Headline News Archives

Wednesday 02.15.2017

Fed on course to raise interest rates at an upcoming meeting: Yellen

The Federal Reserve will likely need to raise interest rates at an upcoming meeting, Fed Chair Janet Yellen said on Tuesday, although she flagged considerable uncertainty over economic policy under the Trump administration.

Yellen said delaying rate increases could leave the Fed's policymaking committee behind the curve and eventually lead it to hike rates quickly, which she said could cause a recession.

"Waiting too long to remove accommodation would be unwise," Yellen said in prepared remarks before the U.S. Senate Banking Committee, citing the central bank's expectations the job market will tighten further and that inflation would rise to 2 percent.

"At our upcoming meetings, the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate."

Swiss Bank Credit Suisse to Cut 5,500 Jobs This Year

Credit Suisse announced plans Tuesday to cut as many as 6,500 jobs this year in an “incremental headcount reduction,” as the Swiss bank continues to rein in costs and change course after two years of losses.

The news came as the Zurich-based bank said that it had more than halved its fourth-quarter loss compared with a year earlier, amid a “challenging” global market and continued cost cuts, and after striking a multibillion-dollar settlement with U.S. regulators over its activities in the run-up to the 2008 financial crisis.

David Mathers, the bank’s chief financial officer, said that Credit Suisse was targeting “net headcount reductions of between 5,500 and 6,500 across the bank” to further lower operating expenses to no more than 18.5 billion Swiss francs by the end of 2017, from 19.4 billion at the end of last year.

Mathers did not specify the types of positions or regions that would be most affected, but a Credit Suisse spokesman said in an e-mail that the focus would be “on contractors, consultants and other contingent workers” that the bank employs by the tens of thousands.

Yellen says 'slowing immigration would slow economic growth' when asked about Trump's immigration plans

Federal Reserve Chair Janet Yellen laid out the negative impact of restricting immigration during her testimony to the Senate Committee on Banking, Housing, and Urban Affairs.

Democratic Sen. Catherine Cortez Mastro asked Yellen about the economic impact of restricting immigration and President Donald Trump's policies regarding the deportation of immigrants from the US.

Cortez Mastro, citing a recent executive order that Trump said is designed to combat criminal organizations that focus in part on undocumented immigrants, noted there was also a wave of deportations by the Immigration and Customs Enforcement (ICE) agency. The Senator asked in Yellen's opinion what a crackdown on immigration would mean for the economy.

While Yellen said she would not "comment in detail on immigration policy" she did lay out what the impact of restraining immigration would be on the economy. From Yellen's testimony: "Labor force growth has been slowing in the United States. It's one of several reasons along with slow productivity growth for the fact that our economy has been growing at a slow pace. Immigration has been an important source of labor force growth. So slowing the pace of immigration probably would slow the growth rate of the economy."

Conservatives take on ‘reverse tea party’

Shoe retailer Payless steps closer to closing hundreds of stores

Payless Inc. is in talks with its lenders over a restructuring plan that includes closing about 1,000 stores as it wrestles with an unsustainable debt load, according to people with knowledge of the matter.

The discount shoe retailer may consider filing for bankruptcy if it’s unable to reach a deal with the creditors, said the people, who asked not to be identified because the information isn’t public. A decision on whether to restructure in or out of court may be reached as soon as this month, they said.

The chain has hired Guggenheim Partners to help in the effort, the people said. Guggenheim declined to comment, as well as Payless. Payless, No. 341 in the Internet Retailer 2016 Top 500 Guide, is the latest retailer to find its back against the wall because of declining mall traffic as more and more customers shift spending to experience from shoes and apparel. The retailer hired law firm Kirkland & Ellis LLP to look at options for its $600 million debt load, people with knowledge of the matter said earlier.

Traditional chains are struggling because of the quickening shift to online shopping offered by competitors led by Inc. (No. 1 in the Top 500) Retailers such as J. Crew Group Inc. (No. 49), Claire’s Stores Inc. (No. 455), Gymboree Corp. (No. 365), Rue21 Inc. (No. 453) and True Religion Apparel Inc., No. 705 in the Internet Retailer 2016 Top 1000, are identified as the most troubled companies on S&P Global’s list of retailers on negative outlook.

Goldman Denies Bonuses To 100 Investment Bankers

As discussed yesterday, over the course of the past 17 years, Goldman trimmed its cash equity trading desk from 600 workers to just 2, replacing virtually all carbon-based traders with automated programs, engineers and algos. But while the gradual replacement of expensive traders with cheap machines is nothing new, Goldman CFO Marty Chavez opened a whole new can of worms when during a presentation at Harvard conference last month, he said "next, will be the automation of investment banking tasks, work that traditionally has been focused on human skills like salesmanship and building relationships. Though those “rainmakers” won’t be replaced entirely, Goldman has already mapped 146 distinct steps taken in any initial public offering of stock, and many are “begging to be automated,” he said."

It now appears that this far more troubling outsourcing may have started when Bloomberg reported that Goldman Sachs didn’t pay 2016 bonuses to about 100 "plain vanilla" investment bankers who advise on takeovers and underwrite securities offerings, "signaling to a bigger crowd of underperformers that they’re probably better off elsewhere."

As Bloomberg adds, the move is more draconian than in past years when many dealmakers who failed to impress their bosses still got something. The number of employees denied a bonus in recent weeks is higher than a year ago -- eliminating what’s typically a major component of their pay. The news is surprising when one considers that as of Q4, Goldman's bonus accrual was the highest on one year, suggesting that the bank may be increasingly concerned about future revenue prospects.

Still, despite the pick up in compensation, and despite remaining No. 1 in global merger adviser in 2016, investment-banking revenue tumbled 11% to $6.27 billion, more than some rivals such as JPMorgan where iBankning revenue slipped 6.7%. In addition to bankers, Goldman also reporetedly denied bonuses to employees in the securities division, run by Isabelle Ealet, Pablo Salame and Ashok Varadhan, though the number affected was more in line with previous years, Bloomberg adds. The fixed-income business in that unit has already seen broad job cuts, and client activity there improved in the second half of the year.

Has the US Reached ‘Peak Car’?

In 2006, the number of light vehicles per household in the United States peaked at 2.050. Since then it dropped to a low of 1.927 vehicles per household in 2013, before climbing back up to 1.950 in 2015.

Measured by miles traveled per household, the peak year was 2004, when the distance driven came to 24,349 miles. Miles driven reached a recent low of 21,866 miles driven per household in 2013 and climbed back to 22,311 in 2015.

The data were reported Tuesday in a new study from Michael Sivak and Brandon Schoettle from the University of Michigan Sustainable Worldwide Transportation group. According to the study, vehicle ownership rates per person and per household are down 4.4% from their recent highs and up 1.4% from recent lows. The ownership rate per household is roughly equal to the rate in 1993.

Miles driven per person and per household are down about 7.8% from their peak and have regained about 2.1% from their trough. The average miles driven per person is about equal to the rate in 1997, and the average per household is roughly the same as in 1994. According to U.S. Census Bureau data, in 1993 there were about 260 million people living in the United States, compared with nearly 324 million at the end of 2016. The number of households grew from 96.4 million to 125.8 million in the same period.

California spent on high-speed rail and illegal immigrants, but ignored Oroville Dam

The flood danger from the Oroville Dam receded Monday, but California was hit by a wave of criticism for failing to heed warnings about risks to the spillway at a time when the state spent generously on illegal immigrants and high-speed rail.

California Gov. Jerry Brown, a Democrat, came under fire amid reports that federal and state officials for years rebuffed or ignored calls to fortify the massive 50-year-old dam, which provides water to more than 20 million farmers and residential consumers.

“What’s Governor Brown doing?” former state Assemblyman Tim Donnelly, a Republican, asked in a Monday post on Facebook. “The same thing he’s been doing for decades — obstructing progress.”

A radio talk show host, Mr. Donnelly said California “has been so busy defying President Donald Trump in order to protect illegal aliens from deportation that it forgot to do the things government is supposed to do, like maintain infrastructure. Governor Brown is now going hat-in-hand to beg the Trump administration for emergency funds.” The blame game for the giant sinkhole in the dam’s concrete spillway kicked in as state and county officials announced that they had managed to discharge enough water from Lake Oroville to stop sheets of water from cascading over its earthen walls.

Sanctuary cities, states ignoring federal immigration law

Big Brother is watching you: Jim Rogers prophesizes death of cash & total govt control of spending

The time will come when you won't be able to buy a cup of coffee without being traced, warns investment guru Jim Rogers. To control people, governments will increasingly seek to hunt down cash spending, he adds.

“Governments are always looking out for themselves first, and it's the same old thing that has been going on for hundreds of years. The Indians recently did the same thing. They withdrew 86 percent of the currency in circulation, and they have now made it illegal to spend more than, I think it's about $4,000 in any cash transaction. In France you cannot use more than, I think it's a €1,000,”said Rogers in an interview with MacroVoices Podcast.

“Many countries are already doing this. Some states in the US you cannot make cash transactions above a certain amount. Governments love it. Then they can control you.

If you want to go and buy a cup of coffee, they know how many you drink, where you buy them, etc., if they can all put it into electronic formats and they will. The world is all going electronic,” the investor said.

Retail CEOs to Meet with Trump in Bid to Kill U.S. Border Tax

U.S. President Donald Trump will meet with the chief executives of eight large retailers, including Target Corp, Best Buy Co Inc and J.C. Penney Company Inc, to discuss tax reform and infrastructure improvements, according to people with knowledge of the meeting.

A White House official confirmed Trump will meet with retail industry CEOs on Wednesday morning to discuss economic growth.

The meeting will include Target CEO Brian Cornell, Best Buy CEO Hubert Joly, Gap Inc CEO Art Peck, Autozone Inc CEO William Rhodes, Walgreens Boots Alliance Inc CEO Stefano Pessina, J.C. Penney Company Inc CEO Marvin Ellison, Jo-Ann Stores LLC CEO Jill Soltau and Tractor Supply Co CEO Gregory Sandfort, according to the people familiar with the matter.

This is the first time well-known retail CEOs will descend on Washington as a group to try to make the case that a controversial proposal to tax all imports will raise consumer prices and hurt their businesses.

Consumers Are Too Giddy When It Comes to Borrowing

Is there such a thing as being too happy? Ronald Reagan was president the last time Americans were as overwhelmingly optimistic about the prospects for jobs. The latest University of Michigan survey on households’ expectations for unemployment declines in the next 12 months came in at 33 percent, matching January for the highest level since 1984, when it was 35 percent. What could be wrong with that?

History tells us that bubbles in optimism can be dangerous for the economy. For starters, an unemployment rate with a "three-handle" that is implied by the Michigan survey isn't even in the same zip code as the Federal Reserve’s forecast for this year or next. The bottom of its 2018 range is 4.2 percent. Any notion of a gradual path of interest-rate increases would be dashed. The result would likely be an inversion of the yield curve -- which has historically preceded recessions -- and a weaker stock market.

The hard data have for some time been broadcasting what’s to come. The costs of higher education, housing and car prices have risen so much that households have had to stretch to qualify for a mortgage or make payments that are in line with the size of their paychecks.

While it’s true that "only" 11.1 percent of the $1.4 trillion in outstanding student loans are delinquent, as has been the case for four years running, fewer than half of all undergraduates are paying down their debt. The remaining are either delinquent or have asked for relief in one of two forms: temporary payment deferment or a payment plan gauged off their income level. A recent report from Goldman Sachs Group Inc. noted that, “high delinquencies will continue to constrain the ability of young households to purchase and finance homes on a forward basis.”

Sporting goods store Gander Mountain going bankrupt

Minnesota-based retailer Gander Mountain is preparing for bankruptcy, which could be filed by the sporting goods store as early as next month, Reuters reports. According to Reuters, Gander Mountain has a $30 million loan, and revolving credit lines for $25 million and $500 million.

A company representative told the Star Tribune that the company has "taken a vow of silence."

Even though the sale of guns and accessories have been booming for the last eight years, the competition in the market has ramped up. Top competitors Bass Pro Shops and Cabela's have opened dozens of stores across the nation the last few years.

In 2016, Bass Pro Shops offered to buy Cabela's for at least $4.5 billion. Like its top competitors, Gander Mountain has also opened a number of locations. According to the Star Tribune, Gander Mountain has increased its footprint from 110 stores in 2012 to 162 currently.

Decades-Old Drug Approved By FDA, Gets 7,300% Price Hike

Last week, the Food and Drug Administration announced that a drug previously not officially available to patients in the United States had been approved. Deflazacort, a corticosteroid, has been shown to be useful and life-prolonging for patients with Duchenne muscular dystrophy, a rare and fatal disease. Its U.S. launch has been delayed, however, after lawmakers questioned the dramatic price hike that came with its debut here.

How much of a price increase? That depends on who you ask. The drug will be marketed under the name Emflaza, and its sticker price will be $89,000 for a year’s worth of pills. The CEO of Marathon Pharmaceuticals, the company marketing the drug, said that the typical cost per patient after discounts and insurance rebates would be $54,000 per year.

The Wall Street Journal reports that families currently pay an average of $1,200 to import deflazacort from countries where it’s available. The price varies: One mother reports paying $800 to $1,000, and other families pay up to $1,600.

Marathon Pharmaceuticals didn’t invent or even perform its own clinical trials on deflazacort, but bought the rights to data from clinical trials performed on Duchenne muscular dystrophy patients in the 1990s, using that to submit an application to the FDA. The clinical trial data showed that the drug helped patients keep more muscle strength, and patients taking it retained their ability to walk for longer.

Keiser Report: Banks appeased, crocodiles feasting

H-1B visas help American firms remain competitive: Indian envoy to US

H-1B visas, sought-after by Indian IT professionals, help make US firms competitive globally and contribute to generating jobs locally, India's envoy here has said amid reports the Trump administration plans to cut down the scheme.

"The H-1B scheme has been crucial in making US companies competitive globally in increasing their client base, in increasing their innovation. And it is the Indian tech industry, which has actually been creating jobs here (in the US)," ambassador to the US Navtej Sarna told CNN on Monday.

"There are reports and analysis by very respected houses, which say that over 400,000 jobs have been directly and indirectly supported in the US," he said, adding that Indian tech companies have invested $2 billion in four years and paid $20 billion in taxes.

H-1B visa is a non-immigrant visa that allows American firms to employ foreign workers in speciality occupations that require theoretical or technical expertise. The tech companies depend on it to hire tens of thousands of employees each year. "Out of every 100, H-1B visas have resulted in support to 183 jobs in the US... This is very important because the US companies - nine out of the 15 top tech companies in India are American companies," Sarna said.

Will I ever be able to retire like my Grandma?

I could get used to this. When I visited my Grandma last winter in Florida, I got a taste of what retirement life is like. Her day-to-day sounds relaxing, but the woman rarely sits still. She's going on an Alaskan cruise and road tripping to Nashville this year.

But I'm not so sure this is the kind of life I can expect in retirement, too. Grandma retired at age 65 after working for 33 years as a secretary at the local high school. I remember going to a big banquet in her honor at the time. A plaque she received that night still hangs on her wall at home. Since then, she's lived off her pension, my late Grandfather's pension, Social Security, and some savings she invested.

I won't be getting a pension, let alone two, and I won't be able to get my full Social Security benefits as early as Grandma did. There's a chance I won't receive as much. I'll be relying on my own savings -- big time. When she quit her 9-to-5 gig, she also gave up side jobs like selling tickets at the school's football games. She didn't have to work again to afford her comfortable lifestyle.

Financial Adviser Douglas Boneparth told me, in so many words, not to expect the same kind of retirement. "Affording not to work entirely might not be an option for our generation," he said. In fact, he doesn't expect a lot of Baby Boomers will be able to quit work entirely right away.

Deflation and Gold: A Contrarian View

The warring forces of inflation and deflation are at each other’s throats. Some see victory for inflation. Others for deflation. So… What happens to gold? Conventional wisdom says gold thrives under inflation and wilts under deflation. The case for gold under inflation is easy enough. Gold rises as the dollar falls. It’s the opposite under deflation.

But is conventional wisdom right about gold and deflation? Is it time to consider a different metric — not the nominal gold price — but gold’s purchasing power relative to consumer prices? The late lamented Roy Jastram was a recognized authority on the gold standard. He authored a 1977 tour de force on gold under both deflation and inflation called The Golden Constant: The English and American Experience, 1560–1976.

Jastram went over the rainbow in 1991 but his book’s withstood time and tide. Jastram examined three deflationary periods in history. The first was from 1814–30. The record shows prices fell 50% over those 16 years. The second was from 1864–97. Prices fell 65% between 1864 and 1897.

The final deflationary period was 1929–33, the locust years of the Great Depression. Prices slumped 31% those four years. So… How did gold do in these three deflationary periods stretching back 200 years?

Gen. Flynn Out At NSC -- Winners and Losers

A Storm Is Brewing Over Europe

Storm clouds are once again gathering above the eurozone. In coming months, its continuity will be threatened by events in Europe and the United States. Germany, the largest political and economic player in Europe, will try to keep the bloc together. But the crisis could be too big for Berlin to handle, especially since some of the actors involved see Germany as a part of the problem rather than the solution.

US President Donald Trump recently described the European Union as "a vehicle for Germany." He and members of his administration argue that Germany's industry has benefited significantly since the introduction of the euro in the early 2000s. The boon to Germany, the argument goes, is that the common European currency is weaker than the deutsche mark would be; the result is more competitive German exports.

Trump was not the first US president to criticize Germany's trade surplus, the biggest in the world. But he was the first to suggest the United States could take countermeasures against German exports.

Some of Germany's own eurozone partners have also accused the country of exporting too much and importing too little, a situation that leads to low unemployment in Germany and to high unemployment elsewhere in the currency area. Their charges, however, do not focus on the value of the euro (which is set by the European Central Bank) but on Berlin's tight fiscal policies, which restrict domestic consumption and limit Germans' appetite for imports. The European Commission and the International Monetary Fund have asked Germany to increase investment in public infrastructure and raise the wages of German workers.

This is What Happens to Inflation when a Currency Gets Unpegged from the Dollar

On November 3, the Egyptian Central Bank removed all exchange-rate restrictions and raised its benchmark rate by three percentage points. This was done to obtain that all-important $12-billion bailout loan the IMF had provisionally agreed to provide in August, though by November 3, the IMF’s executive committee still hadn’t ratified it.

In the unofficial market, the pound had already collapsed against the dollar. With the peg gone, the official exchange rate instantly plunged from 9 pounds to the dollar to over 15 pounds to the dollar, and four days later it was at 18 pounds.

On November 11, the IMF stopped dragging its feet and ratified the $12-billion loan. At today’s rate of 17 pounds to the dollar, the currency has lost 48% of its value since November 3.

But Egypt imports about $60 billion per year in fuel, raw materials, and finished goods. And for Egyptians who have to pay for them in pounds, there are some bitter consequences.

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