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Wednesday 02.22.2017

Student Loan Debt Still Tops Credit Card Debt In America

Student loan debt continues to rise in the U.S. and now surpasses the total amount of credit card debt owed by Americans. Some 44 million Americans hold $1.31 trillion in student loan debt, the Federal Reserve Bank of New York reports. To put that figure in context, Americans hold $779 billion in outstanding credit card balances, a figure nearly half the size of the total student loan burden.

Americans with student debt hold, on average, around $37,172. The national average wage in the U.S. was $48,098.63 in 2015, leaving the average student with little disposable income to help cover their debt obligations, the Social Security Administration reports.

Of the $1.31 trillion in outstanding student debt, 11 percent, or $31 billion, is “seriously delinquent,” meaning the debtor is 90, or more, days past their payment date. Another $32.6 billion of the total debt is “newly delinquent,” meaning that the debt is 30, or more, days past its due date.

Over 2 million of those with student debt hold over $100,000, and 415,000 of those individuals hold more than $200,000. The majority of Americans with student debt are saddled with far lesser amounts, with over 30 million holding between $1-25,000.

US labor market has 'more room to run,' Fed's Kashkari says

Minneapolis Federal Reserve Bank President Neel Kashkari on Tuesday said the U.S. labor market has "more room to run," suggesting he does not believe the central bank should raise rates quickly to head off inflation.

Kashkari said in an appearance broadcast on the bank's website that it has been a "big surprise" that so many workers have returned to the workforce over the past year and a half, and he is "cautiously optimistic" that the pattern will continue.

"I think that process has more room to run," he said. The Fed has raised its short-term interest-rate target only twice since the Great Recession, and last month decided to keep rates unchanged so as to allow the labor market to strengthen further.

Kashkari, a voting member of the Fed's policy-setting panel this year, declined to say when he thinks the Fed should next raise rates. His remarks, though, left little doubt that he is not among the policymakers who are chomping at the bit to do so.

Dozens Of Outback Steakhouse, Bonefish Grill, & Carrabba’s Restaurants Closing

Following in the not so distant footsteps of chains like Bob Evan’s, Old Country Buffet, Ruby Tuesday, and Logan’s Roadhouse, Bloomin’ Brands — parent company to the Outback Steakhouse, Carrabba’s, Bonefish Grill, and Fleming’s Steakhouse chains — announced it would close dozens of locations.

Bloomin’ Brands announced the closure plans in an investor presentation that revealed the company’s earnings dropped $4.3 million in the fourth quarter. Overall profit for 2016, the company notes, also dropped to $41.7 million from $127.3 million in 2015.

As a result, Bloomin’ Brands said it would close 43 underperforming restaurants, without specifying how many and which locations would be shuttered. If you work at one of the restaurants that has been targeted for closing, let us know at tips@consumerist.com. We’ll keep your information anonymous.

Prior to the closures the company operated approximately 1,500 restaurants in the U.S. and 20 other countries. While Bloomin’ Brands has yet to respond to Consumerist’s request for a list of affected restaurants, several local news outlets have reported locations in their cities closing.

Will the Fed Raise Rates in March?

HSBC shares slide after 62% profit fall

Shares in HSBC have fallen after the bank reported a steeper-than-expected fall in annual profits. It reported a $7.1bn (£5.7bn) pre-tax profit for 2016, down 62% on the $18.9bn reported a year earlier.

HSBC attributed the fall to a string of one-off charges, including the sale of its operations in Brazil. HSBC said its performance had been "broadly satisfactory" given "volatile financial conditions" but warned a rise in global protectionism was a concern.

The bank also announced a smaller-than-expected share buyback. That also helped undermine shares, which were down by more than 6% in London.

"It's a bank that is still in transition after the crisis," said banking analyst Chris Wheeler from Atlantic Equities. However, he thinks this could be the last set of results that include big one-off charges, for reorganising the business and writing-down the value of assets.

Rickards: Gold as the New Currency Standard

Jim Rickards joined the Business News Network, a Canadian based channel focused on finance and markets, to discuss his views on markets and why the gold standard would offer stability. The bestselling author offered highlights on his take on what to expect from the United States central bank, the Federal Reserve, and why he views gold as a real alternative.

When asked about his sense on gold and why we have not seen it take off yet he responded, “I think we are getting close. There are still some strong headwinds around gold. In the very short run, my view is that Janet Yellen will raise rates in March and I do expect that. That’s not fully priced in. As that gets priced in, it will make the dollar stronger. The dollar price of gold is just the reciprocal price of the dollar. So if you have a strong dollar, it is a lower dollar price for gold. If you have a weak dollar, it is a higher dollar price for gold.”

Jim Rickards is a New York Times bestselling author who has recently hit the bestseller list again with his book The Road to Ruin. Rickards’ is an economist and lawyer who worked on Wall Street and has advised various U.S government intelligence outlets regarding capital markets and offered inside analysis on global currency operations.

“The Federal Reserve is tightening into weakness, I do expect Donald Trump to appoint doves. The Fed has flip flopped nine different times since 2013 between “risk on and risk off” where now they are calling it “Trump on, Trump off” where they tighten and then they’re going to ease. They literally don’t know what they’re doing. Right now they’re in tightening mode, but I expect by April or May they’re going to have to flip flop again with a combination of new appointees and a slowing economy. I would look for ease by then. That will be a “rocket booster” for gold.

It’s worse than you thought: Americans are drastically under-saved for retirement

There’s no easy way to say this: Americans are not saving for their futures. The numbers for retirement savings already looked discouraging with the average American couple only having put away $5,000, but the situation may be worse: only a third of working Americans are saving money in an employer-sponsored or tax-deferred retirement account, according to U.S. Census Bureau researchers, as reported in Bloomberg. And that’s only if their employers even offer such plans, which, according to this research, only 14% do (and they’re likely large companies).

Saving for the future has always been a problem for Americans, but it’s beginning to catch up with them now as life expectancy increases, and savings may have to last a lot longer. The consequences of not saving appropriately could be detrimental: women 65 and older, for example, are working more now than they did 20 years ago, mostly because they can’t afford not to do so.

Many experts urge millennials to take note and begin saving as soon as possible, though many have trouble putting money away for such a distant goal and struggle to envision themselves as retirees. Younger workers may also question how to balance their paychecks: saving for retirement is important, but some place higher importance on saving for a home or another financial goal, said John Scott, director of the Retirement Savings Project, part of Pew Charitable Trusts, a Philadelphia-based nonprofit non-governmental public policy organization.

The financial services industry and government are battling over how to fix this crisis. Some financial firms, organizations and the former Department of Labor staff under President Obama have fought for greater transparency and lower fees for retirement portfolios with the fiduciary rule, a law that was supposed to come in April and protect retirement savers from conflicts of interest that cut their future assets.

Macy's profit falls nearly 13 percent as sales drop as well

Macy's, the nation's largest department store chain, says its earnings for the quarter that includes the holiday period dropped nearly 13 percent as results were dragged down by lower sales, store closures and other costs.

The profit results beat Wall Street expectations, but Macy's said it would post another year of sales declines for a key revenue measure. Like many department stores, Macy's has faced sluggish sales as customers buy more online and less at the malls where they are often an anchor. Macy's has been shuttering stores as it tries to regroup.

Macy's has also been under pressure from shareholders to get more value out of its real estate holdings, valued by activist investor Starboard at nearly $21 billion. The chain has reportedly been in preliminary talks with Hudson's Bay about a takeover or a real estate deal. However, Macy's declined to talk about the topic to investors on a call Tuesday, saying it doesn't comment on rumors. It did say it will be looking to further monetize its locations and that it made $673 million in the latest year in asset sales.

For the three months ended Jan. 28, Macy's earned $475 million, or $1.54 per share. That compares with $544 million, or $1.73 per share, in the year-ago period. Adjusted earnings per share came to $2.02. Analysts had expected $1.95 per share for the quarter, according to FactSet. Revenue fell 4 percent to $8.52 billion, while analysts had expected $8.61 billion.

American car buyers are borrowing like never before—and missing plenty of payments, too

Last year, Americans bought more new cars than ever before. Given that auto sales make up around a fifth of all retail spending, 2016’s banner year is being hailed as a sign of burgeoning consumer confidence across the country. But something else is revving up, too: auto loans.

The US closed out 2016 with just shy of $1.2 trillion in outstanding auto loan debt, a rise of 9% from the previous year and 13% above the pre-crisis peak in 2005, in inflation-adjusted terms. The number of cars and trucks on the road, meanwhile, rose by only 1.5% last year, and 9% since 2005, according to US transportation department data. Total household debt levels are now a hair under their 2008 peak, with some of the fastest growth in recent years down to auto loans.

If America’s car-buying bonanza is being fueled by cheap credit, is consumer sentiment really as robust as it might seem? And is it sustainable?

There are reasons to wonder. While car purchases and financing have leapt since 2009, wages have picked up only slightly over the same period. Meanwhile, the average loan taken out to buy a new car has risen steadily.

Keiser Report: Ingredients for a New Global Crisis

Gold Isn’t Behaving in Practice The Way It Should in Theory

What works for gold in practice rarely works in theory. The last three U.S. interest-rate increases that should, all other things being equal, be bad for the metal have seen prices jump in the months that followed.

Gold is up about 7 percent since the Federal Reserve raised rates on Dec. 14. It jumped 13 percent in the two months following the last increase in December 2015 and 6 percent the previous time way back in June 2006.

Partly, it’s rational expectations, and other things getting in the way. This time one of those things is Donald Trump’s presidency. Uncertainties surrounding his administration have dominated markets since the Nov. 8 election.

Precious metals initially plunged as investors noted Trump’s vow to supercharge the economy with infrastructure spending. That would raise returns on assets such as shares and curb interest in havens like gold. Yet, with Trump’s time in office so far focused on other matters, the trend was quickly halted and reversed. The Fed’s rate increase in December once again became a low-water mark for gold, and expectations for further increases by the bank have failed to halt further price gains.

Dallas Police and Fire Pension Backs Cutbacks to Avoid Collapse

The Dallas Police and Fire Pension is getting behind a Texas lawmaker’s plan to save the retirement system from financial collapse.

The fund’s board voted 9-0 on Monday to back a proposal by Dan Flynn, chair of the pensions committee in the state’s House of Representatives, that would raise the retirement age to 58 from 55, eliminate cost-of-living adjustments and lower a multiplier used to determine the size of officers’ and firefighters’ benefit checks, according to a summary on the pension’s website.

The plan would also increase Dallas’s annual contribution to 34.5 percent of payroll plus $11 million per year. The city contributed 27 percent in 2015, according to audited financial statements. Employee contributions would climb to 13.5 percent of their pay from 8.5 percent.

The $7 billion shortfall in the police and fire pension triggered downgrades to Dallas’s credit rating from Moody’s Investors Service and S&P Global Ratings. The system was battered by losses on exotic investments including Hawaiian villas, Uruguayan timber and undeveloped land in Arizona. The pension, which counted on annual investment returns of 8.5 percent to cover promised benefits, had an average 1.5 percent loss over the past five years, according to S&P.

Wells Fargo fires 4 senior managers in sales scandal inquiry

Wells Fargo's board of directors fired four senior managers as part of its investigation into the bank's sales practices scandal.

Tuesday's announcement is the first public firing of managers and executives since Wells acknowledged in September that its employees opened up to 2 million bank and credit card accounts without customer authorization in order to meet lofty sales goals.

When the scandal first broke, Wells had said it had fired roughly 5,300 employees as a result of the scandal, the vast majority of them lower-level workers. Numerous low-level employees at the bank have said that intense sales pressure from senior managers was at least partially why they were driven to open the accounts.

The board said the four executives being terminated, effective immediately, were Claudia Anderson, the former community bank chief risk officer; Pamela Conboy, the lead regional president in Arizona; Shelly Freeman, the former regional president in Los Angeles; and Matthew Raphaelson, head of the community bank's strategy and initiatives. The board said the decision was unanimous. The board also voted to deny any 2016 bonuses to the executives, and they will forfeit any unvested stock and stock options.

Homeland Security calls for 15k new border patrol, ICE agents

Poll: Americans overwhelmingly oppose sanctuary cities

An overwhelming majority of Americans believe that cities that arrest illegal immigrants for crimes should be required to turn them over to federal authorities.

The poll shows that President Trump has broad public support in his effort to crack down on sanctuary cities. A survey from Harvard–Harris Poll provided exclusively to The Hill found that 80 percent of voters say local authorities should have to comply with the law by reporting to federal agents the illegal immigrants they come into contact with.

As it stands, hundreds of cities across the nation — many with Democratic mayors or city councils — are refusing to do so. Trump has signed an executive order directing Homeland Security Secretary John Kelly to find ways to starve these sanctuary cities of federal funding. A Reuters analysis found the top 10 sanctuary cities in the U.S. receive $2.27 billion in federal funding for programs ranging from public health services to early childhood education.

Kelly is expected to hire thousands of new immigration enforcement agents with broad authority to detain and deport those in the country illegally, potentially setting up a showdown between the federal government and sanctuary cities. The Harvard–Harris Poll survey found strong support for an overhaul of the nation's immigration laws, with 77 percent saying they support comprehensive immigration reform against only 23 percent who oppose.

Fannie and Freddie plunge after court rules that hedge funds can't sue the government over collecting their profits

Hedge funds still won't be able to sue the US government over seizing profits made by the mortgage-loan companies Fannie Mae and Freddie Mac after their postrecession bailout, a federal appeals court ruled on Tuesday, according to Bloomberg.

Shareholders had argued that the government illegally seized profits from the companies after it decided in 2012 to collect a share of earnings every quarter.

Some contract-based claims related to liquidation preferences and dividend rights were returned to the district court for further proceedings, Bloomberg reported.

On Friday, Fannie Mae said it would pay $5.5 billion in dividends to the US Treasury. With that payment, to be made in March, the company will have paid a total of $160 billion in dividends to the government. The Federal Housing Finance Agency placed both companies under its guardianship — known as conservatorship — in 2008, and they received a $187.5 billion bailout in the wake of the housing crisis.

Greece Calls on Germany to Ease Budget Demands

Greece's government has called on Germany to drop what it described as "irrational" budget demands in the country's bailout program, a day after Greece and its European creditors agreed to resume talks on new reforms.

Spokesman Dimitris Tzanakopoulos on Tuesday noted the eurozone finance ministers had made progress at their meeting this week on Greece's bailout. He said there had been "concessions from all sides" on what reforms Greece must make to keep tapping its bailout loans.

"It is now also time for Germany to proceed on the path of realism," said Tzanakopoulos. He called on Germany to drop its demands that Greece post a 3.5 percent primary surplus — the budget balance minus debt interest costs — each year for a decade.

He also called on Germany to "adopt a constructive stance" to reach a deal on some form of debt relief for Greece. Athens agreed on Monday to implement further reforms that will take effect from the start of 2019, after the country's current third bailout has ended. The government says the measures will be fiscally neutral, with every increase in financial burden being offset by another counter-measure.

Buyback binge is going strong, but here is why they are not the solution

Home Depot is at another historic high on Tuesday following its excellent earnings report, but a major factor behind its stock price rise has been dividend hikes (it raised its dividend 29 percent on Tuesday), and an aggressive buyback program, including the new $15 billion share buyback program that it also announced.

To give you an idea of just how big a $15 billion buyback is, the company's market cap is roughly $175 billion, so we are talking about buying back nearly 9 percent of the company. Even by the standards of the last decade, that is a big buyback.

Home Depot is part of a select group of companies I call "buyback monsters," companies that have bought back more than 25 percent of their shares since 2000.

Why 2000? Because most companies hit their highest levels of shares outstanding between 2000 and 2006; since then, most companies have been reducing share count, in some cases aggressively. Consider Home Depot. In 2003, they had 2.36 billion shares outstanding, according to Factset. Today, they have 1.21 billion shares outstanding. That is half the shares they had outstanding 14 years ago.

Europe Will Need Stronger Bank Regulation Post-Brexit

Wal-Mart's sales got off to a slow start in 2017 due to tax refund delays

A planned delay in the delivery of two tax refunds could be taking a bite out of Wal-Mart's revenue. After reporting another quarter of top-line growth during the holiday period, the world's largest retailer said sales have gotten off to a slow start in its new fiscal year.

Later delivery of the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit could be to blame. Congress passed a measure to delay these refunds, which benefit low- to middle-income households with children, back in 2015. The holdup was designed to give the IRS more time to track down fraudulent claims.

Jefferies estimates this delay has resulted in roughly $45 billion less income than the same time last year. Refunds are expected to begin trickling in next week, meaning Wal-Mart should have a better sense of the impact from their delays in coming weeks, CFO Brett Biggs said.

"We continue to run our plan," the company said. Wal-Mart expects comparable sales for the 13-week period ending April 28 to increase between 1 percent and 1.5 percent. That would mark the 11th consecutive quarter of growth for that key metric.

UPS tests drone deliveries, eyes future price changes

Package delivery company United Parcel Service Inc said on Tuesday it will consider raising prices across the board in coming years to offset pressure on margins, particularly from the rising costs of delivering packages to e-commerce customers.

"We... always have to be diligent about getting the right return," particularly as costs rise, Richard Peretz, the company's chief financial officer, said at an investor event.

His comments came a day after the company tested home delivery by drone in Lithia, Florida, the first step in what it hopes will be more automated - and cheaper - deliveries in rural areas.

UPS is grappling with lower margins for e-commerce, which have dented earnings. Businesses typically get more packages per stop than residences, making delivery to individual homes more expensive. Drones could be one way to reduce those costs.

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