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Wednesday 01.11.2017

Public pensions out of control in Texas’ biggest cities

While clamoring for more “local control” on fiscal matters, big-city politicians in Texas have, at the behest of their public-employee unions, resisted efforts to restore local accountability on pensions. And problems are piling up.

Austin, Dallas, Houston and San Antonio carry a whopping $22.6 billion in unfunded pension liability, according to Moody’s, the financial analysis firm. “Rapid growth in unfunded pension liabilities over the past 10 years has transformed local governments’ balance sheet burdens to historically high levels,” the Moody’s report stated.

Dallas — second only to Chicago in its liability ratio — has unfunded obligations totaling $7.6 billion. That’s more than five times the city’s annual operating revenues. Houston, which came in fourth on the Moody’s list, faces a $10 billion shortfall, more than four times operating revenues.

Austin’s unfunded pensions are 2 ½ times operating revenue and San Antonio’s are nearly double. The problem should concern every taxpayer in the Lone Star State, says James Quintero, director of the Center for Local Governance at the nonpartisan Texas Public Policy Foundation. “There are other ticking time bombs out there getting ready to explode,” he forecast. “It’s not just Dallas’ pension plan that’s taken on excessive risk to chase high yields in a low-yield environment.”

A $22 Minimum Wage?

Hawaii’s minimum wage increased from $8.50 per hour to $9.25 on Jan. 1. It’s slated to jump to $10.10 a year from now. Businesses and business advocates complain that the higher wage is a burden while social groups complain the figure is paltry, given the state’s cost of living and the fact that some states and cities have in place higher wages.

Now along comes Hawaii state Rep. Kaniela Ing, a Democrat from South Maui, who is sponsoring legislation to increase Hawaii’s minimum wage to $15 by 2019 and $22 by 2022.

“The bill will also tie the minimum wage to the Consumer Price Index and eliminates the exemption for tipped employees,” according to a press release Tuesday. “Ing says the bill will be the nation’s most progressive ‘living wage’ law, and encompasses the spirit of the grassroots Fight for $15 movement.”

ng continued: “Hawaii is the most expensive state in the nation. Other high cost of living states and cities like Seattle, California, and New York have already passed $15 minimum wage laws. Working families are struggling, so we as legislators have a moral obligation to act. The evidence shows that raising the minimum wage to at least $15 an hour is the single most impactful policy for Hawaii’s most vulnerable.”

Anti-establishment wave to help push blockchain into real world in 2017

A wave of anti-establishment sentiment sweeping the Western world is likely to help push blockchain - the technology that gave birth to the renegade digital currency bitcoin - out of cyberspace and into the real world in 2017.

Blockchain, which allows the web-based currency to function, has attracted some big backers who have risen to prominence partly because of their rejection of traditional power structures - like bitcoin itself. Now they are looking at a wide range of new uses for the technology, with those outside the realm of finance expected to grow most.

For example, Italy's biggest opposition group, the 5-Star Movement, wants blockchain to be used in streamlining public services. In the United States, President-elect Donald Trump has a number of enthusiasts for the technology in his inner circle. Experts caution that blockchain still needs several years of experimentation and development, much like the early days of the internet, and say some projects will never work.

Nevertheless, in an ironic departure from blockchain's libertarian origins, the very establishment that early supporters hoped it would displace is also jumping on the bandwagon.

Gundlach: Bond market ‘ridiculously’ oversold

Coming to Wells Fargo: Card-free ATMs

You'll soon be able to take cash out of a Wells Fargo ATM without using a card. Starting this spring, customers can use their smartphones to withdraw money.

Here's how it will work: You'll log in to the Wells Fargo (WFC) app and request an eight-digit access code. At the kiosk, you'll enter the access code and your regular ATM code to start the transaction.

Wells Fargo is eager to restore its reputation after the revelation that it created millions of bank and credit card accounts without telling customers. New accounts plunged last year after the scandal broke. Wells Fargo plans to convert all its 16,000 ATMs to include the card-free option. Wells says it expects to be the first bank to do the full conversion.

"That's the game changer for us, that we'll be doing this to all of our ATMs," Wells Fargo spokeswoman Hilary O'Byrne told CNNMoney. Bank of America (BAC) already has the feature at about half its ATMs and plans to convert them all. JPMorgan Chase (JPM) is testing the card-free option in California, Florida and Ohio.

Citi downgrades Goldman Sachs to 'sell' on valuation

Citigroup downgraded Goldman Sachs Group Inc (GS.N) to "sell" citing valuation, sending its stock down as much as 1.6 percent and making it the biggest drag on the Dow Jones Industrial Average .DJI.

Citi analyst Keith Horowitz said Goldman would need an additional $4 billion of revenue above current full-year estimates to bridge the gap between current and expected return on tangible equity.

"While we expect Goldman will see improved trading revenues going forward, the path is relatively uncertain and the bar is relatively high," Horowitz wrote in a note to clients. Analysts on average are expecting 2017 revenue of $32.32 billion, according to Reuters data.

The downgrade comes days before the large U.S. banks start reporting fourth-quarter results, their first after the election in November and the Federal Reserve's rate hike in December. Goldman is expected to report on Jan. 18.

America’s Most Hated Companies

When Time Warner Cable merged with Charter Communications earlier this year and the new public-facing operation rebranded, changing its name to Spectrum, it was likely for good reason. For many Americans, each name had come to be associated with poor customer service.

The long erosion of reputation has the power to destroy businesses. Today, in the internet age, news of a single scandal can spread quickly and seriously cripple a previously respected brand. 24/7 Wall St. reviewed a range of information, including customer survey results from the American Customer Satisfaction Index, employee reviews on Glassdoor, as well as our own annual customer satisfaction survey. We identified 12 companies hated by customers, employees, and the general public.

A single bad experience can forever ruin a company’s image in the mind of a customer. While these are bound to happen at any organization, many of the companies on this list have developed a reputation for consistent poor performance. Most of the companies on this list score worse than the average in their industries in the ACSI. This fact is all the more serious given that many of these companies are in industries with generally poor reputations for customer service, including cable and internet service providers, airlines, and subscription television services.

In 24/7 Wall St.’s annual customer satisfaction survey, the majority of these companies had among the highest share of respondents reporting generally negative customer experiences. In the case of Comcast and Sprint, more than half of respondents had a negative customer experience, the only two existing brands out of the more than 100 we surveyed for which this was the case.

Government "advised" the Reserve Bank of India of Rs 500 and Rs 1,000 notes ban 1 day before announcement

On November 7, 2015, a day ahead of Prime Minister Narendra Modi's demonetisation announcement, it was the central government which "advised" the Reserve Bank of India (RBI) to withdraw the legal tender status of old Rs 500 and Rs 1,000 notes and not the other way round, reported the Indian Express on Tuesday while citing a seven-page note submitted by the RBI to the Parliament’s Department Related Committee of Finance.

Earlier, the government had claimed that it was the RBI which had suggested implementing demonetisation. Speaking in the Rajya Sabha on November 16, the Union Power Minister Piyush Goyal had said that the RBI runs the nation's monetary policy and that the demonetisation decision was taken by the RBI board. The RBI note, however, will only add to the many flip flops which have plagued the note ban saga so far.

"Government, on 7th November, 2016, advised the Reserve Bank that to mitigate the triple problems of counterfeiting, terrorist financing and black money, the Central Board of the Reserve Bank may consider withdrawal of the legal tender status of the notes in high denominations of Rs 500 and Rs 1,000,” said the RBI, according to the national daily, in is note submitted on December 22 .

Further, the report quoted the note as saying: "It was advised in that letter that cash has been a facilitator of black money... Elimination of black money will eliminate the long shadow of the ghost economy and will be positive for India’s growth outlook. They also observed that in the last five years, there has been an increase in circulation of Rs 500 and Rs 1,000 notes with an increasing incidence of counterfeiting of these notes."

Timeline: The rise and fall of Yahoo

Deutsche Bank Predicts Massive US Economic Growth Under Trump

The growth rate of America's gross domestic product might rise by more than 200 percent by 2018 under President-elect Donald Trump's economic plan, according to a new analysis.

CNBC cites a Deutsche Bank forecast that claims Trump's economy-boosting agenda could drive 2.4 percent growth in 2017 and 3.6 percent in 2018. Under President Barack Obama, the economy grew by an average of 1.6 percent during his eight years in office.

CNBC noted Obama is the first president since Herbert Hoover who has not overseen the economy grow by at least 3 percent in one year of their administrations. The Deutsche Bank report predicts the world economy will grow as well, increasing its 2017 GDP forecast from 3 percent to 3.4 percent.

Trump's economic plan puts an emphasis on broad-based growth, according to CNBC, which will help improve America's economy almost immediately.

Wal-Mart To Cut "Hundreds" More Jobs Before End-January

Despite the proclamations from The White House and its lackeys that this is the best jobs recovery ever and we are at full employment, it appears all is not well at the world's third largest employer.

We've discussed many times the fact that Walmart had been overly eager to boost everyone's wage in order to appease the living wage crowd, and as a result the company had to move forward with massive layoffs and store closings to try and mitigate the impact on profits. Earlier last year we also noted that Walmart is testing out drones that when operational, will be able to carry out what once were human tasks in its large distribution centers. This effort will further position the company to be able to shed more labor and benefit expense in the future. That said, Walmart isn't waiting for the drone initiative to come online.

After firing 7,000 in September, The Wall Street Journal reports, Wal-Mart is preparing another round of job cuts at its headquarters before the end of the month, according to people familiar with the situation.

The world’s biggest retailer plans to eliminate hundreds of jobs before the end of its fiscal year on Jan. 31, both at headquarters and regional personnel that supports stores, these people said. Many of the eliminations will affect Wal-Mart’s human resources department, a large team that some senior executives believe should be more efficient or whose duties could be handled by outside consultants, said these people. Other departments could be affected as well, say these people. “We are always looking for ways to operate more efficiently and effectively,” said Wal-Mart spokesman Greg Hitt. “While we continually look at our corporate structure, we have not made any announcements.”

Coming soon -- the digital license plate, ads included

Soon, every square inch of earthly space not covered by an advertisement will be covered by, yes, an advertisement. Helping to achieve this goal is a company called Reviver, which is proposing to replace the lowly license plate with a digital advertising screen.

Besides putting prison inmates out of work, eliminating the stamped metal plates would be a great leap forward in oh so many ways, as Reviver CEO Neville Boston sees it. He's been promoting the so-called rPlate at this week's Detroit Auto Show. Already operational in California, the rPlates will be coming soon to Florida and maybe Arizona, Boston said.

“The rPlate opens up the ‘connected car’ ecosystem to a myriad of solutions – some of which are already in development and many that have yet to be imagined,” said Boston in a news release. “In addition to automating the costly DMV registration process and providing telematics and fleet management capabilities, the rPlate immediately unlocks a powerful new channel for OEMs, dealerships, and organizations, to reach and service customers in hyper-local and targeted ways.”

In other words, the dealer could slap digital ads fore and aft on all its cars, a great leap forward considering that the current options are pretty much limited to a customized license plate holder or a crude sticker affixed to the trunk lid.

Gartman: We like things that if you drop on your foot will hurt

Six Years After Obamacare, 21% of Low-Income Americans Still Uninsured

More than six years after the passage of President Obama’s signature health care law purported to expand health coverage to all, nearly 21 percent of low-income Americans are still living without health insurance.

According to a new quarterly poll out from Gallup,10.9 percent of American adults still lacked health coverage at the end of 2016, a trend that remained fairly steady over the latter half of last year. In fact, despite the president’s controversial and heavy-handed health care law, the uninsured rate has dropped less than five percentage points since midway through 2008, when 15.4 percent of American adults were uninsured.

Interestingly, a large number of low-income Americans still lack coverage, despite being one of the president’s targeted populations. Gallup notes that while the number of uninsured Americans who earn less than $36,000 per year has dropped by about ten percentage points since Obamacare exchanges first opened in 2013, a full 20.8 percent of them still don’t have health insurance, despite state Medicaid expansions, Obamacare’s health insurance mandate and massive federal subsidies offered on government-run exchanges.

Many low-income Americans who have recently signed up for health coverage have done so under Medicaid, which has ballooned by about 15 million new enrollees in the last three years. Likewise, more than 27 percent of Hispanics still aren’t covered.

GM sees 2017 profit rising, boosts stock buyback by $5B

General Motors expects earnings to rise 8% to 9% in 2017, and will buy back an additional $5 billion worth of its own shares, according to a presentation to analysts this afternoon.

The automaker sees clear sailing in North America, even after Americans bought a record number of new vehicles in 2016 for the second straight year. Interest rates are beginning to rise, delinquencies among higher risk auto loans are increasing and there will be more vehicles coming off leases, exerting downward pressure on used car prices.

On a per share basis, GM expects to earn in the range of $6 to $6.50 per share for all of 2017. It has guided to a range between $5.50 and $6 a share for all of 2016. The automaker will report its final 2016 earnings on Feb. 7. GM CEO Mary Barra told analysts the company will generate about $6 billion in automotive free cash flow.

GM shares spiked immediately after the forecast went public, reaching as high as $38.16, a new 52-week high, before retreating in the final hours to close at $37.34, a still-robust 3.7% increase from Monday.

If You’re Relying On Your Tax Refund, IRS Warns It May Come Late This Year

There are just a few weeks left until tax preparation season kicks off, and today the Internal Revenue Service had some bad news for families that receive the earned income tax credit or the additional child tax credit: they will not receive their tax refunds until the end of February.

About 40 million Americans receive one or both of those credits, which generally means that they get a nice refund back. That’s the problem: identity thieves have been using taxpayers’ personal information, sometimes going as far as to steal their W-2s and past tax returns to claim refunds on their behalf.

Hoping to stop some of these refund checks from flowing out of the country to people who aren’t entitled to them, IRS commissioner John Koskinen announced today that the agency will be scrutinizing tax returns claiming these credits more closely, delaying them until the end of February for the earliest filers.

The IRS claims that it has made progress in blocking fraudulent refunds, but that’s why it needs to delay those returns, even if it means delaying payments to the working poor. Tax preparer H&R Block has promised interest-free loans to cover the extra waiting period for its customers, and other preparers will probably offer similar solutions for families who are anxious to receive their tax refund money. People with simple tax returns and modest incomes can easily file for free online.

Ford affirms 2017 to be less profitable than 2016

Ford Motor Co (F.N) on Tuesday confirmed that it would be less profitable in 2017 than last year, even as cross town rival General Motors Co (GM.N) on the same day gave a much more upbeat forecast that surpassed Wall Street expectations.

Ford, the second largest U.S. automaker, affirmed that it was on track to deliver about $10.2 billion in adjusted pretax profit in 2017, matching a forecast it gave previously..

Ford shares initially rose 0.5 percent in extended trading but by early Tuesday evening were flat with their closing value of $12.85. GM shares were also trading near their close of $37.35, up 3.7 percent from the previous day. Ford said profit would improve in 2018 but in 2017 the company would be pressured as it increased spending on "emerging opportunities" like self-driving cars and a rise in other costs.

The company last week said it was on course to deliver a "high-volume, fully autonomous vehicle for ride sharing in 2021" and a fully electric small SUV with a range of at least 300 miles on a full charge.

Why so few cars qualify as "American-made"

Donald Trump last week launched a trifecta of attacks on major automakers. Having bashed Ford (F) and General Motors (GM) for plans to open new factories in Mexico, the president-elect added Toyota to the list. He said if the Japanese automaker (TM) opened a planned Mexican plant to build Corollas, it would face a “big border tax” of 35 percent on any of those cars sold in the U.S.

Never mind that many Republican congressional leaders are anti-protectionism and would likely be reluctant to pass such a tax. The bigger problem is that the notion ignores the modern realities of the auto industry, in which the flow of cars and auto parts across national borders is built into a system that makes it hard to identify “American” cars.

This reality is reflected in the annual American-Made Index published by automotive web site Cars.com. In the most recent version, published last June, only eight cars qualified as “American,” compared with nearly 30 vehicles just five years earlier. And of those eight, five are from Toyota or Honda (HMC). Three GM SUVs complete the list.

To make the list, a vehicle must be assembled in the U.S. using at least 75 percent of parts made here as well. (Although under a labeling law, parts from Canada can be included). Once that group of vehicles is assembled, rankings are determined by sales of individual cars.

Millennials: The Dumbest Generation in History?

U.S. consumer debt surges to fresh record of $3.75 trillion

American consumers are borrowing again, and creating records like it’s nobody’s business.

The Federal Reserve said in a new report Monday that total borrowing surged $24.5 billion, up from $16.2 billion in October. This is the fastest pace that debt has climbed in three months.

In total, United States consumer debt has soared to a fresh record of $3.75 trillion. According to the U.S. central bank, the biggest jump was in credit card debt, which advanced $11 billion in November, up from $2.4 billion in October. This will certainly please retailers because this was the beginning of the Christmas shopping season.

Meanwhile, the acceleration of debt in auto loans and student loans experienced a hiccup in November. They rose $13.5 billion in November, down from a $13.8 billion increase in the previous month.

Yahoo to sell core businesses to Verizon, become known as 'Altaba'

One of America's first gateways to the world wide web, could be getting a new name, if Verizon's $4.8 billion purchase of internet hub Yahoo goes according to plan.

Yahoo, a company that was once valued at more than $100 billion and still currently ranks as the highest-read news and media website and the sixth most visited website in the world, according to Pew Research, will sell its core internet business. What's leftover will be called Altaba, effectively ending an internet brand that has operated for more than 20 years.

The name of the remaining part of the company (consisting of a stake in Alibaba and Yahoo Japan) is a combination of "alternate" and Alibaba, a Chinese e-commerce company with whom Yahoo partnered. It also reflects the new nature of the company, which would primarily include stakes in Alibaba (worth about $35 billion) as well as a smaller stake in Yahoo Japan (worth about $8.5 billion).

The deal would also include CEO Marissa Mayer’s stepping down, as well as the departure of Yahoo co-founder David Filo and four other key members of the Yahoo board, according to an SEC filing. Ms. Mayer, who joined Yahoo in 2012 as the company's sixth CEO since 2007, made valiant efforts to turn around the ailing company.

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