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Tuesday 01.10.2017

Killer Cash!

The global elites’ latest volley in the “war on cash” is a weird one. They’re telling us cash is — drumroll, please — a public health issue. If you’ve been reading us for any amount of time, you’re familiar with the war on cash — the increasing push to get us all to perform our transactions electronically, the better to be tracked and taxed. Former Treasury Secretary Larry Summers figures the least that could be done is abolish the $100 bill; Harvard economist Ken Rogoff would just as soon do away with cash altogether, making his case in a book called The Curse of Cash.

There’s a compelling investment angle to the war on cash… and we’re not talking about anything like keeping gold in a safe at home. We’ll get to that shortly. As you might already know, most of the arguments against cash are a variant on the following proposition: If we don’t do away with cash, then the money launderers and drug runners and terrorists win. Which is what makes the health gambit, if nothing else, novel…

“Studies have piled up in recent years describing exactly how filthy — specifically how bacteria-laden — our dollars and cents can be,” says an article in Scientific American. “Fecal bacteria and other pathogens may have hitched a ride from someone’s hands, nose or apron onto our cash. And yeast or mold might have taken hold, too. The result could be a durable risk to our health whenever our money changes hands.” Oh noes, teh germs!

The article spotlights a number of studies on the subject down through the years. For instance, “a 2010 analysis by Australian researchers looked at the actual number of bacteria per square centimeter on various bank notes and found that a U.S. note contains 10 such microbes per square centimeter.” Cash: It can kill you!

Wall Street Clearing House to Adopt Bitcoin Technology

After months of talk and hype, the world’s biggest banks have taken the first steps toward moving a significant piece of financial infrastructure onto a so-called blockchain — the technology introduced to the world by the virtual currency Bitcoin.

The company that serves as the back end for much Wall Street trading — the Depository Trust and Clearing Corporation, or D.T.C.C. — said on Monday that it would replace one of its central databases, used by the largest banks in the world, with new software inspired by Bitcoin. The organization, based in New York, plays a role in recording and reporting nearly every stock and bond trade in the United States, as well as most valuable derivatives trades.

IBM, which has been making a big push into blockchain technology, will be leading the project for the D.T.C.C. and aims to have it fully functioning by early next year.

“This is a real tangible step into what could be a very different future for Wall Street,” Michael C. Bodson, the chief executive of the D.T.C.C., said in an interview. The announcement is one of the most advanced steps yet in Wall Street’s continuing effort to harness the technological concepts underlying Bitcoin.

GM to Move Production of GMC Terrain to Mexico from Canada

General Motors Co. (IW 500/3) will move production of its revamped GMC Terrain to Mexico from Canada and expand production of the Ontario plant’s Chevrolet Equinox, reflecting the growing popularity of compact sport utility vehicles.

The Detroit-based company currently makes both vehicles Ingersoll, Ontario. GM showed the new upscale Terrain for the first time Sunday night on the eve of the Detroit auto show.

GM has a lot riding on the Equinox and Terrain, which go on sale as redesigned models in the first quarter and this summer, respectively. Small SUVs are a booming segment of the market and a big moneymaker for the company, so when GM planned the new versions, it decided to increase output from one factory to three -- adding the vehicles at two existing facilities in Mexico, according to a GM spokesman.

While the move is GM’s bet that more inventory will mean more new buyers, as well as a play to make more on each sale, it’s also partly a response to hyper competition among automakers seeking an edge through lower production costs. Even so, moving production of the new upscale Terrain to Mexico instead of the U.S. may risk testing the patience of President-elect Donald Trump, who has already has used Twitter to chastise GM and Toyota Motor Corp. for importing low-priced compact cars from south of the border. While the companies also sell these models in emerging markets, GMC is chiefly a U.S. brand with premium SUVs that have fatter sticker prices and higher profit margins than small cars.

How America 'Recovered' From The Great Recession Of '08

I've read a lot recently about the economic recovery and superb jobs numbers. Mystified best describes my general state as I read and hear this. So I decided to throw out some fairly simple charts for discussion's sake.

The chart below highlights peaks in full time employment vs. the Federal Reserve's deemed interest rate (FFR %) and publicly held federal debt. The Fed's interest rate policy and federal debt have gone spread eagle since '07 to recoup the jobs lost and add a measly 2.3 million net new full time jobs.

Below, the three variables in the above chart broken out by change per period. Publicly held federal debt, full time job creation (net new), and the effective reduction in the Federal Reserves federal funds rate (change in the cost of money borrowed from the Fed).

This course of massive debt spending is simply creating illusory wealth, illusory economic activity, but very real debt and very real overcapacity above and beyond what people can truly afford to consume. The overcapacity is now epic and only via faster debt growth can more overcapacity be added and current overcapacity maintained. Going forward, the idea of maintaining and further ramping this debt fuelled growth to maintain the big lie is folly to the nth degree.

Alibaba job boom: Jack Ma chats with Trump about how to create 1 million US jobs over 5 years

President-elect Donald Trump said he had a "great meeting" with Alibaba executive chairman Jack Ma on Monday, when they discussed 1 million new U.S. jobs. Ma said that Alibaba's expansion would focus on products like garments, wine and fruits, with a special focus on trade between the American midwest and southeast Asia.

"We're focused on small business," Ma told reporters. "We specifically talked about ... supporting 1 million small businesses, especially in the Midwest of America. Small businesses on the platform selling products — agriculture products and America services — to China and Asia, because we're pretty big in Asia."

Where those jobs would come from is unclear. While an Alibaba spokesperson told CNBC before the meeting that the Chinese online retail giant company would create 1 million jobs over five years, Ma's comments focused on supporting small businesses.

"Alibaba will create 1 million U.S. jobs by enabling 1 million American small businesses and farmers to sell American goods to China and Asian consumers on the Alibaba platform," the company said in a statement.

Why Venezuela should stop raising wages

FBI arrests Volkswagen exec in emissions scandal

The Volkswagen executive who once was in charge of complying with U.S. emissions regulations was arrested during the weekend in Florida, the government said Monday.

Oliver Schmidt, who was general manager of the engineering and environmental office for VW of America, was charged in a criminal complaint with conspiracy to defraud the U.S. government and wire fraud.

Schmidt is the second VW employee to be arrested as the probe led by the U.S. Attorney’s Office in Detroit continues. He faces an initial hearing in Miami Monday afternoon and likely will be taken to Detroit to face arraignment at a later date.

The complaint, dated Dec. 30 and signed by FBI Special Agent Ian M. Dinsmore, alleges that Schmidt committed the crimes from 2012 to 2015. Schmidt’s bio for a 2012 auto industry conference said he was responsible for ensuring that vehicles built for sale within the U.S. and Canada comply with “past, present and future air quality and fuel economy government standards in both countries.” It says he served as the company’s direct factory and government agency contact for emissions regulations.

Activists Are Hoping To Turn Donald Trump’s Inauguration On January 20th Into One Of The Biggest Riots In U.S. History

Radical leftists are planning to make January 20th the most chaotic Inauguration Day in American history. Their stated goal is to “disrupt” the Inauguration festivities as much as possible, and they are planning a wide range of “actions” to achieve that stated goal. Some of the more moderate groups are using terms such as “civil resistance” and “civil disobedience”, but others are openly talking about “blockades”, jumping barricades, throwing projectiles and “citywide paralysis”. My hope is that all of their efforts will turn out to be a big flop, but it is important to understand that these groups are well funded, highly organized and extremely motivated. The election of Donald Trump has been perhaps the single most galvanizing moment for the radical left in modern American history, and they are working very hard to turn January 20th into a major political statement.

In fact, just recently one activist group took out a full page ad in the New York Times…

Thousands of activists, journalists, scientists, entertainers, and other prominent voices took out a full-page call to action in the New York Times on Wednesday making clear their rejection of President-elect Donald Trump and Vice President-elect Mike Pence with the simple message: “No!”

“Stop the Trump/Pence regime before it starts! In the name of humanity we refuse to accept a fascist America!” the ad states, followed by a list of signatories that includes scholar Cornel West; author Alice Walker; Chase Iron Eyes of the Standing Rock Sioux; educator Bill Ayers; poet Saul Williams; CNN‘s Marc Lamont Hill; Carl Dix of the Communist Party USA; and numerous others.

Toyota to invest $10 billion in U.S. over five years

Toyota Motor Corp will invest $10 billion in the United States over the next five years, the same as in the previous five years, North America Chief Executive Jim Lentz said on Monday, to meet demand and upgrade plants to build more fuel-efficient models.

The Japanese automaker has come under fire by President-elect Donald Trump for its plans, announced in 2015, to shift production of its Corolla to Mexico from Canada. Lentz said in an interview at the Detroit auto show the decision was not in response to Trump’s remarks made in a recent tweet, but was part of Toyota’s business strategy to invest in the United States, where it has 10 plants in eight states.

Planning for the new Mexico plant began about two years before it was announced in 2015, said Lentz, describing such decisions as long-term ones. Lentz said he had not spoken with Trump.

The $10 billion includes Toyota’s new North American headquarters in Texas that is under construction and major improvements to its plants. Toyota plans to expand some of its U.S. plants over the next five years, said Lentz, declining to say if that effort would boost jobs. Toyota, which employs 40,000 in the United States, added more than 5,000 U.S. jobs over the last five years, he said. Toyota President Akio Toyoda appeared at the show later on Monday to tout the company’s investment plans and its updated flagship Toyota Camry that is built in Kentucky.

Rand Paul: Obamacare Should Be Replaced Day One

American Apparel auctions off its assets

American Apparel auctioned off its assets Monday, with the winning bid scheduled to go before the bankruptcy judge for approval Thursday.

The Los Angeles clothier, which filed for bankruptcy in November for the second time, has received multiple bids, according to a person familiar with the situation who was not authorized to speak on the record.

Gildan Activewear, a Canadian clothing maker, is the stalking horse bidder with an offer of $66 million for American Apparel’s intellectual property rights and other assets. Companies that have expressed interest include e-commerce behemoth Amazon.com, cheap-chic retailer Forever 21 and garment maker Next Level apparel, according to Reuters.

It remains to be seen whether the winning bidder will keep any manufacturing in Southern California or the U.S. Gildan, which has manufacturing hubs in Central American and the Caribbean, has the option of buying some of American Apparel’s factories.

Despite OPEC Production Cut, Another Year Of Low Oil Prices Is Likely

An OPEC production cut offers oil producers hope for higher prices in 2017. But there is a dark cloud hanging over that expectation. Global storage inventories must be substantially reduced before higher oil prices can be sustained. Some of U.S. tight oil has nowhere to go but into storage because it can neither be refined nor exported.

If all OPEC cuts take place as announced, it will be at least a year before sufficient inventory reductions allow prices to move much higher than current levels. If not, lower oil prices will last even longer.

OPEC agreed to cut production in November partly because it was incapable of sustaining output at 2016 levels. Announcing a cut is a good way to cover the reality that commercial reserve limits have been reached.

Analyst narratives have created the unfounded but widely accepted belief that OPEC has a strategy, and that strategy involves a price war with U.S. tight oil producers. The cartel's inaction since 2014 more probably reflected an unwillingness to repeat the mistake of cutting output between 1980 and 1985: those cuts had little effect on world over-supply and damaged OPEC market share and revenue.

Credit Card Spending Jumped in November

Consumers increased their borrowing in November at the fastest pace in three months. Total borrowing in November climbed $24.5 billion, compared to a smaller $16.2 billion in October, the Federal Reserve reported Monday. The increase pushed total debt to a fresh record of $3.75 trillion.

The acceleration reflected a big jump in the category that covers credit card debt, which rose $11 billion, compared to a much smaller $2.4 billion increase in October. It was the largest monthly advance since March and was a good sign at the start of the holiday shopping season.

Growth in the category that covers auto loans and student loans slowed a bit in November, showing a rise of $13.5 billion after a $13.8 billion increase in October.

Patterns in consumer credit are closely watched by economists for clues they can provide about consumer spending, which accounts for 70 percent of economic activity. The November increase, which translated into a strong gain of 7.9 percent at an annual rate, was larger than economists had been forecasting. It came at a critical time for consumer spending in the midst of the holiday shopping period.

The End Of Car Ownership? Cadillac Launches Vehicle ‘Subscriptions’

Car makers are worried right now as young people turn away from traditional car ownership. U.S. car sales had a big decline last year, and meanwhile, people in cities are finding it easier than ever to use ride hailing services like Uber and rental services like Zipcar.

Cadillac is hoping it’s found the answer to reinventing car ownership, with its new luxury vehicle subscription service. The brand’s upcoming BOOK service will give members access to popular Cadillac vehicles without the long-term commitment of leasing, financing or buying — they just have to pay a monthly fee of $1,500.

“BOOK is aimed squarely at Gen X and Y customers who want the experience of a luxury vehicle without the hassles of traditional ownership,” Melody Lee, director or brand marketing, told Vocativ. “BOOK fills a gap between traditional ownership (leasing, financing, buying) and the efficient, but less personal aspect of rental, car- and ride-sharing (Hertz, Zipcar, Uber/Lyft).”

BOOK’s $1,500 monthly fee is definitely more expensive than just leasing a Cadillac, which could cost about $300-$750 a month, depending on the model. However, Cadillac’s pitch is that members only have a month-to-month commitment, can switch cars whenever (up to 18 times a year) and also don’t have a limit on mileage. Members also benefit by not having to worry about registration, taxes, maintenance and insurance — all that is handled by Cadillac. If a member were to get involved in an accident and they were responsible, Cadillac would cover the premium but the member would pay a $750 deductible — similar to claims under typical insurances. Another, less significant, perk is that members are invited to all Cadillac events that are otherwise not open to the public.

Once iconic U.S. shopping malls are on the decline

War on Cash: Could It Be Coming to North America Soon?

Truth be told; the war on cash has begun. Don’t be shocked if it comes to North America sooner than many anticipate. Not too long ago, India made headlines across the globe. The Indian government, all of a sudden, banned some of the most-used currency notes in the country, all in the name of cracking down on corruption. This created havoc in the country, with long lines at ATMs, and leaving many strapped for cash.

You see, in the Indian economy, cash is commonly held by households to pay for groceries and bills. What do you do when the cash you had isn’t acceptable anymore, and you are ultimately forced to deposit money in a bank and can only get a rationed amount back for now? This is a war on cash.

But don’t be so naïve to think that India is the only country in the midst of a war on cash. My colleague, Alessandro Bruno, BA, MA, wrote about the war on cash that’s going on in Europe here: “Here’s How the War on Cash Threatens You.” He talked about how the Spanish government plans to issue a law that will limit cash transactions to no more than €1,000.

In Venezuela, a war on cash is in full effect as well. Around mid-December, President Nicolás Maduro announced that 100-bolivar bills, the most commonly used notes in the country, would become illegal and useless. This was done in the name of punishing currency speculators in Colombia and Brazil, who were supposedly behind the bolivar’s decline.

The odds of a “Frexit” vote just inched a little higher

One of the great mysteries of the crisis in the eurozone is why no country – not even Greece – took the step of leaving the single currency. It’s pretty clear that fear of the immediate disruption caused by a potentially massive devaluation, outweighs any concerns about policy-making under the European Union.

So if you’re trying to make a sales pitch for leaving the EU, one of the main issues to deal with is this currency issue. Which is why what Marine Le Pen, of the Front National in France, said last week is so interesting…

Last week, Marine Le Pen was outlining her sales pitch for the French presidency. She wants to see full powers over immigration controls and economic policy returned to member states by the EU. If not, she says, she’ll hold a referendum on “Frexit”.

The French – like everyone else, it seems – are itching for change. And as we saw last year, both Donald Trump and Brexit surprised everyone. Of course, both the polls and commentators who claim to know a lot about the French electoral system are saying that Le Pen will definitely get beaten in the second round, no doubt about it. So she has to be in with a half-decent chance.

Keiser Report: Unhappy Outlook for Chinese New Year

Average college degree pays off by age 34

If you're debating the value of your college degree, rest assured it will likely be worth the cost -- eventually. It takes an average of 12 years to recoup the cost of getting your Bachelor's degree, according to a new report from The College Board.

In other words, you will have earned enough money to repay the cost of your degree and make up for your time out of the workforce by the age of 34. If that seems like a long time, consider this: college grads with a full-time job earned a median of 67% more than high school grads last year. That doesn't include those who went on to receive an advanced degree.

And despite the horror stories of over-educated Millennials having a hard time landing a job, the unemployment rate for 25- to 34-year-olds with a Bachelor's degree was 2.6% last year, more than five percentage points below the unemployment rate for those with just a high school education. College grads are also more likely to exercise, vote, and less likely to smoke, according to the report.

"A higher education is an investment that pays dividends over the course of a lifetime -- even for students who accumulate some debt to obtain a degree," said Jennifer Ma, senior policy research scientist at the College Board. The average undergraduate student loan borrower left school last year with $30,100 in debt.

Tiny houses rise as an economical option but face legal barriers

Aaron Castle and his fiancé Candace Anderson wanted to invest earnings in a tangible asset, rather than watching their earnings evaporate every month to cover rent. With combined annual incomes less than $50,000, Castle and Anderson found only a tiny house can be built on minimum wage in the Bay Area.

Tiny houses provide a way to own a home in the Bay Area’s exorbitant housing market, where a one-bedroom apartment asks for an average of around $3,000 rent a month and a median price of home is $1.1 million, according to Zillow, the online real estate marketplace. Castle and Anderson poured $18,000 and 1,400 hours into building their home. They have lived in their self-built, 139-square-foot tiny house on wheels for two and a half years, moving from Redwood City to San Bruno.

The couple have to repeatedly pick up and relocate their tiny home, because there are no California laws defining and regulating tiny houses, a situation which has left construction of the units in a murky legal situation. “There’s always sort of insecurity around our living situations,” Castle said.

The tiny house community defines a tiny house as a home of 400 square feet or less, either on wheels or a foundation. Castle is a tiny house advocate who has been deeply involved in tiny house discussions and events for the last three years. He envisions a fair number of Bay Area residents would seriously consider living in a tiny home if it is more readily available and legal.

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