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Friday 01.06.2017

M.D. Anderson Cancer Center to cut 1,000 jobs in Houston

The University of Texas M.D. Anderson Cancer Center announced Jan. 5 that it plans to eliminate roughly 1,000 jobs, or 5 percent of its workforce, through layoffs and retirement. The cuts are expected to save the institution around $120 million a year, or $10 million a month, M.D. Anderson officials said at a press conference.

Between 800 and 900 jobs will be cut, officials said, and the institution plans to eliminate the remaining 100-200 expected job cuts through attrition and retirement. Of the total 1,000 jobs being eliminated, roughly 120 employees in managerial, leadership or VP roles will be affected, officials said. No clinical faculty will be affected by the cuts. All of the affected jobs are in Houston.

"We primarily focused on those areas where we could make staff reductions, re-engineer administrative support, and not impact quality of patient care," officials said at the conference.

M.D. Anderson has a workforce of roughly 20,000 employees and is one of the largest employers in Houston. The institution's financial woes started when it rolled out a new electronic health records system in March. The nonprofit cancer hospital anticipated the system would create an initial loss in productivity as the users — physicians and mid-level clinicians — started using the system. To combat that, the institution bolstered its cash reserves and staffed additional contractors and part-time personnel to create a smoother transition, M.D. Anderson CFO Dan Fontaine told the Houston Business Journal in December.

If the unemployment rate included everyone who says they want a job, it would be nearly double

Along with GDP growth, the unemployment rate is the most recognized economic statistic in the United States. It’s too bad it is so misleading.

“The unemployment rate declined to 4.6 percent in November…” are the very first words of the Bureau of Labor Statistics’ news release about the November 2016 survey data. That must seem incredibly wrong to many Americans. And that is because it is, in fact, not true that 4.6% of Americans who want a full-time job don’t have one. The unemployment rate is something more specific and less meaningful.

As measured by the BLS, the unemployment rate is defined as the percentage of unemployed people who are currently in the labor force. In order to be in the labor force, a person either must have a job or have looked for work in the last four weeks. A person only needed one hour in the prior week to be considered employed.

This leaves out a ton of relevant people. According to the November 2016 data, over 5.5 million Americans said they want a job, but don’t have one, and are not considered a part of the labor force. If these people were included in the unemployment rate, it would jump to 8.2%. The BLS is not attempting to be deceptive. These folks are left out of the calculation because more than half of them have not done anything to find work in more than a year. Another 10% of this group say they are not available for work at the moment.

The Biggest Central Bank Experiment Ever Failed The Average Joe/ Jane

Global central bank policies left investors starving for yields in 2015 and 2016 and looking for returns in some unorthodox places in an attempt to garner more than just tiny single digit returns. Then voters cast their ballots in favor of change, both in the U.S. with the election of Donald Trump and in the U.K. with the Brexit vote. Despite the votes for change, 2017 could be another year of measly single-digit returns, however, as it will take the world’s central banks some time to change their policies.

Michael Cembalest of JPMorgan said in his “Eye on the Market Outlook 2017” that diversified investment portfolio proxies returned only 1% to 3% in 2015. Although this improved to between 6% and 7% in 2016, he doesn’t expect a break into the double digits this year.

He defined the “unorthodox” central bank policies over the last couple of years as “the biggest experiment in central bank history,” amounting to $11 trillion through November. He said that although those policies did help employment in the U.S. and the U.K. recover, they broadly failed the average citizen. Instead, he said most of the benefits ended up in the pockets of those who hold financial assets (despite the lack of yield for most investors).

Cembalest noted that consumer spending has remained solid around the globe, but business fixed investment is still weak. He does expect Trump’s policies to result in a growth boost for the U.S. in the near term, but he looks for only 1% growth in Japan and 2% in Europe. He added that global trade has already stalled in anticipation of Trump taking office.

Sears to Sell Craftsman for $900 Million

Sears Holdings Corp. agreed to sell its Craftsman tool brand to Stanley Black & Decker Inc. for about $900 million, marking Chief Executive Officer Edward Lampert’s third move in the last two weeks to prop up the beleaguered retailer with fresh sources of funding.

Under terms of the deal, Stanley will pay $525 million at closing and $250 million after three years, the companies said in a statement Thursday. The buyer also will make annual payments on new Craftsman sales for 15 years. Separately, Sears announced plans to shutter 150 unprofitable stores in a bid to streamline the chain.

With Sears’s department-store business continuing to bleed cash, Lampert has turned to selling and spinning off assets to keep the company operating. The hedge fund manager, who’s also the retailer’s chairman and largest investor, agreed earlier this week to lend the company $500 million and said last month that affiliates of his firm would offer it a $200 million line of credit. Sears also has been reviewing its DieHard batteries and Kenmore appliance brand for potential sales.

“Looking ahead, we will continue to take actions to adjust our capital structure, meet our financial obligations and manage our business to better position Sears Holdings to create long-term value,” Lampert said in Thursday’s statement. Investors cheered the move, sending Sears up as much as 8 percent to $11.19 in New York. The stock had slumped 55 percent last year as the company continued to post losses. Shares of New Britain, Connecticut-based Stanley advanced 2.4 percent to $119.22.

Silver, Platinum May Outshine Gold Says Bloomberg's McGlone

US “car recession” spreads among largest automakers

The media hoopla has been deafening. In December, “new vehicles sales” – defined as the number of new cars, trucks, and SUVs that dealers sold to their customers, including fleets – rose 3.1%. That was stronger than “expected.” And in the media reports, there was euphoria between the lines.

Automakers and dealers had certainly tried. Inventories are high, layoffs and plant closings have already been announced, and so every effort was made to move the iron and pull out the year. No incentive was spared to get the job done.

With this gain in December, total sales for 2016 edged up 0.4% to a record 17.55 million vehicles, according to Autodata. Sales of light trucks and SUVs rose 7.2% for the year, but sales of cars sagged 8.1%. Gasoline is cheap, and Americans love big implements.

Car sales at GM dropped 4.3% in 2016, at Ford 13.0%, and at Fiat Chrysler a catastrophic 33.5%! Plants that build cars were the ones mostly (but not exclusively) hit by shutdowns and layoffs. Then there was the whole to-do about Trump, Ford, and the plant in Mexico.

Uber driver is employee, not freelancer: Swiss agency

An Uber driver is an employee for which the company must pay social security contributions, a Swiss insurance agency has ruled, dealing a blow to the U.S. ride-hailing platform that says drivers are independent contractors.

The California-based startup whose cab service has expanded worldwide vowed to challenge the ruling, the latest clash with regulators that have accused it of bypassing national labor protection standards and shunning collective negotiation with drivers who work on freelance terms.

In October, a British tribunal ruled Uber should treat its drivers as employees and pay them the minimum wage and holiday pay.

Suva - which as a provider of obligatory on-the-job accident insurance in Switzerland helps decide which workers are freelance - found an Uber Technology [UBER.UL] driver was staff because he faced consequences if he broke Uber rules and could not set prices and payment terms independently, broadcaster SRF reported.

Macy’s CEO Lundgren Ruins Retailer as He Leaves

Macy’s Inc. (NYSE: M) CEO Terry Lundgren was supposed to be a retail genius who reinvented the company to the point where it was considered among the nation’s premier retailers. Instead, as he retires from the CEO job this year, he leaves Macy’s in ruins, which has cost investors and lost thousands of employees their jobs.

Macy’s most recent debacle was a 2.7% drop in same-store sales over the absolutely critical holiday season, which included November and December. The result is that Macy’s will close 68 stores, and a broader restructuring will result in the cut of 6,200 jobs. They will be part of a “headcount reduction.” That is another term for people who will be fired.

Lundgren commented, “These are never easy decisions, and we are committed to treating associates affected by these closings with respect and transparency.” What “transparency” means in the case of layoffs is hard to imagine.

In exchange for the store closings and layoffs, Macy’s offered investors efforts toward mobile shopping, e-commerce, in-store pickup and a better analytics and statistics team. It is a wonder Macy’s did not do all these things several years ago when they were cutting-edge tactics.

Think Your Pension Is Safe? Think Again!

Pension funds take money set aside for retirement and invest that money into safe securities. The goal is to grow that money so there is enough capital to pay retirees down the road. These pensions must protect their capital, because losing money for their retirees would be disastrous. But they also must grow their investments. Otherwise, there won’t be enough money to pay employees when they retire.

In the past, these funds could buy safe investments like Treasury bonds or highly rated corporate bonds. The yields on these safe securities would help the pension funds grow their accounts just enough to be able to pay retirees.

But all of that changed since the Fed has lowered interest rates and kept them near zero for the better part of a decade. Yes, the Fed raised rates last month. But they’re still hovering just above zero. So pension fund managers have had two choices:

Continue to invest in “safe” bonds. This choice guarantees that pension funds will not generate enough money to pay retirees. So this option is not a good one. Buy “riskier” investments. This choice may give pension funds higher returns, which will allow them to pay retirees. But this choice is also not a good one, because riskier investments could backfire, causing pension funds to lose money! By the way, this wasn’t an accident. It’s been an actual, purposeful war by the Fed. The Fed doesn’t want you to save, and it doesn’t want these pension funds to invest in safe bonds.

Japanese insurance firm replaces 34 staff with Artificial Intelligence

For 34 staff at a Japanese insurance firm, that vision just became a reality. Fukoku Mutual Life Insurance is laying off the employees and replacing them with an artificial intelligence (AI) system that can calculate insurance payouts.

The firm believes it will increase productivity by 30%. It expects to save around 140m yen (£979,500 / $1.2m) a year in salaries after the 200m yen AI system is installed later this month.

Maintenance of the set-up is expected to cost about 15m yen annually. Japan's Mainichi reports that the system is based on IBM Japan Ltd's Watson, which IBM calls a "cognitive technology that can think like a human". IBM says it can "analyze and interpret all of your data, including unstructured text, images, audio and video".

Fukoku Mutual will use the AI to gather the information needed for policyholders' payouts - by reading medical certificates, and data on surgeries or hospital stays. According to The Mainichi, three other Japanese insurance companies are considering adopting AI systems for work like finding the optimal cover plan for customers.

Idea Bank launches “pay as you drive” car loan in Poland

Idea Bank in Poland has launched “the world’s first pay-as-you-drive” car loan model –Happy Miles – with the payments calculated according to the travelled distance. A GPS device installed in the vehicle automatically sends the information about the distance covered to the lender.

“Monthly payment is the distance multiplied by a kilometre-based rate, plus a small fixed amount,” Idea Bank says. Happy Miles is the brainchild of the bank’s board member Dominik Fajbusiewicz.

“We are creating an engine that might become widely popular in services associated with the financing of sales and rental of passenger cars, trucks, agricultural machinery and construction equipment,” he hopes. “The car loan market is the first we want to introduce the new technology to. Fintech trends are quite strong in the banking sector, but the car financing services lack innovation.”

Leasing is a popular form of car financing in Poland, he notes. “It’s like the market’s asking us to be transformed”. Idea Bank’s recent acquisition of Getin Leasing (which, combined with the bank’s existing leasing business, covers 15% of the country’s car loan market) “has provided us with some perfect tools to do so”, Fajbusiewicz adds.

Keiser Report: Consumer Confidence

Mexico central bank sells $1 billion to prop peso after Trump slump: traders

Mexico's central bank sold dollars in Mexico and New York on Thursday to fight off the peso's nose dive to record lows amid fears U.S. President-elect Donald Trump's protectionist policies could further hammer Latin America's second-biggest economy.

The central bank sold at least $1 billion in U.S. currency in morning trade, four traders told Reuters, asking not to be identified because they were not authorized to speak publicly. The bank kept the amount confidential.

Mexico's currency commission said in a separate statement that the move was aimed at providing liquidity and combating recent volatility in the peso, adding that it could not rule out further discretionary intervention to support the currency.

The dollar sales mark the bank's first currency intervention since February 2016, when it sold $2 billion to prop up the sinking peso. The peso depreciated 20 percent last year alone and was among the world's worst performing currencies. Banco Base said in a report following the intervention that the decision was aimed at combating "speculative positions" that had built up against the peso.

Student Loan Servicing Issues Contribute To Older Borrowers’ Defaults

In 2015, nearly 40% of all federal student loan borrowers over the age of 65 were in default, thanks in part to issues they faced when it came to the servicing of their debts, including problems enrolling in income-driven repayment plans and accessing protections as co-signers.

That’s according to a new report from the Consumer Financial Protection Bureau that examines the significant increase in older student loan borrowers over the past decade, and how those debts have contributed to financial insecurity.

From 2005 to 2015, the number of Americans age 60 or older with one or more student loans quadrupled from about 700,000 to 2.8 million, the CFPB analysis found. The average debt load owed by an older borrower — either for their own loans or those they cosigned for — roughly doubled in the same time frame from $12,000 to $23,500.

Of that debt, 73% of the borrowers took out the loans for their child or grandchild, while 27% took out the loans for their own or their spouses’ education. The report found that because older borrowers tend to have a decreased income or fixed-income, they are more likely to default on these loan obligations as time goes on, while younger borrowers have more opportunity to pay back their debts.

Americans are putting billions more than usual in their 401(k)s

Saving for retirement requires making sacrifices now so your future self can afford to stop working later. Someday. Maybe. It’s not news that Americans aren’t saving enough. The typical baby boomer, whose generation is just starting to retire, has a median of $147,000 in all of his retirement accounts, according to the Transamerica Center for Retirement Studies. And if you think that’s depressing, try this on: 1 in 3 private sector workers don’t even have a retirement plan through their job.

But the new year brings with it some good news: If people do have a 401(k) plan through their employer, there’s data showing them choosing to set aside more for their later years. On average, workers in 2015 put 6.8% of their salaries into 401(k) and profit-sharing plans, according to a recent survey of more than 600 plans. That’s up from 6.2% in 2010, the Plan Sponsor Council of America found.

An increase in retirement savings of 0.6 percentage points might not sound like much, but it represents a 10% rise in the amount flowing into those plans over just five years, or billions of dollars. About $7 trillion is already invested in 401(k) and other defined contribution plans, according to the Investment Company Institute.

If Americans keep inching up their contribution rate, they could end up saving trillions of dollars more. Workers in these plans are even starting to meet the savings recommendations of retirement experts, who suggest setting aside 10% to 15% of your salary, including any employer contribution, over a career. While workers are saving more, companies have held their financial contributions steady — at least over the past few years. Employers pitched in 4.7% of payroll in 2015, the same as in 2013 and 2014. Even so, it’s still more than a point above their contribution rates in the aftermath of the Great Recession.

For many retailers, it wasn't a December to remember

In the latest sign of the wrenching transformation in retailing, Macy’s (M), Sears Holdings (SHLD), Kohl’s (KSS), Victoria’s Secret parent L Brands (LB) and Barnes & Noble (BKS) have all reported disappointing holiday sales as consumers shift to shopping online. Shares of most of them went into tailspins, some falling by double-digit percentages.

Speaking to Wall Street analysts during Macy’s third-quarter earnings conference call last year, Chief Financial Officer Karen Houget noted “some positive trends” heading into the holidays. However, the largest department store operator’s modest expectations proved unrealistic. Macy’s yesterday slashed its 2016 earnings per share guidance to a range of $2.95 to $3.10 from $3.15 to $3.40. It also provided details on its previously announced store closure plan that will shutter 68 locations and cut 10,000 jobs.

Sears Holdings, which recently got a financial lifeline that could be worth as much as $500 million arranged through CEO Edward Lampert, who’s also a billionaire hedge fund tycoon, unveiled plans to close 150 locations. The cash-strapped parent of Sears and Kmart also announced plans to sell its Craftsman tool business to Stanley Black & Decker for $900 million, as it continues to unload assets to bolster its finances.

The Craftsman announcement helped Sears shares buck the downturn among retailers, pushing its stock up 1.35 percent, or 14 cents, to $10.50 in Thursday afternoon trading. Still, Sears shares have been hammered down nearly 50 percent over the past year.

The future of brick-and-mortar retailers

Deutsche Bank considering loans to private equity as part of $4.1 billion in consumer relief

Recently, Deutsche Bank announced that it reached a settlement with the Department of Justice over the bank’s issuance and underwriting of residential mortgage-backed securities between 2005 and 2007. While the government initially wanted $14 billion from Deutsche Bank, the settlement figure came in at roughly half that, just above $7 billion.

As part of the settlement, which is not yet finalized, Deutsche Bank will be required to provide $4.1 billion in consumer relief. But a new report from Bloomberg suggests that Deutsche Bank is considering an unorthodox method of providing that $4.1 billion in consumer relief – lending to private equity firms.

Bloomberg’s Matt Scully has the story: Germany’s biggest bank, dogged last year by questions about its capital levels, is exploring ways to avoid using its balance sheet to buy soured mortgages that it can partially forgive, according to a person with knowledge of the matter. One option it’s reviewing is to instead lend to firms like Lone Star Funds, which specialize in buying bad mortgages from government auctions and lowering consumers’ obligations.

As Scully notes, Lone Star Funds is a frequent buyer of delinquent loans from Fannie Mae, Freddie Mac, and the Federal Housing Administration. For example, last July, Fannie Mae sold 4,537 loans with an aggregate unpaid principal balance of $746,438,433 to LSF9 Mortgage Holdings, a fund controlled Lone Star Funds.

Healthcare Sector Plans to Move Hard and Fast to Blockchain in 2017

According to a recent international survey conducted by IBM, 16 per cent of Healthcare Stakeholders Plan to Use Blockchain by 2017. In the report called “Healthcare Rallies for Blockchains – Keeping Patients at the Center”, the health industry appears to be setting the pace on Blockchain adoption, slightly ahead of the financial industry even. Interesting they see substantial opportunities for business model innovation in most of the areas surveyed, but healthcare executives don’t anticipate much disruption ahead due to the dense web of regulatory constraints.

They don’t expect to be ‘Uberised’. But they do expect innovation. 16 per cent of the healthcare respondents expect to have a commercial Blockchain solution at scale in 2017. 6 in 10 anticipate Blockchains will help them access new markets, and new and trusted information they can keep secure. 7 in 10 healthcare expect the greatest Blockchain benefits to be in clinical trial records, regulatory compliance and medical/ health records.

From the report: Forget, for a moment, “big data.” Instead think “long data” – short for longitudinal data – and its application to healthcare.

How valuable would it be to have the full history of an individual’s health? What if every vital sign that has been recorded, all of the medicines taken, information associated with every doctor’s visit, illness, operation and more could be efficiently and accurately captured? The quality and coordination of care would be expected to rise, and the costs and risks likely to fall. Long data is simply the lifetime history of data related to a person, place or thing.

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