Atlanta Fed raises U.S. fourth-quarter GDP growth view to 2.9 percent
The U.S. economy is on track to grow at a 2.9 percent annualized pace in the fourth quarter following the latest data on inventory, spending, investments and net exports, the Atlanta Federal Reserve's GDP Now forecast model showed on Tuesday.
The latest fourth-quarter gross domestic product (GDP) estimate was higher than the 2.5 percent growth rate calculated on Dec. 22, the Atlanta Fed said on its website.
The forecast of the contribution of inventory investment to fourth-quarter growth increased to 0.73 percentage points from 0.35 percentage points following the U.S. Census Bureau's advance economic indicators release on Dec. 29, the regional central bank said.
On the other hand, it forecast a steeper 0.67 percent drag from net exports on fourth-quarter growth from a previous estimate of 0.25 percentage point based on the same release.
Ford Decision Cements Mexico as 'Front Line' for Trump's Policy Agenda
What happened in small-town Michigan Tuesday morning certainly didn't stay there. Ford Motor Co.'s announcement in Flat Rock that it would forego building a $1.6 billion plant in Mexico sent the peso tumbling along with shares in one of the country's major parts suppliers. Ford jumped, while Kansas City Southern - which generates 41 percent of its revenue south of the border - sank. The cost of insuring Mexico's bonds against nonpayment touched the highest level in almost three weeks.
That a relatively minor investment decision from a $49 billion auto giant roiled such a diverse set of assets underscores the tricky landscape investors must navigate in 2017 as Donald Trump prepares to take office. The president-elect's proclivity for policy declarations on Twitter has left most without a playbook as he opines on everything from China's currency to the F-35 fighter.
``It is going to be a choppy ride as the market and press get to understand the new administration's policy agenda," said Andrew Stanners, an investment manager at Aberdeen Asset Management, which has $11 billion in emerging-market debt including Mexican peso bonds. "Unfortunately for Mexico, it is on the front line."
The peso, which acted as a barometer of Trump's perceived odds during the U.S. campaign, fell the third-most in the world last year on concern that the new administration would renegotiate the North American Free Trade Agreement and curb illegal immigration by building a wall along the U.S.’s southern border. It reached a fresh low Tuesday, dropping 0.8 percent to 20.8904 per dollar following Ford's announcement at 11:03 a.m. New York time.
J.C. Penney Is Selling Its Headquarters for $353 Million
J.C. Penney has found a new way to chip away at its enormous debt load: selling its sprawling Plano, Texas campus for $353 million.
The retailer said on Tuesday it had sold its headquarters near Dallas along with 45 acres around it to Dreien Opportunity Partners but would lease back 65% of that space for its home office.
The move is the latest by Penney to clean up its balance sheet and lower a debt load that is out of proportion to the profits its main retail business generates. As of Oct. 29, 2016, the end of its most recently completed fiscal quarter, Penney had long term debt of $4.5 billion, a big improvement over the $5.15 billion a year earlier, but certainly enormous for a retailer expected to report annual sales of only $13 billion for the fiscal year ending at the end of this month.
"This transaction also represents a significant financial milestone for the Company, as proceeds from the sale give us the opportunity to reduce outstanding debt and make improvements to our workspace," Penney CEO Marvin Ellison said in a statement. CBRE Capital Markets represented Penney in the deal.
Oil prices hit highest level in 18 months
New York governor proposes free tuition at state colleges
Governor Andrew Cuomo wants to make free tuition a reality at New York's public colleges. Students whose families earn $125,000 or less would pay nothing for tuition at two- and four-year public colleges under the governor's plan.
It's similar to what Hillary Clinton proposed for public colleges across the country during her presidential campaign. Cuomo announced his proposal in Queens on Tuesday, alongside Senator Bernie Sanders who first advocated for free tuition during the 2016 presidential campaign.
"In this economy, you need a college education if you're going to compete," Cuomo said in front of a crowd at LaGuardia Community College. "It's incredibly hard and getting harder to get a college education today. It's incredibly expensive and debt is so high it's like starting a race with an anchor tied to your leg," he said.
Tuition at New York's state-operated colleges, which includes 64 SUNY campuses, is $6,470 at four-year schools and $4,350 at community colleges for the 2016-2017 school year. The City University of New York's 18 campuses have similar tuition costs and would also be included under Cuomo's plan. (Students would still be on the hook for additional fees, as well as room and board costs.)
Amazon now has 45,000 robots in its warehouses
The newspaper — based in the same city as Amazon's global headquarters — wrote last week that the ecommerce giant now has 45,000 robots across 20 fulfillment centres.
That's reportedly an increase of 50% on the same time the year before, when the company said it had 30,000 robots working alongside 230,000 people.
Amazon bought a robotics company called Kiva Systems in 2012 for $775 million (£632 million). Kiva's robots automate the picking and packing process at large warehouses in a way that stands to help Amazon become more efficient. The robots — 16 inches tall and almost 145kg — can run at 5mph and haul packages weighing up to 317kg.
When Amazon acquired Kiva, Phil Hardin, Amazon's director of investor relations, said: "It's a bit of an investment that has implications for a lot of elements of our cost structure, but we’re happy with Kiva. It has been a great innovation for us, and we think it makes the warehouse jobs better, and we think it makes our warehouses more productive."
Hard Brexit Could Create 400,000 Jobs, According to European Commission’s Own Figures
In addition, 387,580 jobs would likely be created. And although the majority of those would be in London and the South East, a substantial proportion would go to the regions, with the East of England picking up 33,000 jobs and the North West a likely further 36,000.
The report is something of a shot across the government’s bows from leading Brexiteers as it considers its negotiating position ahead of negotiations with the EU. There are concerns that the government will try to keep Britain within the customs union.
Although the foreign secretary, Boris Johnson, has previously said that Britain will “probably” have to leave the union, which sees tariffs on imports and exports set at an EU level, his comments were played down by Downing Street. Michael Gove, the former justice secretary and a founding supporter of Change Britain, said: “The UK has a prosperous future ahead of us if we leave the EU’s customs union and become a beacon of global free trade.
“As we strike new trade deals with the growing economies of the 21st century, it will create hundreds of thousands of jobs right across the country, strengthening communities throughout the UK and ensuring that everyone feels the benefits of economic growth. “But in order to achieve this we must take back control of our trade policy. Only then can we realise the full potential of this great trading nation.”
Uncle Sam Can't Even Manage The National Debt Right--And That Will Cost You Lots Of Money
In an era of epic economic malpractice, one operation that has received scant attention is the U.S. Treasury Department's mismanagement of the national debt. With interest rates abnormally low--thanks to their suppression by the Federal Reserve--you'd think Uncle Sam would go heavy on the issuance of long-term bonds to lock in ultralow costs. It wasn't so long ago that a 30-year Treasury bond would routinely yield more than 7% instead of what it has paid recently: less than 3%.
But the geniuses at Treasury shortened the average duration of government debt to five years. This was a short-term expedient, artificially cutting the cost of financing the debt and thereby freeing up more money for wasteful domestic programs. The move was all too typical of the Obama regime in all facets of its governance. (The most egregious example of this destructive myopia was Obama's precipitous withdrawal of U.S. forces from Iraq in 2011 in order to bolster his reelection chances. Look, America, Obama proclaimed, the war on terror is winding down, and we've won. But the reality was that our painful victory over Islamic terrorism in Iraq was thrown away. In the ensuing vacuum ISIS emerged.)
Interest rates are moving up. If the bulk of Donald Trump's tax, health and regulatory proposals come to pass, the U.S. economy will genuinely expand again; demand for credit will grow, as will the cost of gaining access to it. Washington's interest outlays will mushroom in the years ahead.
Thankfully, there's still time to issue significant amounts of long-term bonds with historically low costs. In fact, we should follow the examples of other countries that have issued debt with really long maturities. Economic guru Larry Kudlow suggests that Uncle Sam auction off bonds with 100-year maturities. If Mexico, Ireland and Belgium can pull this off--and they have--so can we. Austria issued one for 70 years, and Britain floated a number of issues with maturities of 40 to 50 years.
Expect more store closings despite big holiday sales
In a sign of how dramatically the landscape is changing when it comes to shopping, experts say don't expect any let up in store closings in 2017 just because retailers just had biggest growth in holiday sales in five years.
Consumers finally opened their wallets, making purchases on everything from toys to apparel. But a record amount of the spending for the season went to online sellers. And when the droves eventually showed up in stores, much of the foot traffic was driven by discounting.
Promotions are great for shoppers, but not terribly profitable business for those who own traditional stores. "This was a fantastic shopping season, but for many department store and apparel retailers, this was a very challenging holiday," says Steven Barr, retail consumer leader for consultants PwC. "I anticipate we will see significant numbers of store closures."
Macy's, for instance, has already announced it will close about 100 stores in 2017 -- and is yet to specify the locations. The closings will amount to about 15% of Macy's 675 full-line locations. Other department store chains may follow suit.
Elites Don’t Need to Ban Cash to Eliminate It
It’s a new year. And the war on cash opens on a new front… India launched a major offensive in November when it banned the most widely used bank notes. Chaos was the result. And now… Greece is launching its latest offensive against cash…
This offensive amounts to a “soft” ban on cash. Greece may not seem important. But beware… this “soft” cash ban could be a model for the advanced economies… The Greek news site, Keep Talking Greece, reports that as of Jan. 1, Greek taxpayers will be required to make a minimum amount of purchases with credit or debit cards. Here’s the deal:
If you’re Greek and make less than 10,000 euros, you’ve got to make 10% of your payments with plastic. Make up to 30,000 and that number rises to 15%. Over 30,000 and it rises to 20%.
And if you don’t play by the rules? Enjoy that 22% penalty. Say you make 50,000 and you’re required to spend 10,000 digital. But you only spend 5,000 digital. Your penalty would be 22% of that 5,000 you didn’t spend — 1,100 euros.
Starbucks could top McDonald’s as most valuable restaurant chain with 50,000 locations: analyst
Starbucks Corp. is poised to overtake McDonald’s Corp. as the world’s most valuable restaurant chain, and the coffee giant could ultimately have a staggering 50,000 locations.
That’s the prediction of Nomura analyst Mark Kalinowski, who named Starbucks his top restaurant stock for 2017 in a report on Tuesday. He estimates that the company will increase its worldwide restaurant count by 8.4 per cent this year and boost same-store sales by more than 5 per cent.
There’s more room for growth in the beverage industry — and less competition — giving Starbucks an edge over McDonald’s and other more food-focused rivals, Kalinowski said. The coffee chain’s new upscale Reserve brand also could eventually generate US$3 billion in sales, helped by pricier drinks.
“It is only a matter of time before Starbucks overtakes McDonald’s as the largest market cap restaurant stock, although likely not in 2017,” he said. Starbucks’ stock is coming off a weak 2016. It fell 7.5 per cent last year, dragged down by concerns about slowing growth. Chief Executive Officer Howard Schultz also announced plans to step down, giving jitters to investors.
Ford CEO on Trump tweeting at companies
Harry Dent: Market Bubble Could Start to Burst Mid-Year
Economist Harry Dent, who has been skeptical on the multi-year bull market, said the current rally—deemed by many as the “Trump rally”—should extend even further. “This rally is real. It was a technical breakout—what I call a ‘fifth wave’ or a ‘blow off rally,’ Dent told the FOX Business Network.
Dent, who believes there is currently a bubble, sees the market reaching a top around July 2017, with the Dow hitting 22,000, possibly rising even more. The economist said come mid-year, that bubble could start to burst.
“What happens if that is a fifth wave kind of peak like this that I’ve been looking for, for a long time, the first wave down in most bubble bursts in history—the first move down is 40-45% in two and a half to three months,” he said.
Though Dent notes that many have confidence in President-elect Trump’s ability to turn around the economy and promote growth, he still isn’t buying into the idea.
Consumer Financial Protection Bureau fines TransUnion and Equifax for deceiving consumers with their marketing
The Consumer Financial Protection Bureau revealed in a press release on Tuesday that it is not only fining TransUnion but Equifax as well for deceiving consumers in marketing credit scores and credit products.
Chicago-based TransUnion and Atlanta-based Equifax are two of the nation’s three largest credit reporting agencies. The other top credit reporting agency is Experian. According to the bureau, it took action against Equifax, TransUnion, and their subsidiaries for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers.
The bureau also asserted that the companies lured consumers into costly recurring payments for credit-related products with false promises. As a result, the two companies must pay a total of more than $17.6 million in restitution to consumers, and fines totaling $5.5 million to the CFPB.
Broken up, TransUnion must provide more than $13.9 million in restitution to affected consumer and $3 million to the Bureau’s civil penalty fund. Equifax must provide almost $3.8 million in restitution to affected consumers and pay $2.5 million to the Bureau’s civil penalty fund. Both were also ordered to truthfully represent the value of the credit scores they provide and the cost of obtaining those credit scores and other services.
Toyota lays off 650 workers as it prepares to shutter northern Kentucky headquarters
Toyota has laid off 650 employees in its Northern Kentucky facility, the latest step in what the company says is a reorganization of its operations. The Japanese auto giant is moving from its Erlanger, Kentucky, facility and relocating to Plano, Texas, according to Dayton Business Journal.
'The Company anticipates that it will permanently cease all operations at its Erlanger, Kentucky facilities by the end of 2017,' Toyota officially informed the state of Kentucky on Tuesday.
'The relocation of Toyota Motor Engineering & Manufacturing's operations to Plano, Texas, will affect approximately 648 employees, who will be subject to either job relocation or employment termination.'
The corporate reshuffle is part of the company's plans to consolidate its North American operations.While Erlanger, a suburb of Cincinnati, will lose vital revenues from one of its biggest taxpayers, Toyota says that it will continue to do philanthropic work in Kentucky.
Keiser Report: Predatory Promises
China Introduces Yet Another Round Of Capital Control Measures
Chinese policymakers have added yet another round of capital account control measures this week as they try to stem the accelerating capital flight out of the country. On the last day of 2016, China’s State Administration of Foreign Exchange introduced a new round of regulation on information reporting of individuals’ foreign exchange. While the $50,000 limit has not been reduced (yet), individuals are now required to produce a more detailed description of what the funds will be used for after exchange.
Individuals are now required to give more detailed proof of their activities falling under the approved areas: tourist travel, education, business travel, visiting relatives, medical treatment, imports of goods, buying non-investment insurance products and consultation services.
“There are several aspects in the new reporting. First, more details are required and individuals should be clear about their legal responsibilities before reporting. Under the new reporting system for individuals, they will only be allowed to buy FX for the purpose of tourist travel, education, business travel, visiting relatives, medical treatment, import of goods, buying non-investment insurance products and consultation services. Second, banks should strengthen their compliance checks and report suspicious transactions, or they will be punished. Third, spot checks will be conducted and people on the focus list will be punished by restrictions on forex transactions, money laundering investigations and so forth.” — Credit Suisse
Analysts at Credit Suisse believe these regulations are mainly designed to curb flows to Hong Kong-based financial institutions, primarily insurance companies, and the Macau gaming sector. Both of these are routes that have been regularly cited as being the primary methods of getting capital out of China.
Do We Trust Autonomous Technologies With Our Lives?
In 2016, self-driving cars went mainstream. Uber’s autonomous vehicles became ubiquitous in neighborhoods where I live in Pittsburgh, and briefly in San Francisco. The U.S. Department of Transportation issued new regulatory guidance for them. Countless papers and columns discussed how self-driving cars should solve ethical quandaries when things go wrong. And, unfortunately, 2016 also saw the first fatality involving an autonomous vehicle.
Autonomous technologies are rapidly spreading beyond the transportation sector, into health care, advanced cyberdefense and even autonomous weapons. In 2017, we’ll have to decide whether we can trust these technologies. That’s going to be much harder than we might expect.
Trust is complex and varied, but also a key part of our lives. We often trust technology based on predictability: I trust something if I know what it will do in a particular situation, even if I don’t know why. For example, I trust my computer because I know how it will function, including when it will break down. I stop trusting if it starts to behave differently or surprisingly.
In contrast, my trust in my wife is based on understanding her beliefs, values and personality. More generally, interpersonal trust does not involve knowing exactly what the other person will do – my wife certainly surprises me sometimes! – but rather why they act as they do. And of course, we can trust someone (or something) in both ways, if we know both what they will do and why.