seductive but misleading type of voodoo economics. It goes like this: Obamacare throws money at hospitals, doctors’ offices, and other health services. Those recipients build new facilities and hire more workers, who spend their paychecks in their communities. It is the same kind of research that developers seeking taxpayer-subsidized stadiums commission – and it is meaningless. - See more at: http://healthblog.ncpa.org/obamacare-is-a-terrible-jobs-progam/#sthash.3MaYPWBK.NDlb25hH.dpuf

If Congress just sent a fleet of helicopters to scatter banknotes from the sky, the same “multiplier effect” would take place: people would pick the money up and spend it. Businesses located near the drop zones would profit, hire, and expand. However, jobs and the economy would not grow, because the effect would be a mix of inflation and reduced spending in areas away from the drop zones. - See more at: http://healthblog.ncpa.org/obamacare-is-a-terrible-jobs-progam/#sthash.3MaYPWBK.NDlb25hH.dpuf

Worse, because this type of spending is politically motivated, it is usually demanded by industries which resist productivity improvements. Last July, Dr. Bob Kocher, a venture capitalist who served as a special assistant to Obama when Obamacare was crafted, lamented that just over half of health service workers are administrators, up from just over one third before Obamacare. - See more at: http://healthblog.ncpa.org/obamacare-is-a-terrible-jobs-progam/#sthash.3MaYPWBK.NDlb25hH.dpuf

Wells Fargo Scandal Blocks Severance Pay for Laid-Off Workers

For more than 400 employees recently laid off by Wells Fargo, the aftermath of the bank’s scandal over sham accounts has had an unexpected consequence: The bank is prohibited from paying the severance it owes them.

In mid-November, Wells Fargo’s federal regulator, the Office of the Comptroller of the Currency, imposed additional restrictions on the troubled bank. The rules, part of which are intended to curb golden parachute packages, limit what payments Wells Fargo is permitted to make to terminated employees without explicit regulatory approval.

Routine severance pay is sometimes exempted from such restrictions, but the federal rules for golden parachute pay are complex, and Wells Fargo’s severance plan is not eligible for the exemption, according to Diana Rodriguez, a bank spokeswoman.

Former employees at all levels of the company, from rank-and-file branch workers to corporate executives, are affected by the hold. Wells Fargo’s severance packages typically run from six weeks of pay to as long as 16 months, depending on the employee’s length of service.

IBM: Blockchain good for governent services

Nine in 10 government leaders worldwide predict they will be using blockchain by 2020, but a small group of trailblazers expects to start using the digital ledger technology this year, according to a new survey.

Overall, the survey shows North America is lagging behind global levels of blockchain adoption in four key areas where the trailblazers are leading: citizen services, regulatory compliance, identity authentication and contract management.

The Economist Intelligence Unit surveyed 200 government executives in 16 countries about their experiences and expectations with blockchain technology.

The survey’s sponsors, the IBM Institute for Business Value, blogged about the results this week, and published them in full in a report entitled “Building trust in government — Exploring the potential of blockchains.” “To our surprise, 14 percent of government organizations surveyed expect to have blockchains in production and at scale in 2017,” the report states.

Bix Weir-Trump Will Crash System then Rebuild

Here's How Many People Were Actually Affected By Trump's EO

While the liberal media and slews of anti-Trump protesters were freaking out on Saturday over President Trump’s executive order on immigration, customs officials were busy dealing with the actual situation on the ground at U.S. airports.

It was widely reported by the news media that approved visa holders, legal permanent residents and foreign-exchange students were being held up at airports across the country, all thanks to Trump’s so-called “Muslim ban” that put a temporary hold on refugees admitted from a select few Middle Eastern nations. According to the avalanche of left-leaning articles and hyperbolized news reports, you’d think refugees were standing at the doors to our airports and banging on the windows to be set free, or that every person with a headscarf was exiting the plane only to be shot on sight.

But in all the media hype surrounding the EO and its admittedly butchered rollout, just how many people were actually affected by the initial confusion?

Well, according to a Monday report published by U.S. Customs and Border Protection, a relatively few. CBP reported customs officials recommended a denial of boarding for 721 people following the executive order. Additionally, DHS granted 1,059 waivers to legal permanent residents who returned to the United States during that time. Another 75 visa holders were granted waivers. In all, only 1,855 people had been directly affected by the EO’s chaotic implementation as of Monday.

Americans are making big compromises to buy homes

Limited housing supplies are forcing prospective homeowners to make significant compromises, such as devoting less money to saving for emergencies and retirement, a new survey says.

According to a study commissioned by Owners.com, an online brokerage, about 60% of consumers said saving for a home takes priority over saving for an emergency, or retirement and 72% said it would limit their contributions to other investment funds.

Although most consumers prioritize home ownership, the lack of affordability is a cause for concern. According to the survey, 69% of consumers fear not having enough cash for the down payment. Besides cutting back on other savings, the survey respondents are willing to downsize their dream homes:.51% would consider buying a fixer- upper, while 36% are willing to purchase a smaller home than what they prefer.

"Constrained inventory in many areas and climbing rents, home prices and mortgage rates means it's not getting any easier to be a first-time buyer," said Lawrence Yun, chief economist of the National Association of Realtors. "It'll take more entry-level supply, continued job gains and even stronger wage growth for first-timers to make up a greater share of the market."

More Than Half of the Internet’s Sales Growth Now Comes From Amazon

Amazon continues to dominate the Internet. The online retailer captured 53% of online sales growth in the U.S., according to new data from Slice Intelligence. Amazon's e-commerce success is up from 40% in 2015, the Slice report said, a time when the company also accounted for 43% of all online revenue.

Electronics like Amazon Echo and other products have helped the company grow significantly, while the company also managed to stay on top thanks to its shipping speed, Slice found. As of December, Amazon packages delivered in an average of 3.4 days, beating out the average of 5.6 delivery days from other online services.

"Amazon maintains an obsessive focus on removing every pain point from the buying process. This is clearly exemplified with its Prime program, with free, reliably quick shipping,"

Slice principal analyst Ken Cassar wrote in a blog post. "While the rest of the market is investing to get our packages to us faster, Amazon still maintains a significant lead."

Airbus Is About To Build A Self-Flying Electric Robo-Taxi

If you think self-driving cars are futuristic, imagine them flying overhead. That's what European aerospace titan Airbus has done in designing its Vahana electric, autonomous plane, which can fly a single passenger on trips of around 50 miles, getting there about twice as fast as by car.

Airbus teased two possibilities for the Vahana on December 14: an electric helicopter and a plane with wings that tilt up to enable vertical take off and landing, or VTOL. After its engineers ran the numbers on both types, Airbus today announced that it's building a prototype of the sci-fi looking tilt-wing plane, which will begin test flights before the end of the year. "The vehicle is being built. Parts are being made as we speak," says Airbus chief engineer Geoffrey Bower.

Don't spend too much time fantasizing about your first ride in such an aircraft just yet, though. The company's goal is to get air taxis in service in about 10 years, possibly partnering with ride-hailing companies like Uber. "We would love to see what that kind of partnership might evolve into," says Maryanna Saenko of Airbus Ventures.

The Vahana (named for the creatures that Hindu gods ride upon) looks far different from other small planes because it has to fly straight up and down to fit tight urban landscapes without runways. It achieves that with two sets of wings—one sprouting from the craft's nose and one from the tail—which tilt up about 90 degrees to a vertical position. The wings carry eight propellers in total, making the Vahana look like a forest of helicopters on ascent and descent. The wings rotate level for flight, providing the extra lift that lets the plane travel more than twice as far as the competing helicopter design Airbus was considering. (The Vahana will also have a parachute to bring the whole plane down gently in case of an emergency.)

Alert: U.S. Bacon Reserves Hit 50-Year Low Because We Just Can’t Stop Eating Bacon

Crispy, crunchy, fragrant, savory — it’s no mystery that Americans love our bacon. But we’re eating so much of it lately that our nation’s bacon reserves — yes, that exists — are at their lowest levels in 50 years.

According to the Ohio Pork Council, a non-profit out of Columbus, the demand for frozen pork belly, which is often made into bacon, is outstripping supply because pig farmers just can’t keep up.

“Today’s pig farmers are setting historic records by producing more pigs than ever,” Rich Deaton, president of the organization, tells USA Today. “Yet our reserves are still depleting.”

As USA Today puts it, “There are literally not enough little piggies going to market.” In Dec. 2016, America’s frozen pork belly inventory stood at 17.8 million pounds, which is the lowest it’s been since 1957 according to the U.S. Department of Agriculture.

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