Headline News Archives

Tuesday 04.11.2017

Yellen Says Fed's Focus Has Shifted to Sustaining Economic Gains

Federal Reserve Chair Janet Yellen said the U.S. central bank’s task has shifted from a post-crisis exercise of healing the economy to one aimed at sustaining progress.

“Before, we had to press down on the gas pedal trying to give the economy all of the oomph that we possibly could,” Yellen said Monday in Ann Arbor, Michigan. The Fed is now trying to “give it some gas, but not so much that we’re pushing down hard on the accelerator.”

Yellen and her colleagues are aiming to ease back significantly this year on the level of support the central bank is providing the U.S. economy as they close in on their goals of full employment and 2 percent inflation. Policy makers have penciled in two additional rate hikes this year, on top of one executed in March.

Minutes of their March meeting showed that most Fed officials also expect to begin shrinking the bank’s $4.5 trillion balance sheet later this year, gradually reversing emergency bond purchases made during the financial crisis and recession. “The appropriate stance of policy now is closer to, let me call it neutral,” Yellen said in response to questions during an event at the Gerald R. Ford School of Public Policy at the University of Michigan.

U.S. Gold Bullion Exports To Hong Kong Surge, 82% Of Total Shipments

U.S. gold bullion exports to Asia started off with a bang in 2017, as the majority of the total shipped in January went to Hong Kong. Not only did the U.S. export most of its gold bullion to Hong Kong, it was the highest monthly amount in quite some time.

Looking back at the data for the past two years, Hong Kong’s highest monthly amount of gold bullion imported from the United States was less than half of what was shipped in January. According to the USGS, the U.S. exported 31.6 metric tons (mt) of gold bullion to Hong Kong, 82% of the total 38.1 mt shipped in January:

The four other countries that received the remaining lion’s share was, China (2 mt), India (1.6 mt), Singapore (1 mt) and Switzerland (1 mt). If we assume that most of the gold bullion exported to Hong Kong made its way into China, then if we add the other 2 mt that China received, the total gold bullion shipped to China was more like 33.6 mt.

Either way, the overwhelming majority of U.S. gold bullion exports in January went to Asian countries and India (35.2 mt). Switzerland only received 1 mt of gold bullion from the United States. However, Switzerland also received 14.3 mt of gold dore bars and precipitates from the U.S.. The majority of this amount likely came from domestic U.S. gold producers.

Survey has some bad news for restaurant industry

Frequent users of quick-service and fast-casual restaurants are planning to cut back on their restaurant spending in the coming year, usually because they want to spend their money on something else.

That is the result of a survey of 1,000 U.S. consumers by the New York-based consulting firm AlixPartners. The results suggest that sales and traffic challenges that beset the industry in 2016 could be part of a longer-term trend.

“There’s a significant percentage of us thinking of their dining dollars differently,” said Adam Werner, a managing director with the firm. “You’re thinking of dollars you may have allocated toward restaurants and are thinking of spending them in other ways.” Surveys of consumer spending intentions can be tricky, because consumers frequently overstate how much they intend to cut back on spending.

Still, the results offer similar conclusions to other studies suggesting a consumer that is concerned about rising prices in restaurants and is more willing to cut back on restaurant spending in favor of other things. The survey found that more than half of consumers, 57 percent, plan to dine out the same number of times in the next 12 months that they did last year — the same percentage as a year ago. And these consumers’ average spending per meal was $15.38, the highest in the survey’s history.

Why thousands more retail stores may have to close

The wrenching changes in the retail industry resulting from the shift of consumer spending online shows no signs of slowing. As shoppers flock to e-commerce sites such as Amazon (AMZN), the result has been a record number of store closures and thousands of job cuts.

A recent Cowen & Co. report predicts that mall-based chains such as Macy’s (M), JCPenney (JCP), Abercombie & Fitch (ANF), Gap (GPS) and Ascena (ASNA) (parent of Lane Bryant, Anne Taylor and Loft stores), may have to trim their store counts by 20 percent or more. The Cowen estimate would equal about 2,000 locations and is more than the closures retailers have announced but haven’t completed yet. And it would mean about 20 percent of U.S. malls, particularly those in weak markets, will have to be “repurposed” or closed, the report said.

The Cowen estimate would equal about 2,000 locations and is more than the closures retailers have announced but haven’t completed yet. And it would mean about 20 percent of U.S. malls, particularly those in weak markets, will have to be “repurposed” or closed, the report said.

“Declines in traffic have been a multi-year issue; however, we believe this problem has accelerated and become more volatile given the rise of mobile phone use as well as share gains at Amazon -- and the battle amongst online stores of traditional retailers,” Cowen said. “The consumer is in the catbird seat -- the consumer wants and demands ease, value, and selection. If you do not offer this, the shopper will get this combination somewhere else.”

Neel Kashkari: Biggest banks still in danger of failing

Wells Fargo report gives inside look at the culture that crushed the bank's reputation

A high-level investigation into the fake accounts scandal at Wells Fargo blamed a "sales-oriented culture or a decentralized corporate structure" that "unfortunately coalesced and failed dramatically," resulting in one of the worst banking controversies in years.

A report obtained by CNBC detailed the findings of the investigation, which was overseen by a special board committee chaired by Stephen Sanger and including three other independent directors: Elizabeth Duke, Enrique Hernandez and Donald James. To assist the special committee, the group retained law firm Shearman & Sterling.

The investigation included 100 interviews of current and former employees, reviewed information concerning more than 1,000 existing and past investigations, and searched more than 35 million documents.

The review was particularly critical of former head of Wells Fargo's Community Bank unit, Carrie Tolstedt, and the way she and her team allegedly cultivated a culture that led to wrongdoing: "Even when challenged by their regional leaders, the senior leadership of the Community Bank failed to appreciate or accept that their sales goals were too high and becoming increasingly untenable." "It was convenient instead to blame the problem of low quality and unauthorized accounts and other employee misconduct on individual wrongdoers."

Gas Prices Higher in 48 States, National Average Spikes 3%

The price of gasoline on Monday morning was higher by seven cents a gallon compared with last week’s national average pump price for regular. Compared with the same day last year, Monday’s national average price of $2.40 is about 35 cents a gallon higher.

U.S. refineries are back near normal production levels of more costly summer-grade gasoline. Combined with still-rising crude oil prices, U.S. drivers are paying more at the pump and probably will be for several weeks.

GasBuddy senior petroleum analyst Patrick DeHaan said: While the continued increases are completely seasonal in nature, it’s not any easier for motorists to digest. Oil now stands $5 per barrel higher than just a few weeks ago and is the main culprit for rising gasoline prices. Many areas are also nearing completion of the transition to summer gasoline and with it comes a complex list of various summer blends of gasoline that cause us to pay more each and every spring. In addition, with the situation in Syria, there is a rising risk of more heat between some of the world’s largest oil producers, causing concern in oil markets which could be a slight contribution to higher prices

Gas prices rose in 48 states over the past week. The five states taking the largest increases were Kentucky (up 15 cents a gallon), Florida (12 cents), Michigan (12 cents), Indiana (11 cents) and Missouri (10 cents).

2 of America's biggest truckers are merging to form a $5 billion industry giant

Knight Transportation and Swift Transportation have agreed to merge to create a North American trucking giant.

The merged firm, to be called Knight-Swift, will have a holding-company structure while maintaining the distinct brands, according to a statement Monday.

In an all-stock transaction, each Swift share will convert into 0.72 shares of the merged company. Each Knight share will be swapped for one Knight-Swift share. The deal would help Knight and Swift take on their competitors amid plunging orders for some companies like Volvo Trucks North America. The rise of e-commerce is also changing their industry, as volumes and costs rise to meet new demand for home delivery.

The two companies earned about $5.1 billion in total revenue and $416 million in adjusted operating income last year. The companies expect to achieve about $15 million in cost-saving synergies and pretax revenue in the second half of 2017, and up to $150 million in 2019.

Single-Payer Health Care: America Already Has It

Tesla becomes most valuable U.S. car maker, edges out GM

Tesla Inc on Monday briefly became the most valuable U.S. car maker, reaching a market capitalization of as much as $51.105 billion, higher than General Motors's .

Helped by an analyst's recommendation, the luxury electric car maker's stock rose as much as 3.15 percent to a new record high of $313.73, and its market value was at one point larger than GM's, which was $51.095 billion, before it dropped behind again.

Over the past month, Tesla has surged 35 percent as investors bet that it and Chief Executive Elon Musk will revolutionize the automobile and energy industries.

Tesla's market capitalization is now equivalent to $102,000 for every car it plans to make in 2018, or $667,000 per car sold last year. By comparison, GM's market capitalization is equivalent to $5,000 per car it sold in 2016. Proponents believe Tesla will become a carbon-free energy and transportation heavyweight and they argue its valuation is reasonable based on long-term expectations for Tesla's growth.

IMF, WTO Argue for Open Trade, More Aid for Displaced Workers

Global trade has brought benefits from increased productivity to lower prices but governments have not adequately helped workers and communities hit hard by imports, the world's top multilateral economic institutions said on Monday.

In a report that serves as their answer to the Trump administration's more protectionist trade stance, the International Monetary Fund, World Trade Organization and World Bank said that an open trading system based on well-enforced rules was critical to world prosperity.

The institutions, which have promoted free trade for decades, cited research showing that manufacturing regions that were more exposed to imports from China since about 2000 saw "significant and persistent losses in jobs and earnings, falling most heavily on low-skilled workers."

It described what U.S. President Donald Trump has called the "forgotten Americans" that he wants to serve with his "America First" trade policies. "Workers displaced from manufacturing tend to be older, less educated and longer-tenured in the lost job than workers displaced from other sectors, and in turn tend to take longer to return to work," the groups said in the report.

The number of reluctant part-time workers is still higher than before the Great Recession

Millions of Americans don’t want to work part-time. The U.S. economy added just 98,000 jobs in March, the smallest gain in nearly a year, after adding more than 200,000 jobs in January and February. Economists predicted that the number of jobs created in March would hit 180,000, so the actual figures fell far short of that. Unemployment fell to a 10-year-low of 4.5% in March from 4.7% in February, but the “real” unemployment rate that includes part-time workers who would rather work full-time and job hunters who gave up searching for work was 8.9%, although this was also down from 9.2% in February.

Part-time work is still a contentious alternative for many workers. On Thursday, Amazon said it will create 30,000 part-time jobs in the U.S. over the next year, nearly double the current number. Of those, 25,000 will be in warehouses and 5,000 will be home-based customer service positions. Amazon AMZN, +1.18% said in January it would create 100,000 full-time jobs over the next 18 months, according to a separate announcement made in January. Last year, Amazon’s world-wide workforce grew by 48% to 341,400 employees. In the U.S., it has over 70 “fulfillment centers” and 90,000 full-time employees. (Amazon did not respond to request for comment.)

There were some 5.6 million involuntary part-time workers in March 2017, little changed from the month before, but down from 6.4 million a year earlier, according to the Bureau of Labor Statistics. That number is up from 4.5 million in November 2007, but way off a peak of 8.6 million in September 2012. These figures are almost entirely due to the inability of workers to find full-time jobs, leaving many workers to take or keep lower-paying jobs, according to the Economic Policy Institute, a nonprofit think-tank in Washington, D.C. And 54% of the growth in these involuntary part-time jobs between 2007 and 2015 were in retail, leisure and hospitality industries, the EPI said.

There’s a prolonged “structural shift toward more intensive use of part-time employment,” the Economic Policy Institute report found. Aside from the frequent lack of sufficient work hours, these part-time workers must also “navigate unpredictable and/or variable hours,” with their work schedules varying week-to-week at a rate more than double that of full-time workers, it added. What’s more, part-time workers suffer from a lower rate of pay and benefits coverage than full-time workers, such as access to health insurance and paid time off. Compared to similar full-time workers, men working part-time earn 19% and women working part-time earn 9% per hour.

Watchdog calls out HUD for $500B-plus in accounting 'errors'

Everybody makes mistakes – but this could be an accounting error for the ages. An inspector general audit has identified more than $500 billion in "errors corrected" in the notes and financial statements for the Department of Housing and Urban Development under the Obama administration.

According to the report released in March, HUD reissued financial statements for fiscal 2015 and 2016 "due to pervasive material errors that we identified." Those errors were contained in a November filing. "The total amounts of errors corrected in HUD’s notes and consolidated financial statements were $516.4 billion and $3.4 billion, respectively," the IG said.

The office also noted other circumstances that apparently made it difficult for the IG to obtain “sufficient, appropriate evidence” as part of the report. According to the IG, this included weak internal controls over financial reporting which led to errors and delays in preparing financial statements; several “significant deficiencies”; and instances of noncompliance with applicable laws and regulations.

In response, HUD revised the statements and said the “errors” were solely in “presentation” of financial information which had since been corrected. A February letter from HUD’s Chief Financial Officer Courtney B. Timberlake also argued that the corrections “did not represent a change in cash balances, any improper payments, or misallocation of HUD resources.”

U.S. Government shutdown?

California Cities' Pension Tab Seen Almost Doubling in 5 Years

California cities and counties will see their required contributions to the largest U.S. pension fund almost double in five years, according to an analysis by the California Policy Center.

In the fiscal year beginning in July, local payments to the California Public Employees’ Retirement System will total $5.3 billion and rise to $9.8 billion in fiscal 2023, according to the right-leaning group that examines public pensions.

The increase reflects Calpers’ decision in December to roll back the expected rate of return on its investments. That means the system’s 3,000 cities, counties, school districts and other public agencies will have to put more taxpayer money into the fund because they can’t count as heavily on anticipated investment income to cover future benefit checks.

Calpers hasn’t calculated the dollar impact of reducing the investment return over the years, said the group, which derived its estimate from guidance the system sent in January. Including the costs paid by cities and counties that run their own systems, the fiscal 2018 tab will be at least $13 billion to meet retirement obligations for public workers, according to the analysis, which is based on actuarial reports and audited financial statements.

Charlotte-based Dollar Express closing all 323 of its stores

Charlotte-based Dollar Express is closing all of its 323 stores nationwide, according to a notice this week to state officials, the latest blow for employees who were surprised last week by the retail chain’s proposed sale to Dollar General.

Nearly 2,800 employees – including 110 in the Charlotte corporate office – are losing their jobs ahead of the deal, which still needs approval from federal regulators. The Observer reported earlier this week that the jobs were in jeopardy.

As a standalone company, the retailer owned by New York private equity group Sycamore Partners lasted less than 18 months. Analysts said the company may have found itself on a bumpy road from the start, especially in the face of giant competitors like Dollar General and Family Dollar. In a federal filing, the company said without a sale, it no longer had a viable future.

Dollar Express said in its notice to the N.C. Commerce Department that it made the “difficult decision” to close all of its stores, as well as its corporate office, by June 30. Store-level Dollar Express employees nationwide this week also received letters from the company notifying them of the closure. “The company’s decision is certainly not a reflection on the store team, and we appreciate your efforts to make the store successful,” reads the letter from Dean Williamson, head of human resources at Dollar Express. The letter adds that Dollar Express has “a need for your services until the store closes.”

Immigration Reform 2017: Billions In H-1B Funds Wasted, Report Finds

U.S. Citizenship and Immigration Services’ suspension of the premium processing route for its H-1B visa program, effective April 3, will cost the government $100 million in foregone fees charged to companies for lowering the wait times for authorization of skilled foreign workers, ProPublica found in a report released Friday. Making matters worse, the revenue cuts came as a failed 12-year-old initiative to digitize the agency has cost it upwards of $2.3 billion, according to ProPublica’s investigation.

Each year, USCIS establishes a cap of 85,000 H-1B visas, reserved for foreign workers with bachelor’s degrees or higher in fields of technology, math and business, but doled out nearly 173,000 in 2015. The sheer volume has expanded wait times to as long as several months, but the premium processing service allowed companies to limit their waiting period to 15 days for a fee of $1,225.

That fee has been a key source of the revenue channeled toward a program known as Electronic Immigration System—or, in a play on the immigration center Ellis Island, “ELIS”—that’s been rife with faulty information and errors, and hasn’t helped the agency draw down its excessive and inefficient use of paper files, current and former officials told ProPublica.

In addition to suspending the premium route at the start of March, USCIS implemented new restrictions earlier in April to combat fraudulent use of the visa program, which the agency reopened March 15 with the annual cap at its usual level.

Oil Prices Pull Higher On Outage In Libya’s Biggest Oil Field

Production from Sharara, Libya’s biggest oil field, has stopped again, unnamed sources told Bloomberg. The sources said the pipeline that carries crude from Sharara to the Zawiya export terminal stopped operating on Sunday, without giving any further details.

The field produces 200,000 barrels of crude daily, contributing a large part of the country’s overall output, which stood at 700,000 bpd before last week. The first suspension of production at Sharara, as well as at a neighboring field, Wafa, occurred two weeks ago when unnamed armed factions blocked the pipeline carrying oil to the coast, cutting the country’s total output by 252,000 bpd.

Last week, however, the National Oil Corporation said that after intervention from its chairman Mustafa Sanalla, the militiamen agreed to release the pipeline, so the oil flow could be resumed.

The Sharara field was just restarted in December 2016, and NOC said that it planned to increase output from it to the 330,000 bpd it pumped before the civil war, aiming for a national total of 900,000 bpd in the next few months and 1.1 million bpd at the end of 2017.

Will tax reform really happen by August?

Over 100,000 Of Amazon’s Third-Party Sellers Were Hacked

You know that deal for a Roomba vacuum you saw on Amazon last week that seemed too good to be true? It probably was. It’s a good thing you passed. Over 100,000 of Amazon’s two million third-party sellers saw their accounts hacked in recent weeks, with said stolen information then finding its way onto the ‘dark web.’ There, crooks used the stolen credentials to sell nonexistent merchandise, then changed users banking info to their own to collect the sales.

The theft of the Amazon Seller account usernames and passwords allowed hackers to list high-priced items at hugely discounted rates in an attempt to quickly gain sales of which they diverted to their own bank account. Buyers jump on the steal-of-a-deal right away, and the money clears their account in no time. Before the actual seller can even receive an email informing them they have sold a product that they don’t recognize, the money is gone.

While Amazon isn’t commenting on issues individual sellers have had, a company spokesman said the company “is constantly innovating on behalf of customers and sellers to ensure their information is secure and that they can buy and sell with confidence.” This same scheme has been used in the past on eBay sellers using PayPal accounts, but this is the first time Amazon has seen the move used on their website. With Amazon being a heavyweight in the online marketplace, it was only a matter of time until hackers broke in:

“Hacking Amazon is becoming … increasingly a big deal,” said Juozas Kaziuk nas, chief executive of Marketplace Pulse, a business-intelligence firm focused on e-commerce. “The value to be gained is bigger as Amazon grows.”

The Gig Economy’s False Promise

The promises Silicon Valley makes about the gig economy can sound appealing. Its digital technology lets workers become entrepreneurs, we are told, freed from the drudgery of 9-to-5 jobs. Students, parents and others can make extra cash in their free time while pursuing their passions, maybe starting a thriving small business.

In reality, there is no utopia at companies like Uber, Lyft, Instacart and Handy, whose workers are often manipulated into working long hours for low wages while continually chasing the next ride or task. These companies have discovered they can harness advances in software and behavioral sciences to old-fashioned worker exploitation, according to a growing body of evidence, because employees lack the basic protections of American law.

A recent story in The Times by Noam Scheiber vividly described how Uber and other companies use tactics developed by the video game industry to keep drivers on the road when they would prefer to call it a day, raising company revenue while lowering drivers’ per-hour earnings. One Florida driver told The Times he earned less than $20,000 a year before expenses like gas and maintenance. In New York City, an Uber drivers group affiliated with the machinists union said that more than one-fifth of its members earn less than $30,000 before expenses.

Gig economy workers tend to be poorer and are more likely to be minorities than the population at large, a survey by the Pew Research Center found last year. Compared with the population as a whole, almost twice as many of them earned under $30,000 a year, and 40 percent were black or Hispanic, compared with 27 percent of all American adults. Most said the money they earned from online platforms was essential or important to their families.

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