Arizona Senate Committee Passes Bill To Treat Gold As Money, Remove Capital Gains Tax
Former US Rep. Ron Paul testified today in the Senate Finance Committee in support of House Bill 2014 (HB2014). The legislation, which previously passed the state House by a 35-24 vote, would eliminate state capital gains taxes on income “derived from the exchange of one kind of legal tender for another kind of legal tender.” The bill defines legal tender as “a medium of exchange, including specie, that is authorized by the United States Constitution or Congress for the payment of debts, public charges, taxes and dues.” “Specie” means coins having precious metal content. In effect, passage of the bill would, as Paul noted, “legalize competition in a Constitutional fashion.”
Under current Arizona law, gold and silver are subject to capital gains tax when exchanged for Federal Reserve notes, or when used in barter transactions. If the purchasing power of the Federal Reserve note has decreased due to inflation, the metals’ nominal dollar value generally rises and that triggers a “gain.” In most cases, of course, the capital gain is purely fictional. But these “gains” are still taxed — thus unfairly punishing people using precious metals as money.
Today, the Senate Finance Committee passed the bill by a 4-3 vote along party lines. Passage of HB2014 would remove the amount of any net capital gain derived from the exchange of one kind of legal tender for another kind of legal tender or specie (gold and silver coins) from their gross income on their state income tax. In other words, individuals buying gold or silver bullion, or utilizing gold and silver in a transaction, would no longer be subject to state taxes on the exchange.
Bill sponsor Rep. Mark Finchem (R-Tucson) discussed this as well. “What the IRS has figured out at the federal level is to target inflation as a gain. They call it capital gains.” He noted that the bill would help Arizona residents “protect their conversion of one kind of currency for another.” Passage into law would mark an important step towards currency competition. If sound money gains a foothold in the marketplace against Federal Reserve notes, the people would be able to choose the time-tested stability of gold and silver over the central bank’s rapidly-depreciating paper currency. The freedom of choice expanded by HB2014 would allow Arizona residents to secure the purchasing power of their money.
RadioShack Bankruptcy Puts 1,500 Stores at Risk
RadioShack parent, General Wireless Operations, made a voluntary Chapter 11 filing yesterday. The company stated it would close 200 stores immediately. General Wireless is “evaluating options” for another 1,300, the entire balance of the locations. If all of them are shuttered, it will be one of the largest mass store closings in recent memory. Based on past employee counts, over 10,000 jobs maybe at stake.
Some of the stores may stay open. Many are operated as joint locations with Sprint Corp. (NYSE: S), which uses them as locations to sell wireless services and products. If all locations disappeared, Sprint would lose some of its ability to compete with the wireless operations of T-Mobile US Inc.
The battle for wireless market share in the United States is brutal. With over 300 million wireless subscribers, which is close to the number of people in the country, the primary challenge is market share improvement. Sprint already struggles in the number four position.
One set of stores may remain regardless of the Chapter 11 proceedings. Those are 425 owned by independent companies. RadioShack posted online that: RadioShack stores and website are currently open for business and serving customers. RadioShack is exploring all available options for the Company, including alternative business models that will enable it to keep some stores open on an ongoing basis. Additionally, we expect the 425 independent dealers stores to continue to serve communities nationwide.
The world's billionaires are now worth $8 trillion
The world's billionaires are now worth $8 trillion, greater than the GDPs of Germany and France combined.
According to the latest Hurun Global Rich List, published by the China-based Hurun Report research unit, there are now 2,257 billionaires in the world — up 3 percent from last year.
Their combined fortunes jumped 16 percent over 2016, to the equivalent of 11 percent of the world's annual GDP. Their wealth was also larger than every country's individual GDP, other than the U.S. and China. "Billionaires are concentrating wealth at a supercharged rate," Rupert Hoogewerf, Hurun Report's chairman & chief researcher, said in a statement.
Indeed, the number of billionaires has exploded over the past five years, rocketing 55 percent higher. Because much of the world's wealth is hidden or difficult to find, the actual number of billionaires may be closer to 5,000, Hoogewerf said. "While some billionaires go to extraordinary lengths to conceal their wealth, for the most part it is that they are discreet and prefer operating under the radar," he said.
Former Reagan budget director on national debt nearing $20T
Staples Closing Another 70 Stores as North American Sales Sink
One of the country's largest store chains wants to be a bit smaller. Staples said on Thursday it was closing another 70 stores in North America amid sharp sales declines in its top market and a continued pivot to business services and away from brick-and-mortar for the leading office supplies retailer.
Comparable sales, which excludes the impact of newly opened or closed stores, fell 7% in the fourth quarter in the United States and Canada, and for the whole company, adjusted profit per share was 25 cents a share in the period, a penny less than analysts estimated.
Staples' shares were down 5% to $8.50 in morning trading. The latest store closings come on the heels of 48 shutterings last year, and a combined 242 in the two prior years. As of the start of the current fiscal year, Staples had 1,255 U.S. stores and 304 Canadian locations. The retailer also operates some stores in other markets.
In the nearly one year that has passed since U.S. regulators thwarted its plan to buy smaller rival Office Depot (ODP, -1.19%) on antitrust concerns, Staples has been trying to win more business contracts and further beef up its e-commerce, already a leader in drive-by pick up and delivery, and rely less on traditional retail to everyday consumers, a long dwindling business. Staples made its initial offer to buy Office Depot in early 2015 in a cash-and-stock deal valued at $5.5 billion at the time.
Restaurants Adding Surcharge To Customers’ Bills Amid Rising Labor Costs
Restaurants are taking a cue from the cable industry: Rather than raise menu prices to cover the higher cost of paying wages, some eateries are tacking on “labor surcharges.” The Wall Street Journal reports that some restaurants in states where the minimum wage has recently increases have chosen to pass on the rising cost of labor to customers by way of 3% to 4% surcharges on their bills.
So far the surcharges have turned up at chains and local restaurants in California, Arizona, Colorado, and New York, the WSJ reports, with reps for the California Restaurant Association calling the added fees the “new norm” for the industry.
Supporters of the surcharge contend that the surcharge makes better business sense than higher menu prices. That’s because, when a customer sees the prices on menus increase they’re more likely to pick a non-expensive item, such as choosing a sandwich rather than an entrée.
“We want people to understand there is a cost,” David Cohn, the owner of 15 restaurants in San Diego, tells the WSJ of adding the surcharge rather than increasing prices. “How do we stay in business with margins shrinking and competition increasing?”
Sears to use Craftsman sales proceeds for pensions
Sears Holdings Corp. made another move to prop up its cash-draining pension plan, saying it would direct a chunk of proceeds from the sale of its Craftsman brand toward its obligations as part of a deal with the government's pension insurer.
In line with the original terms of the sale, Sears received $525 million from Stanley Black & Decker when the transaction closed and will get $250 million more after three years, plus annual payments on a percentage of Craftsman sales over the next 15 years.
On Thursday, Sears pledged the $250 million payment and some of the income stream from the annual payments toward pension plans, as part of a deal it struck with the Pension Benefit Guaranty Corp., a federal agency that insurers private pension benefits. Further, Sears agreed to a lien on $100 million in real-estate assets to the PBGC.
Sears has poured billions into shoring up its pension plan over the past decade. Sears has also been cutting spending and selling off real estate lately to fund its operations, but its existing locations continue to struggle as shoppers spend more online and at other chains.
Home flipping hits 10-year high in 2016
Home flipping just reached a 10-year high, according the 2016 Year-End U.S. Home Flipping Report by ATTOM Data Solutions, a fused property database. The new report shows 193,009 single family homes and condos were flipped, or sold in an arms-length transfer for the second time in a 12-month period, in 2016. This is an increase of 3.1% from 2015 to the highest level since 2006.
“Home flipping was hot in 2016, fueled by low inventory of homes in sellable or rentable condition along with a flood of capital — both foreign and domestic — searching for the returns and stability available with U.S. real estate,” ATTOM senior vice president Daren Blomquist said. “The combination of more home flips and a greater share of financing for flip purchases resulted in a 19% jump in the estimated dollar volume of financing for home flip purchases, up to $12.2 billion for the flips completed in 2016 — a nine-year high.”
Home flips accounted for 5.7% of all single-family home sales during the year, up from 5.5% last year to a three-year high. However, it is still well below the 2005 peak of 8.2%. And now, more investors are entering the market as the number of individuals and institutions that flipped homes in 2016 increased 1% from last year to the highest number since 2007.
“Investors in search of flipping returns are increasingly willing to move to secondary and tertiary housing markets and neighborhoods with older, smaller properties that are available at a deeper discount,” Blomquist continued. “Given that many of these markets are more affordable, we are also seeing a higher share of the flipped homes sold to FHA buyers, with that share reaching a four-year high of 19.6% in 2016.”
Wells Fargo fallout: Execs reshuffled, 3 managers out
The scandal-ridden bank reshuffled its consumer-banking empire this week, demoting one powerful regional boss and reassigning another. Wells Fargo (WFC) also confirmed that three regional managers are gone as the bank tries to repair trust with customers and its employees due to outrage over mistreatment of workers and the creation of as many as 2 million fake accounts.
In recent weeks, Wells Fargo has also stripped CEO Tim Sloan and seven of his top lieutenants of their 2016 bonuses, fired four other execs and replaced the notorious sales goals that fueled the fraudulent behavior. All of this comes as Wells Fargo braces for the findings of an independent board investigation into the fake account scandal. Results are expected to be released prior to what could be a contentious annual meeting with shareholders on April 25.
"We have taken many steps to rebuild trust with customers and team members, but we have more work to do in our journey," Mary Mack, head of the Wells Fargo community banking division at the heart of the scandal, wrote in a memo to employees this week. As part of the latest shake-up, Wells Fargo announced the demotion of former Southwest regional boss John Sotoodeh and reassignment of small-business banking head Lisa Stevens.
Mack's memo cited the importance of "putting people in place who come to work every day thinking about how to best serve customers" and help employees. She said the reorganization is aimed at making Wells Fargo "more streamlined, efficient, and consistent across our branches."
European Central Bank keeps stimulus on track to aid economy
The European Central Bank thinks the balance of risks facing the 19-country eurozone has shifted away from its own home-grown and drawn-out economic difficulties to the international arena.
In a press briefing Thursday after the bank kept policy unchanged, President Mario Draghi said domestic pressures have "been more contained" but that at the same time, geopolitical risks "are on the up." He noted Britain's decision to leave the European Union last June as a risk to the eurozone even though no real economic impact could yet be seen. Political uncertainties abound in the eurozone this year, including elections in the Netherlands, France and Germany.
"We don't know yet how these risk events will reverberate on the economic situation," he said. Draghi was speaking after the bank opted against any change to its stimulus programs even though economic growth across eurozone appears to be picking up steam and inflation has risen to the bank's targets.
Draghi argued that the recent rise in the annual inflation rate to 2 percent - past the ECB's target of just under 2 percent - has come from higher oil prices, and not from fundamental improvements in the economy such as higher wages for workers. He said underlying inflationary pressures across the region are still too weak for the bank to start the process of withdrawing its monetary stimulus efforts. Underlying inflation pressures, he said, "continue to remain subdued."
The bull market: 8 years old -- and ready to collapse?
Do you remember March 9, 2009? On that day, amid the worst recession since the 1930s, the bear market in stocks ended. Since then, share prices have gained nearly 250 percent, making the current bull run the third-largest since 1928 and second-longest since World War II. In duration, only the rally from 1987 to 2000 has it beat.
A decade ago, it was hard to see the clouds parting. The U.S. government was funneling capital into the financial system. Corporate earnings were collapsing. The Wall Street Journal led its investing section with a story warning that stocks could return to levels not seen since 1995.
But they rallied, thanks largely to ultra-aggressive monetary policy from the Federal Reserve as well as a series of bailouts, capital injections and stimulus programs funded by U.S. taxpayers.
At this bull’s height -- at which the market now stands, with trillions in new wealth created -- investors would do well to put all of this in context. Consider that stock prices are increasingly unlikely to keep pushing higher (unless “this time is different,” which it rarely is).
What Drives the Price of Gold?
CaliBurger to roll out burger-flipping robot
The quick-service CaliBurger chain on Tuesday unveiled a new burger-flipping robot that it plans to roll out to more than 50 locations worldwide by the end of 2019.
Dubbed “Flippy,” the robotic kitchen assistant is the creation of Miso Robotics, an engineering firm specializing in “adaptable robotics” for commercial kitchens. The goal is to develop technology that can handle hazardous, tedious and time-sensitive aspects of cooking, from flipping burgers to frying chicken, cutting vegetables or final plating, according to press materials.
For CaliBurger, the move is part of a larger emphasis on technology. Some CaliBurger restaurants, for example, feature video gaming walls, on which diners can play communal games, like Minecraft, and watch gaming tournaments, like League of Legends. And, like many quick-service chains, technology is also being incorporated in operations, from ordering to delivery.
Once seen as an In-N-Out Burger knock off that operated mostly overseas, CaliBurger was reportedly sued by In-N-Out in 2012 for trademark infringement, but the case was later settled. CaliBurger made some changes to be less like In-N-Out, renaming the double-patty burgers it once called the Double Double as the “Cali Double,” for example.
Steve Forbes: Make Tax Reform 'Retroactive to January 1st'
The tax-reform package being drawn up by Republican lawmakers may take months to enact and that's okay – as long as the tax cuts that come along with it are retroactive to the beginning of the year, says Steve Forbes, chairman and editor-in-chief of Forbes Media.
"They can wait until August. The key thing is if they wait that long [is to] make it retroactive to January 1st so that the American people feel this right away," Forbes said Thursday to Steve Malzberg on Newsmax TV’s "America Talks Live."
"So early next year, when they file their tax returns, they're going to get a big refund all to the good. The eye-shaped Republicans, the root canal Republicans, say, oh you can't do that. Yes you can, just do it. No one can stop it."
Forbes said that no matter what is ultimately contained in the tax-reform bill, nothing should get in the way of "a big tax cut."
Oil drops to lowest since OPEC deal, US crude below US$50/bbl
Oil fell about 2 percent on Thursday in heavy trade, extending the previous session's slump to prices not seen since an OPEC-led pact to cut production was agreed, as record U.S. crude inventories fed doubts about the effectiveness of the deal to curb a global glut.
U.S. crude prices fell through the US$50 a barrel support level, with market participants unwinding some of the massive number of bullish wagers they had amassed after the deal.
The losses followed Wednesday's slide of more than 5 percent, the steepest in a year, after data showed crude stocks in the United States, the world's top oil consumer, swelled by 8.2 million barrels last week to a record 528.4 million barrels.
But several analysts remained bullish on oil for the long term. "Headline risk can capture the imagination of the market over the near term, but we see dips as short-lived, key buying opportunities," RBC analysts said in a note. "Record high inventory levels are reason for pause, but we believe that the market is overly focused on U.S. stocks ... The U.S. will be the last of the major regions to rebalance stocks given that storage capacity remains abundant, cheap and U.S. shale is extremely elastic in a US$50-per-barrel price environment."
Modi's Goal of a Cashless India May Be Thwarted as Digital Drops
Prime Minister Narendra Modi’s plan to reduce India’s reliance on cash may go awry.
Digital transactions are dropping before next week’s deadline to lift all lingering caps on cash withdrawals, central bank data show. Modi had shocked the nation Nov. 8 when he canceled 86 percent of currency in circulation and pushed for electronic payments to boost transparency and fight graft.
Printing presses are churning out new bank notes and come Monday, Indians will be able to withdraw as much money as they like from their bank accounts as the Reserve Bank of India lifts the 50,000 rupee ($748) a week limit. Economists including Sonal Varma at Nomura Holdings Inc. predict India will recover from Modi’s cash shock by June and demand will rebound after that.
The $2 trillion economy is forecast to grow 7.1 percent in the year through March, the slowest pace since 2014 but among the fastest in the world. As much as 98 percent of all consumer payments were in cash, according to a PWC report in 2015.
Food-Delivery Robots Rolling in D.C.
Consumers face continued income uncertainty
Since the financial crisis nine years ago, American households have been through some financial ups and downs. After the crisis turned an ordinary recession into The Great Recession, a number of households lost income. Young people just entering the workforce often had to work two part-time jobs because full-time jobs were hard to get.
Things are a lot better now, but a new report from the Pew Charitable Trust found something hasn't changed since those uncertain times. A significant number of U.S. households are experiencing income volatility from one year to the next, defined as a 25% swing, up or down. More than a third of U.S. households experienced such a swing from 2014 to 2015.
Pew's most recent survey found only about 46% of respondents earned more money than they spend, meaning more than half are falling deeper into debt. Making matters more difficult, only 47% reported having consistent and predictable bills and income month-to-month. That makes financial planning harder.
Some key takeaways include the fact that income volatility is widespread but is pronounced among certain populations. Thirty-eight percent of families earning below $25,000 reported significant gains in income. At the same time, 20% of Hispanic households, and those with no college, reported declining incomes. When income shifts, the change is often dramatic. At the median, the incomes of households with losses plunged by 49%, while families with gains raised their incomes by 56%. The median household income gain was $20,500 and the median income loss was $25,000.
Almost 7,000 IRS Documents Relating To Targeting Scandal Found. Bad News: No Clue When They'll Be Public
In 2013, the IRS was involved in a scandal regarding its Exempt Organizations Unit and conservative nonprofits. Tea Party and other right-leaning groups claimed that they were targeted for audits, or their applications for tax-exempt status were subjected to extraordinary scrutiny, which then-EOU director Lois Lerner later issued an apology. In doing so, the IRS admitted that they targeted conservative groups during the 2012 election. Lerner insisted this wasn’t politically motivated:
The Internal Revenue Service on Friday apologized for targeting groups with “tea party” or “patriot” in their names, confirming long-standing accusations by some conservatives that their applications for tax-exempt status were being improperly delayed and scrutinized.
Lois G. Lerner, the IRS official who oversees tax-exempt groups, said the “absolutely inappropriate” actions by “front-line people” were not driven by partisan motives. Rather, Lerner said, they were a misguided effort to come up with an efficient means of dealing with a flood of applications from organizations seeking tax-exempt status between 2010 and 2012.
During that period, about 75 groups were selected for extra inquiry — including burdensome questionnaires and, in some cases, improper requests for the names of their donors — simply because of the words in their names, she said in a conference call with reporters. They constituted about one-quarter of the 300 groups who were flagged for additional analysis by employees of the IRS tax-exempt unit’s main office in Cincinnati.
College kids are using student loans for wild spring break trips
A growing number of students, it seems, will use their student loans to fund their upcoming fun-in-the-sun spring breaks.
Roughly 30 percent of US students will tap into their growing pile of college debt to pay for their weeklong frolic, a survey from LendEDU revealed.
That’s up from last year, when a separate survey, conducted by Google Consumer Surveys on behalf of Student Loan Hero, found that about 20 percent of students spent their loan cash on dining out, entertainment and spring breaks.
While using student loan cash for booze, beer pong and sunblock is not illegal, few experts find it wise. “Students should minimize their borrowing during their college years and live a sparse lifestyle — but no one wants to hear that when their fraternity brothers or sorority sisters are packing up to Cabo for the week,” said Greg McBride, chief financial analyst of Bankrate.com.