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Monday 01.23.2017

Why A Forced Yellen Resignation Could Move From Possible To Probable

One of the arguments, along with its calculations, have been what many perceive as the inevitable clash broiling on the horizon with the now president Trump and Federal Reserve Chair Janet Yellen.

The president has made no-bones about his feelings when it comes to the Fed, and Fed policy during his campaign. While simultaneously it leaves little to one’s imagination that Ms. Yellen (along with most, if not all at the Fed.) probably harbors the same of the now president. The only thing left to argue now is: When does the first clash happen? And will it be (to use Fed-speak) A one and done? Or, A gradual inflation of transitory insults?

This too becomes data dependent, so we’ll just have to wait and see,

Presidents clashing with The Fed. or its members is nothing new. There are even stories of physical intimidation. (e.g., president Lyndon B. Johnson employing his then coined “The Treatment”) And yes, even back further when Andrew Jackson via executive order shut down the Second Bank of the U.S in 1833, yesterday’s precursor of today’s Federal Reserve.

Warren Buffett says the US will do fine under Trump because we've got the 'secret sauce'

Hillary Clinton backer Warren Buffett told CNBC on the eve of Donald Trump's inauguration that the billionaire real estate mogul has the "most important job in the world." "America works," the chairman and CEO of Berkshire Hathaway said. "I've said this before. It'll work wonderfully under Hillary Clinton, and I think it'll work fine under Donald Trump."

At a red carpet event Thursday night in New York for a new HBO documentary about his life, Buffett told CNBC the United States has the "secret sauce." "It doesn't work all the time perfectly," the billionaire investor and philanthropist said, "but you just look at where we go, milestone after milestone. Never bet against America."

"It doesn't work all the time perfectly," the billionaire investor and philanthropist said, "but you just look at where we go, milestone after milestone. Never bet against America." With that mantra as a guiding principle, Buffett said, "we're almost always a buyer of stocks over time."

Reiterating his call to invest for the long haul, Buffett acknowledged that he doesn't know where the stock market will go in the next "10 days or a year or two years." But one thing he said he does know: "It's going to be higher 10 years, 20 years from now." "There will be hiccups from time to time in the economy," he cautioned. "[But] we'll do well over time."

IBM Share Wildly Underperform Over 5 Years

A recent rally in IBM (NYSE: IBM) shares has taken them out of a nose dive, the drop based mostly on revenue which has dropped 19 consecutive quarters. However, a longer term look shows just how poorly Wall St. thinks of the company. Its shares are off 10% during the last 5 years to $171, The S&P 500 has risen 72% to 2,271 over the same period.

The key to the huge difference continues to be skepticism about the turnaround plans of IBM (NYSE: IBM) CEO Ginni Rometty. Her comment about the company’s prospects were light on details once again when results for the 4th quarter and full year 2016 were released:

“In 2016, our strategic imperatives grew to represent more than 40 percent of our total revenue and we have established ourselves as the industry’s leading cognitive solutions and cloud platform company. IBM Watson is the world’s leading AI platform for business, and emerging solutions such as IBM Blockchain are enabling new levels of trust in transactions of every kind. More and more clients are choosing the IBM Cloud because of its differentiated capabilities, which are helping to transform industries, such as financial services, airlines and retail.”

Revenue for the entire company in the 4th quarter was $21.8 billion. IBM’s pitch was that its new “strategic initiatives” revenue base was increasing.

Nunes: Obamacare will be replaced in stages

Millennials Spend More On Coffee Than 401k Investments

If you’re looking for a glitch in our app-heavy, latte-sipping brave new world this might be it; millennials are spending more on coffee than saving for retirement. Given the well-documented difficulty in foregoing immediate gratification for an intangible benefit years, sometimes decades, away, the findings are distressing, but not surprising.

The news comes from “micro investing” app Acorns, which found roughly half of millennials admitted to choosing the rich, full-bodied goodness over a properly diversified 401k investment. A silver lining, according to the tech platform, is that new products (including theirs) allows consumers to “round up” whatever change is left over from a coffee purchase to then invest.

The survey looked at the spending habits of more than 1,900 Millennials, aged 18 to 25. Young women had the most problem controlling their coffee spending. Around 44 percent of women in the 18 – 25 age group spend more on their daily cup of coffee than their retirement savings, which is about 10 percent higher than men of the same age.

That isn’t to say millennials are ignorant of the importance of retirement saving. Fully 80 percent of millennials say they would prefer to work for a company that offers a 401k plan, according to another recent survey, this time from Fisher Investments 401(k) Solutions.

Why Macy's Is Closing Even Profitable Stores

It's no secret that department stores are having a rough time these days. Comparable sales over the holiday season fell at nearly every major chain, and total sales at department stores dropped 5.6% last year, according to the Census Bureau.

Macy's may be the poster child for this declining industry. The company is more than 100 years old, and has flagship stores in the downtown of major cities across the country. It's as synonymous with shopping as any other store.

It has, however, posted declining comparable sales for the last seven quarters in a row, and is on its way to its eighth straight drop. Like its peers, Macy's has been squeezed by e-commerce competitors like Amazon.comon one side and by fast-fashion purveyors like H&Mand Uniqlo on the other.

As part of its restructuring strategy, Macy's announced last year that it would shut down 100 stores, and recently named 68 of them, saying it would lay off 10,000 employees in the process.

The American Debt Trap

“Just finance it!” This has been the advice that the U.S. has given to young people for decades now. We borrow money to go to college, to buy houses, to buy cars and even to make everyday purchases. We're bombarded by internet ads and junk mail offering new mortgages, auto loans, low-rate credit cards. Student loan sales agents meet freshmen in front of the student union on the first day of orientation. Public thinking seems to have shifted accordingly. Where someone from a bygone generation might judge their solvency by how much they have in the bank, we look at our monthly cash flow -- if more money comes in than goes out, we breathe a sigh of relief.

As a result, Generation X and older millennials are the most debt-laden people in U.S. history. Back in 2014, researchers at the Federal Reserve Bank of St. Louis looked at how debt levels varied by the age of the head of household. Their findings confirm that despite aggressive deleveraging since the financial crisis, the problem remains acute:

Generation X (born between 1965 and 1980) were the most aggressive borrowers prior to the financial crisis, and their cumulative debt increases to date remain the largest in percentage terms among all age groups… Early (millennials) also borrowed aggressively.

What is the true cost of all this household debt? Most people know -- many through grim experience -- that when their incomes don’t grow as much as they expected, debt can magnify the pain. This is just a way of saying what everyone in finance knows -- leverage increases risk. Another problem is that unexpectedly low inflation, like the kind the U.S. has had in recent years, can be hard on debtors.

Bill Gates on the benefits of automation replacing labor

Will Trump's Tough Talk On Immigration Cause A Farm Labor Shortage?

In the Central Valley, there's a bumper sticker you see all over the place. It's shaped like California, and reads "My job depends on Ag." In California, that agriculture depends on immigrant labor.

Many farmers in the state supported President Donald Trump despite his hard-line stance on immigration. So as the new Trump administration takes office, what's the thinking of those involved in the region's biggest industry? Just after the workday ends, men in dirty jeans and work boots stream into a small record store in the farming town of Mendota. Racks of CDs and music posters line the walls, but nobody's browsing. The guys are in line to use the store's wire transfer service. They're sending money home to families in Mexico and El Salvador.

"We just came in from the fields — nine hours pruning pistachio trees," says a weary-looking man in a dust-covered sweatshirt. He'll say only that his name is Pablo because, like all the farm workers I talked to for this story, he's in the country illegally. I ask him what he thinks of Trump's tough talk on immigration. Pablo's answer includes a strong, derogatory word.

"You think a gringo's gonna be pruning pistachios?" he asks me in Spanish. He says in his 17 years working the California fields, he's seen only Latinos — mostly immigrants — doing this work. So he's not buying the idea that he's taking away a job from a U.S. citizen.

Minimum Wage Hikes Will Help Amazon Kill Millions Of Traditional Sales Jobs Sooner Than Later

In a few years, local communities in America will be totally different places. There will be very few iconic retail chain stores, or sales people behind counters and on the shopping floor. Automated Amazon Go stores and remote warehouses will replace most local retail stores, killing millions of sales jobs, and bring further losses to investors in these icons.

And making this transformation happen sooner rather than later? Minimum wage hikes.

For years, American retail icons like Macy’s, JCP, and Wal-Mart colored the lives of local communities, providing sales jobs for millions of people. Then came on-line retailer Amazon to crush these icons, as evidenced by their sluggish sales, falling margins, and equity price performance.

In the most recent quarter, for instance, Macy’s sales dropped by 4.20 percent, while Amazon sales increased by a whopping 29 percent. In the last ten years, Macy’s stock is down 34 percent, while Amazon’s stock is up close to 2000%.

Foxconn CEO says investment for display plant in U.S. would exceed $7 billion

Foxconn, the world's largest contract electronics maker, is considering setting up a display-making plant in the United States in an investment that would exceed $7 billion, company chairman and chief executive Terry Gou said on Sunday.

The plans come after U.S. President Donald Trump pledged to put "America First" in his inauguration speech on Friday, prompting Gou to warn about the rise of protectionism and a trend for politics to underpin economic development.

Foxconn's proposal to build a display plant, which would be planned with its Sharp Corp unit, depend on many factors, such as investment conditions, that would have to be negotiated at the U.S. state and federal levels, Gou told reporters on the sidelines of a company event.

Gou said that Foxconn, formally known as Hon Hai Precision Industry Co (2317.TW), had been considering such a move for years but the issue came up when Foxconn business partner Masayoshi Son, head of Japan's SoftBank Group Corp (9984.T), talked to Gou before a December meeting Son had with Trump.

Trump vows to start NAFTA renegotiation talks

OPEC Shrugs Off Threat of U.S. Cutting Oil Imports

OPEC’s two biggest suppliers to the U.S. shrugged off a vow by President Donald Trump to end dependence on the group’s oil, saying the world’s biggest economy would continue to need crude from abroad.

The U.S. is “closely integrated in the global energy market,” Saudi Arabia’s Energy and Industry Minister Khalid Al-Falih said, while his Venezuelan counterpart Nelson Martinez said he expects his country’s crude exports to the world’s top consumer to remain stable.

“The positions that the U.S. and Saudi Arabia take in global energy are very important for global economic stability,” Al-Falih said at a meeting of producing countries in Vienna. He added that Saudi Arabia was looking forward to working with the Trump administration.

Just after his inauguration on Friday, Trump said he was “committed to achieving energy independence from the OPEC cartel and any nations hostile to our interests,” by exploiting “vast untapped domestic energy reserves”, according to a plan posted on the White House website. The U.S. imported about 3 million barrels a day from the organization last year, with Saudi Arabia and Venezuela accounting for 1.81 million, according to data compiled by Bloomberg.

Obama administration spent billions on failing schools, achieved nothing

Part of the American Recovery and Reinvestment Act of 2009, aka the stimulus, was a multi-billion dollar commitment to improve failing schools through targeted grants. These School Improvement Grants (SIG) were given out to schools that agreed to adopt one of four approved models for improvement. Wednesday, two days before President Obama left office, the Education Department published a study on its website showing the expenditure of $7 billion dollars on these grants accomplished nothing.

The full report, which calls the grants, “one of the largest federal government investments in an education grant program.” It’s a lengthy report but the conclusion on student test scores and graduation rates is relatively brief:

There were no significant impacts of SIG-funded models on math or reading test scores, high school graduation, or college enrollment of students in schools at the SIG eligibility cutoff… For 2012–2013, the impact on math test scores was 0.01 standard deviations, the impact on reading test scores was 0.08 standard deviations, and the impact on high school graduation was -5 percentage points, but these impacts were not statistically significant.

So the graduation rate actually went down, just not in a statistically significant way. Andy Smarick of the American Enterprise Institute told the Washington Post this week, “We’re talking about millions of kids who are assigned to these failing schools, and we just spent several billion dollars promising them things were going to get better.” He added, “Think of what all that money could have been spent on instead.”

Americans hopeful on finances for next 4 years, survey says

Americans are generally optimistic on financial matters with Donald Trump as president, though Republicans are more upbeat than Democrats and independents.

Those are some of the takeaways from a post-election survey conducted by credit bureau Experian. When asked about the financial status of Americans overall, 37 percent of respondents said they expected to see improvement over the next four years, 30 percent expected Americans' financial health to stay the same and 33 percent anticipated a decline. In terms of their own financial status, 51 percent were optimistic, 28 percent said they expected things to stay about the same and 21 percent anticipated financial deterioration.

The top personal-financial goal cited by respondents was to save more money over the next four years, ahead of paying off credit-card debts and shopping more wisely. Having enough money to retire was the top concern.

Also, respondents generally said they assess the health of the economy in various ways, with unemployment rates the top indicator that people track, followed by local costs of living and general inflation. Personal financial status, gross domestic product and stock-market values were among indicators ranking further down the list.

Power by the Tweet

Western Union Fined $585M for Aiding Scams

Money services giant Western Union has agreed to forfeit a record $586 million to settle charges that it facilitated fraud by failing to properly enforce its anti-money laundering systems, resulting in the processing of “hundreds of millions of dollars” in illegal transactions.

U.S. authorities said Western Union turned a blind eye as fraudsters used its service to move cash, with its own employees sometimes processing payments in return for a cut of the proceeds.

The settlement announced Thursday concludes investigations by the Department of Justice and the Federal Trade Commission. As part of a deferred prosecution agreement, Western Union admitted to a willful failure to maintain an effective anti-money laundering program and aiding and abetting wire fraud.

The $586-million forfeiture, which will go toward reimbursing consumers who were victims of fraud from 2004 to 2012 , is the largest-ever imposed on a money services business. “Western Union owes a responsibility to American consumers to guard against fraud, but instead the company looked the other way, and its system facilitated scammers and rip-offs,” FTC Chairwoman Edith Ramirez said in a news release.

Border Patrol Alters Stats to Hide Release of Criminal Aliens, High Recidivism

The U.S. Border Patrol alters statistics involving the apprehension of criminal illegal immigrants to conceal that thousands are being released, a new federal audit reveals. The frontline Homeland Security agency charged with preventing terrorists and weapons—including those of mass destruction—from entering the country also skews figures to drastically deflate the high recidivism rate of aliens caught entering the U.S.

The distressing details of this crucial agency’s crafty record-keeping practices are outlined in a scathing report issued this month by the investigative arm of Congress, the Government Accountability Office (GAO). The probe focuses on a Border Patrol system developed to address a smuggling crisis along the southwest border. It’s officially known as Consequence Delivery System (CDS) and is used to identify the most effective and efficient consequences to deter illegal cross border activity in each of the agency’s sectors. For the system to work, the Border Patrol must report accurate information involving illegal aliens who are apprehended.

Instead, it appears that federal agents on the ground are being ordered to fudge the numbers as part of a broader Obama administration effort to protect illegal immigrants and falsely portray the Mexican border as safe. The GAO report suggests that Border Patrol headquarters directed agents to misclassify criminal illegal aliens, presumably to hide the fact that they were being released instead of prosecuted. Officials interviewed as part of the probe “said that agents received oral direction from headquarters to reclassify criminal aliens who cannot be given a consequence of federal prosecution, and that written data integrity guidance to sectors did not include activities for checking the accuracy of alien classifications,” the GAO report states.

The misclassification of apprehended illegal immigrants resulted in nearly 4,000 criminal aliens being returned to their home country rather than prosecuted between 2013 and 2015, the GAO found. After analyzing Immigration and Customs Enforcement (ICE) data, congressional investigators determined that an astounding 94% (109,080) of the 116,409 aliens given a consequence of warrant or notice to appear still had an open case and “may remain in the United States.” Thousands more escaped criminal prosecution because they were not properly classified. “Specifically, of the approximate 15,000 apprehensions of criminal aliens who were not classified according to CDS guidance between fiscal years 2013 and 2015, 8 percent were recommended for criminal prosecution (3,912 apprehensions) compared to 47 percent of all criminal aliens during that timeframe,” the GAO writes.

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