Headline News Archives

Thursday 03.16.2017

Yellen tells consumers after rate hike: 'The simple message is the economy is doing well'

Indebted consumers nervous about Wednesday's interest rate hike from the Fed can take solace even as their credit card bills shoot higher, Fed Chair Janet Yellen said.

"The simple message is the economy is doing well," the central bank leader said in her quarterly news conference following the Federal Open Market Committee meeting. The statement was in response to a question about what consumers should take from the decision to raise the central bank's benchmark rate.

"We have confidence in the robustness of the economy and its resilience to shocks," she added. "It's performed well over the past several years. We've created since the trough in employment after the financial crisis around 16 million jobs."

The increase was the second in the past three months for a Fed that is looking to get monetary policy back to normal after a historically accommodative period following the financial crisis.

Oakland solar company Sungevity lays off 350 as it files for bankruptcy

Oakland solar company Sungevity has filed for Chapter 11 bankruptcy in a Delaware court, after laying off 350 workers and arranging the sale of all its assets to private equity firm Northern Pacific Group.

John Ordoña, vice president of communications for Sungevity, told the Business Times he couldn't provide comment on the layoffs, but a source close to the matter confirmed the job cuts. In January, the company laid off 66 workers, bringing the total number of job losses to 410.

Sungevity said in its bankruptcy filing that it had assets and liabilities between $100 million to $500 million, but that once the bankruptcy court approves the terms, Northern Pacific will pour $20 million in financing into the solar company.

“The agreement we have reached with the team led by Northern Pacific Group and its co-investors is a testament to their confidence in the future of Sungevity’s business,” William Nettles, the newly appointed chief administrative officer of Sungevity, said in a statement. “The actions we have announced will allow Sungevity to emerge as a stronger and more competitive company.”

GoPro will cut 270 more jobs

More tough news for GoPro as it pre-announced its first-quarter earnings earlier today. While the company announced that revenue for the first part of 2017 will hit toward the high end of guidance, the positivity was tempered by its plans to cut 270 more jobs.

That number that comes in addition to the 100 it announced in January 2016 and 200 back in November, amounting to seven- and 15-percent of the company’s workforce, respectively.

The job loss comes as GoPro looks to right the ship following a tough 2016 that found its stock price plummeting, in the wake of weak 2015 holiday sales and a recall of the company’s long-awaited folding Karma drone, which was pulled off the market after “a very small number” lost power while in use. The analogies are tough to avoid.

As ever, the GoPro’s founder and CEO Nick Woodman put a happy face on the company’s prospects moving forward, as he addressed the difficult news. “We’re determined that GoPro’s financial performance match the strength of our products and brand,” he said in a statement issued alongside the financial news. “Importantly, expense reductions preserve our product roadmap and we are tracking to full-year non-GAAP profitability in 2017.”

Sen McCain on Sen. Paul: "The Senator from Kentucky is now working for Vladimir Putin."

Retail sales in February rose, just barely

Americans spent only slightly more last month at retail stores compared with January, a sign of consumer caution despite rising optimism about the economy.

The Commerce Department says retail sales ticked up a seasonally adjusted 0.1 percent in February, after a much bigger gain of 0.6 percent the previous month. January’s gain was revised higher.

The figures suggest that strong job gains this year, near record-high stock prices and decent pay gains haven’t yet lifted spending. But last month’s sluggish pace could prove temporary.

Economists note that spending was likely held back by delays in tax refund payments. A new law has required tougher scrutiny of a tax credit claimed by lower-income taxpayers. Walmart (WMT) said last month that the delay had slowed sales at its stores in February.

200 plus Layoffs Scheduled at Alexion Pharmaceuticals

Alexion Pharmaceuticals plans to lay off 210 people as part of a company restructuring. The company is based in New Haven and has other facilities in Rhode Island and Massachusetts along with a global government affairs office in Washington, D.C., according to NBC Connecticut. It specializes in creating drugs for rare diseases.

The number of layoffs is about seven percent of the 3,000 person workforce across the country, according to the New Haven Register.

Alexion took state incentives when it returned to New Haven as part of the First Five economic development program.

The State of Connecticut provided Alexion with up to $51 million in assistance through the First Five program. It included a $6 million grant to help construct its laboratory in New Haven, tax credits of up to $25 million and a 10-year loan of $20 million at a rate of 1% with principal and interest deferred for five years.

Are we heading toward another subprime mortgage crisis?

The Federal Reserve bailed out Bear Stearns on March 14, nine years ago. What has the Fed learned from that mistake? Not enough, perhaps.

A little understood part of the Bear story is that in March 2008, the Federal Open Market Committee, or FOMC, ignored critical facts concerning Fannie Mae and Freddie Mac. Unfortunately, the Fed may be making the exact same mistake today.

Bear's problems came from excessive investment in bonds based on subprime mortgages, which carry greater risk for one or more reasons, such as the borrower's poor credit rating. Fannie and Freddie were the principal housing lenders, having been organized as "Government Sponsored Enterprises" or "GSEs," and they were responsible for the creation of much of the subprime mortgages.

Yet the FOMC transcripts and the staff materials prepared in March 2008 suggest that no one in the Fed bothered to read the GSE's 2007 annual reports, released February 28, 2008. In the FOMC conference call meeting March 10, there is mention of Fannie/Freddie in the context of declines in their stock prices, but no mention of important disclosures revealed in their annual reports.

Four indicted in hacking of 500 million Yahoo accounts

It was the attack that helped bring down a doddering giant -- the 2014 hacking of Yahoo that gave cyber criminals access to more than 500 million user accounts and may lead to a $350 million cut to what Verizon will pay for Yahoo's core business. Now, three years later, a federal grand jury has indicted four defendants, including two officers of the Russian Federal Security Service who are part of a unit that is the FBI's point of contact with Russian law enforcement.

One of the defendants is in custody in Canada. Another was briefly in custody in Europe but escaped, and the other two remain at large.

Investigators allege that the four used the stolen information to break into user accounts not only at Yahoo but also at Google and other webmail providers. In some cases, the data theft appeared to have intelligence goals, involving Russian journalists, U.S. and Russian government officials, and prominent business figures.

In others, the goal was simply theft. One of the defendants in particular pursued financial gain, the indictments allege, by searching Yahoo user emails for credit card and gift card account numbers, redirecting a subset of Yahoo search engine web traffic so he could make commissions and enabling the theft of the contacts of at least 30 million Yahoo accounts to facilitate a spam campaign.

What the Fed rate hike means for homebuyers

It's a tough market for homebuyers. Prices are high and supply of available homes is low. And while the Federal Reserve's rate hike could make home buying more expensive, house hunters shouldn't start panicking yet.

The Fed increased its benchmark interest rate by one-quarter of a percentage point on Wednesday. The Fed doesn't directly set mortgage rates, but its actions can affect the housing market.

Mortgage rates tend to move with the government's 10-year Treasury note, which serves as a benchmark for many forms of credit, including mortgages. Interest rates on the notes have already risen since Donald Trump was elected president and on signals the Fed would continue to tighten monetary policy.

But Wednesday's hike was widely expected, meaning the markets had already priced it in. So many experts don't see rates moving much higher in the coming weeks. "The last couple of times the Fed made a move, the rates firmed up in advance of the decision, and when it happened they kind of faded," said Keith Gumbinger , vice president of

Wells Fargo CEO Sloan receives $12.8 million, pay bump despite sales scandal

Wells Fargo & Co's (WFC.N) board of directors awarded Chief Executive Timothy Sloan $12.8 million for his work last year, a 17 percent increase, according to a securities filing on Wednesday.

Sloan was CEO for only a few months in 2016, having taken over the helm after former CEO John Stumpf resigned in light of a scandal over the bank's sales practices. He had previously been president and chief operating officer.

Sloan's compensation rose despite the board's decision not to award him or other top executives bonuses in light of the scandal, which involved thousands of employees opening perhaps millions of accounts in customers' names without their permission over a period of years.

Sloan's package was less than the $19.3 million Stumpf received as CEO the prior year.

The Only Way to Stop Indians Buying Gold? Take Away Their Cash

It seems the only way to stop Indians from buying more gold is to take their money away. Prime Minister Narendra Modi’s government spent 16 months trying to persuade Indians to deposit their jewelry in the bank to earn interest, in an effort to curb soaring imports of the precious metal. But the program has only lured a tiny fraction of the $900 billion of gold that families and temples are estimated to have stashed away. On the other hand, Modi’s controversial decision to withdraw all high-value banknotes did the job instead.

Coupled with a higher import tax, the abolition of 86 percent of the nation’s banknotes in an anti-corruption drive helped push gold imports down 39 percent last year to 558 metric tons. Overall consumption in India tumbled to 676 tons, the lowest since 2009, according to the World Gold Council.

That’s bought Modi some breathing space to persuade Indians to recycle their gold in a country where jewelry plays an important role in weddings and festivals and is handed down to daughters for their own weddings.

“We Indians don’t like to sell our gold,” said Samsher Aliyar, a 29-year-old Mumbai cab driver. “My grandmother’s generation and even my parents aren’t going to deposit their gold with the banks as they consider it a part of their children’s inheritance. In a worst case scenario, we would take a loan on it.”

America has lost faith in big business

The relationship between Main Street and Big Business appears to have broken down completely in the United States. Brunswick, the international advisory firm, has just released their global survey of over 40,000 people from 26 countries. The survey spans generations, geographies and measures global sentiment on an array of topics such as globalization and automation.

And what is striking is that respondents in the United States are among those most likely to be highly skeptical of the role of big business.

The key findings: 69% of Americans said business leaders do not understand the challenges they face in their life, the highest percentage of any country in the survey. There was 33% net agreement that when businesses do well, everyone benefits, with the US ranking below the likes of China, India, Italy, Brazil, Germany, Sweden and Japan by that metric. Only 43% of respondents agreed with the statement that businesses can provide solutions to major challenges. Only India and Thailand had lower scores.

The research from Brunswick echoes earlier research from Just Capital, a nonprofit set up by legendary hedge fund manager Paul Tudor Jones. In a survey conducted back in 2015, Americans of all ages, incomes, and political leanings said corporate America is headed in the wrong direction.

Janet Yellen just made an unsettling admission about the economy

It didn't take long for Janet Yellen to rid investors of that rare feeling of predictability from the Fed.

"The data have not notably strengthened," the Federal Reserve Chair said during her March 15 press conference after the central bank raised interest rates for just the third time since the financial crisis.

This hike was one of the least surprising to markets, with traders pricing in a full 100% chance that it would take place. The Fed chair just killed that kind of confidence for any move going forward.

Yellen was talking about the lack of economic progress since the Fed's last meeting in January. She went further though, saying that the Fed doesn't see any evidence that the optimism of a record-breaking stock market has made its way into spending by companies or people. Investors are desperately seeking clarity on the timing of future rate increases, and they will now be left to speculate as to whether May, June or September will bring the next move. Much hangs on US President Donald Trump’s ability to push through a promised agenda of tax cuts and infrastructure spending, which has fueled Wall Street benchmark's higher. The early reception of the Trump/House Republican healthcare plan is hardly encouraging.

What The Fed Rate Hike Means For Consumers

GM will rehire 500 Michigan workers slated for layoffs

General Motors Co plans next year to rehire 500 Michigan assembly plant workers who are to be laid off in May, citing increased demand for larger vehicles, the company said on Wednesday.

GM said last week it planned to lay off 1,100 workers in May at its Lansing Delta Township assembly plant in Michigan. The company is moving production of the GMC Acadia mid-size SUV to Spring Hill, Tennessee, from the factory, which will build just two models, the Chevrolet Traverse and Buick Enclave SUVs.

The company said that when it begins full production of the new versions of the two models in 2018, it would "bring back approximately 500 jobs to give the company flexibility to meet market demand." GM also said it would add 220 jobs at a plant in Romulus, Michigan, that is building 10-speed automatic transmissions, and it would retain 180 jobs by shifting Lansing workers to a Flint assembly plant to support pickup truck production.

The news comes as U.S. President Donald Trump is set to visit Michigan later on Wednesday to announce that his administration will reopen a review of fuel efficiency standards, a move that could help automakers sell more of their larger models. GM did not credit Trump with the decision to add jobs. "We haven’t fundamentally changed any of our plans, but we continue to look for ways to improve our operations and find ways to help the country, grow jobs and support economic growth," spokesman Pat Morrissey said.

Fitch: The debt ceiling will be raised to $20,000,000,000,000 just in nick of time

The federal debt ceiling will either be suspended or raised on time, before midnight on March 16, as both Congress and the White House are under Republican control, said Fitch Ratings.

The rating agency put US sovereign debt on its negative watch the last time things came down to the wire in October 2013.

Last week, Treasury Secretary Steven Mnuchin wrote Congress warning about the US federal debt situation the "extraordinary measures" the Treasury will have to take to continue funding the federal government if the debt ceiling is not raised by the deadline.

Fitch noted that a sizeable number of Republicans had opposed raising the debt ceiling in 2015 when the proposal was passed successfully with support from Democrats.

Idaho & Arizona Pass Bills To Remove “Capital Gains Taxes” On Gold & Silver

In just the past week, lawmakers in Idaho and Arizona have passed bills removing “Capital Gains Taxes” from gold and silver coins and bars. Normally, when individuals sell gold or silver, they must pay capital gains on any increase on the value of their precious metals investments. However, gold and silver are really not investments per say, rather they perform as real money.

Thus, the lawmakers in Idaho and Arizona realize their citizens shouldn’t have to pay taxes on their gold and silver holdings because they have increased in value due to the debasement of the U.S. Dollar by loose Federal Reserve monetary policies.

According to the article, Arizona State Senate Committee Passes Bill To Treat Gold As Money, Remove Capital Gains Tax:

Today, an Arizona Senate Committee passed a bill that would eliminate state capital gains taxes on gold and silver specie, and encourage its use as currency. Final approval of the legislation would help undermine the Federal Reserve’s monopoly on money. 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.”

Pace of Wage Growth Quickens as Minimum Wage Rises

In 2016, 17 states and the District of Columbia raised state-mandated minimum wages. In those states, total wage growth for workers in the 10th (lowest) percentile of the population rose by 5.2%. In states where the minimum wage was unchanged, wages rose by 2.5%. The data were reported Wednesday by the Economic Policy Institute (EPI), an independent, nonprofit think tank.

That’s hardly a surprise. Wages have been growing slowly since the end of the Great Recession because employers did not have to pay a lot to find and keep the workers they needed. The Federal Reserve’s low-interest-rate policy also weighed on wages by keeping inflation well below the bank’s target of 2% for years.

To make up for the slow growth in wages, bigger boosts were needed, and those have been provided by states that have raised minimum wages.

In another report published earlier this month, the EPI noted that “slow wage growth is a key sign of how far the U.S. economy remains from a full recovery.” According to EPI, the actual year-over-year nominal wage growth for private employees has averaged 2.8%, compared with a target of 3.5% to 4.00%.

Maddow's tax return story a 'journalistic fiasco'

Obama admin spent record amount of money fighting Freedom of Information Act lawsuits

In his final year in office, former President Barack Obama’s administration spent a record $36.2 million defending itself from Freedom of Information Act lawsuits, according to a new Associated Press analysis.

When the money is broken down, the AP found that the biggest chunks were spent by the Justice Department ($12 million), the Department of Homeland Security ($6.3 million) and the Pentagon ($4.8 million).

The Obama administration also denied access to requested documents and information more than any previous administration. The AP report revealed that Obama’s government “set a record for times federal employees told citizens, journalists and others that, despite searching, they couldn’t find a single page of files that were requested.”

The news wire also concluded that the Obama administration set the record for “outright denial of access” to files by refusing to quickly consider requests described as “newsworthy.” The figures reflect the final struggles of the Obama administration during the 2016 election to meet President Barack Obama’s pledge that it was “the most transparent administration in history,” despite wide recognition of serious problems coping with requests under the information law. It received a record 788,769 requests for files last year and spent a record $478 million answering them and employed 4,263 full-time FOIA employees across more than 100 federal departments and agencies. That was higher by 142 such employees the previous year.

Most Gold Miners Don’t Understand Gold

“Modern mining executives have no appreciation of gold’s unique characteristics, so they treat it as a base metal” that’s according to Daniel Oliver, research analyst at Myrmikan Research who published a report on the economic’s gold miners earlier this week.

The logic behind the statement above is based on the ideal of gold has a negative discount rate. Over time gold has maintained its value, but due to improvements in technology and monetary inflation, the cost of producing gold has fallen. Gold’s relative stability of value in the face of technological process forces the value of other goods to fall regarding gold time. Oliver writes that since 1784 “copper priced in gold has declined 0.7% per year on average, cotton by 1.0%, and wheat by 1.1%.”

Furthermore, while the price of crude oil has been relatively constant in terms of gold for the past 45 years, fuel efficiency has soared. Gold, therefore, “offers an economically risk-free means not just to store but to increase purchasing power (assuming continued technological advancement)—in other words, gold has a negative discount rate, which is why man has a propensity to store it in vaults to save it for the future.”

However, while gold above ground effectively has a negative discount rate, gold in a mine is a very different story. Oliver opines that gold mining is the act of moving gold from a positive to a negative discount rate environment.

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