Headline News Archives

Thursday 03.23.2017

Sears' retirees worry about their pensions as the company raises doubts about its future

Sears and Kmart retirees are worried about their pensions as the parent company raises doubts about its future and stirs speculation that it could seek bankruptcy protection.

Sears Holdings has an almost $1.6 billion shortfall in obligations to its underfunded pension system for nearly 200,000 retirees, the parent firm's public filings show. The company’s retirees also could face termination of life insurance policies that provide roughly $10,000 to $12,000 in benefits for some.

Stunned by the company's Tuesday night disclosure that it faces "substantial doubt" about being able to stay in business, the retirees are awaiting Sears Holdings' next move. “This has come as a shock. Sears has always put on a glad face," Ronald Olbrysh, chairman of the National Association of Retired Sears Employees, said in telephone interview Wednesday. "All of this is definitely a significant concern for the retirees.”

Sears Holdings has contributed nearly $4 billion to its pension plan over the last 12 years, Jason Hollar, the company's chief financial officer, told financial analysts during a fourth-quarter earnings conference call on March 8th. The plan provides benefits for past service by Kmart and Sears retirees. Current employees don't earn pension benefits because the plan is frozen.

Wells Fargo introduces cardless ATMs across U.S. in digital push

Starting on Monday, Wells Fargo & Co depositors can withdraw money using a smartphone at any branded ATM, the latest sign of U.S. lenders moving away from traditional brick-and-mortar banking.

Jonathan Velline, Wells Fargo's head of ATM and store strategy, said that the San Francisco-based bank decided to apply the smartphone technology to all of its 13,000 cash machines after piloting the idea in select locations across the country.

Bank of America Corp and JPMorgan Chase & Co are among the big banks that have announced digital upgrades to their ATM infrastructure, but Wells Fargo is the first U.S. bank to roll out cardless machines across its entire network.

The 20 million customers on Wells Fargo's mobile banking app will be able to request an eight-digit code to enter along with their personal identification code at an ATM to retrieve cash. "The new feature allows customers to withdraw cash at any time, even when they don't have their cards on them," Velline said. The new option will also improve protections against data theft, Velline said.

Raising the Minimum Wage Is a Jobs Killing Move

In January, 19 US states raised their respective minimum wages. Washington was among the most generous, hiking by $1.53 (bringing it to $11 per hour). Arizona got an increase of $1.95—their “bottom rung” now sits at $10 per hour.

In all, 4.3 million workers are slated to receive a hike as they earn less than the new minimum wage in their respective states. Well, that’s what’s meant to happen. Judging by the fallout from recent hikes, it seems things aren’t going according to plan.

In February, Wendy’s CEO Bob Wright said the firm expects wages to rise at least 4% in 2017. Wendy’s has three options to offset the rising costs. First, they could cut margins, but with an 8% margin, that’s unlikely. The second option is to raise prices. Given how price-sensitive consumers are these days, that too is a non-starter. Finally, the firm could reduce the amount of labor they use… and that’s exactly what they did. Wendy’s eliminated 31 hours of labor per location, per week.

However, their locations are just as busy. To keep output steady, they are planning to install automated kiosks in 16% of their locations by the end of 2017. David Trimm, Wendy’s CIO said the timeframe for payback on the machines would be less than two years, thanks to labor savings. Market leader McDonald’s has also been automating. Last November, the firm said every one of its 14,000 US stores will be replacing cashiers with automated kiosks. McDonald’s has actually prioritized these changes in locations like Seattle and New York that have higher minimum wages.

Doug Casey-High Unemployment & High Inflation Coming - Buy Gold

UBS charges customers to deposit euros

Swiss bank UBS will start charging customers who deposit more than a million euros, as negative interest rates hit banks' profits. The annual 0.6% charge will take affect from May.

UBS already imposes charges for large accounts held in Swiss francs by companies and some wealthy clients. Banks' profits have been hit by the European Central Bank's policy of stimulating growth through negative interest rates and increased liquidity.

The ECB penalises banks that store euros with it in an effort to make them lend rather than hoard their cash. It imposes a so-called negative rate, equivalent to four euros annually on each 1,000 euros that lenders deposit with the central bank.

Banks in Sweden and Switzerland, which are outside the eurozone, pay a similar charge. A UBS spokesman said: "This charge reflects the increasing costs seen across the industry of reinvesting cash from deposits in money and capital markets, the continued extraordinarily low and negative interest rates in the euro area and increased liquidity regulations."

Apparel Retailer Lands’ End’s Loss More Than Doubles to $94M

The retailer's new CEO is planning to "put more resources toward running a great e-commerce business as opposed to running a great catalog business." Lands’ End’s losses more than doubled in the fourth quarter but the struggling apparel retailer’s new CEO said its fortunes could improve if it leverages its “iconic brand heritage” and e-commerce platform.

For the quarter ended Jan. 27, Land’s End posted a net loss of $94.8 million, or $2.96 per share, compared with a net loss of $39.5 million, or $1.23 per share, during the same period last year.

Adjusted net income, excluding a previous $173 million write-down of the Lands’ End trade name, was $13 million, or 41 cents per share, beating analysts’ estimates of 35 cents a share. But revenue slid 3.1% to $458.8 million, from $473.5 million while same-store sales dropped 1.7%. “Lands’ End continues to suffer from its association with Sears, which has been slouching toward death for years now and which spun off the apparel retailer in 2013,” RetailDive said.

But Jerome Griffith, who took over as CEO earlier this month, noted that the company “saw sequential improvement in our fourth quarter results, attributable to recent initiatives across merchandising, marketing and e-commerce.” “In order to drive long-term success, we need to strengthen our competitive position and develop and execute a strategic plan that leverages our iconic brand heritage, as well as our well-established e-commerce platform,” he added.

Starbucks to create 240,000 jobs by 2021, tapping vets, teens, refugees

Starbucks is ramping up its hiring efforts, announcing plans Wednesday to create more than 240,000 jobs globally by 2021.

In the U.S. alone, the company is slated to add 68,000 jobs as it moves toward opening 3,400 new stores by that year. Partially included in that number are other programs the coffee chain sponsors to boost hiring among groups like veterans and teens.

Starbucks boasted that it had reached its initial goal of hiring 10,000 veterans and military spouses ahead of its 2018 deadline and will be expanding its goal to 25,000 by 2025.

In addition, Starbucks is scheduled to open 100 more military family stores throughout the U.S. in the next five years. These stores are designed to support military communities and are staffed by veterans, advocates and military spouses. So far, the chain has 32 of these stores. The company will also be hiring more young people. Starbucks said it has exceeded its goal of hiring 10,000 "opportunity youth" in America by 2018 by hiring more than 40,000. Starbucks said it is helping to jump-start their careers by giving them their first job. The company said it will be expanding its goal to 100,000 hires by 2020.

CEO creates ‘Snowflake Test’ to weed out job applicants

Have We Reached A Turning Point For Stocks?

The post-election stock market rally is officially over. After hovering near record highs for the past couple of weeks, U.S. stocks had their worst day in six months on Tuesday. For quite some time it has been clear that the momentum of the post-election rally had been exhausted, and a pullback of this nature was widely anticipated. But even though stocks fell by more than 1 percent during a single trading session for the first time since last September, it is going to take a whole lot more than that to bring stock prices back into balance. In fact, stocks are so overvalued at this point that it would take a total decline of about 40 to 50 percent before key stock valuation measures return to their long-term averages.

So we are still in a giant stock market bubble. All Tuesday did was shave about one percent off of that bubble. Let’s review some of the numbers from the carnage that we witnessed… -The Dow was down 237.85 points (1.14 percent) -The S&P 500 was down 1.2 percent on the day -The Nasdaq was down 1.8 percent at the closing bell -Financial stocks were down more than 2.5 percent -Overall, it was the worst day for banking stocks since the Brexit vote -Bank of America is now down more than 10 percent since Trump’s speech to Congress -The Russell 2000 (small-cap stocks) dropped about 2 percent

Some prominent names on Wall Street were warning ahead of time that this was coming. Marko Kolanovic was one of those voices…

Marko Kolanovic has done it again. Last Thursday, one day ahead of the massive quad-witching where over $1.4 trillion in options expired in relatively tame fashion, the JPM quant warned of “near-term market weakness” and suggested “reducing US equity exposure. And, sure enough, JP Merlin’s Gandalf timed it impeccably yet again. To be sure, the jury is still out on what caused the selloff – lack of votes to repeal Obamacare, fears about Trump’s fiscal policy agenda, the market’s sudden realization that it is at 30 CAPE, or just a technical revulsion – what matters is that once again, like clockwork, Kolanovic called a key inflection point just days in advance.

About 17,000 AT&T workers in California and Nevada go on strike

About 17,000 AT&T Inc workers in California and Nevada went on strike on Wednesday, alleging that the company violated contract terms by forcing employees to do work outside their areas of expertise.

The employees, who work in the company's phone, landline and cable services businesses, have been working without a contract for almost a year. Last year, the workers, who are represented by the Communications Workers of America, voted to authorize a strike.

AT&T had 268,000 employees as of Jan. 31, according to a filing. The company said it was prepared to continue serving customers.

"A walkout is not in anybody’s best interest, and it’s unfortunate that the union chose to do that," AT&T said in a statement. "We’re engaged in discussion with the union to get these employees back to work as soon as possible."

The retail apocalypse has officially descended on America

Thousands of mall-based stores are shutting down in what's fast becoming one of the biggest waves of retail closures in decades. More than 3,500 stores are expected to close in the next couple months.

Department stores like JCPenney, Macy's, Sears, and Kmart are among the many companies shutting down stores, along with middle-of-the-mall chains like Crocs, BCBG, Abercrombie & Fitch, and Guess. Some retailers are exiting the brick-and-mortar business altogether and trying to shift to an all-online model.

For example, Bebe is reportedly closing all 170 of its stores to focus on growing online sales, according to a Bloomberg report. The Limited also recently shut down all 250 of its stores, while still selling Others, like Sears and JCPenney, are aggressively paring down their store counts to unload unprofitable locations and try to staunch losses.


Sears is shutting down 10% of its Sears and Kmart locations, or 150 stores, and JCPenney is shutting down 14% of its locations, or 138 stores. According to many analysts, the retail apocalypse has been a long time coming in the US, where stores per capita far outweigh any other country.

Sears Changes Its Tune: No, We’re Totally Not Doomed

After being refreshingly candid in its annual report, admitting that there is a lot of “doubt” about its ability to remain afloat in the long run, Sears Holdings is now doing an about-face, with its chief financial officer assigned to handle damage control. Get your “Sears Holdings Corporate Announcement Bingo card” ready.

“Sears Holdings remains focused on executing our transformation plan and will continue to take actions to help ensure our competitiveness and ability to continue to meet our financial obligations,” CFO Jason Hollar, who is not the founder of online dollar store Hollar, wrote on the SHC Speaks blog.

Between the sale of the Craftsman tool brand, the sale of Sears properties to a real estate investment trust, and more borrowing from its CEO, Sears Holdings will be able to pay its bills for another year unless something unanticipated happens, to the company or to retail in general. What happens after that?

CFO Hollar argues that the risks listed in that annual report are required by regulators and that the report didn’t include the company’s corresponding plans to mitigate those risks.

Immigration In Canada: Undocumented Immigrants Should Be Deported, Half Of Canadians Say

Nearly half of Canadian adults were for having undocumented immigrants deported from their country, while some opposed the way Prime Minister Justin Trudeau was handling their illegal entry, according to a Reuters/Ipsos poll released Monday.

Forty-six percent Canadians said they disapproved of Trudeau's stance on undocumented immigrants crossing into Canada through the U.S. illegally, while 37 percent supported the prime minister’s decision and 17 percent said to be indifferent. Forty-eight percent said Canada should "send these migrants back to the U.S."

Those who were highly supportive of the deportations were men, older people with higher incomes and adult without college degrees. "Refugees are much more welcomed when we have gone and selected them ourselves as a country, as opposed to refugees who have chosen us," said Janet Dench, executive director of Canadian Council for Refugees.

In a separate Ipsos poll in January, studies showed 59 percent of Canadians approved of Trudeau’s policies, while 41 percent opposed them. “To those fleeing persecution, terror & war, Canadians will welcome you, regardless of your faith. Diversity is our strength #WelcomeToCanada,” Trudeau tweeted in January.

Google Promises Closer Policing of Websites

Hot US real estate a potential red flag: Fed's Rosengren

The run-up in U.S. real estate prices could potentially amplify any future economic downturn, a Federal Reserve official said on Tuesday, urging regulators globally to consider tools beyond interest rates that could help cool the sector.

A sharp downturn in U.S. residential and commercial property prices in 2007 and 2008 rocked banks that were highly leveraged in the sector, sparking the global financial crisis and deep recession. With the economic recovery now well under way, bank holdings of commercial and apartment mortgages rose 9 percent and 12 percent, respectively, in the past year.

Eric Rosengren, president of the Boston Fed and an influential financial regulator at the U.S. central bank, said the "sharp" rise in apartment prices in particular may signal financial instabilities that interest rates, which are only gradually rising, may not be able to contain.

"Because real estate holdings are widespread, and the monetary and macro-prudential tools for handling valuation concerns are somewhat limited, I believe we must acknowledge that the commercial real estate sector has the potential to amplify whatever problems may emerge when we at some point face an economic downturn," Rosengren said in prepared remarks for delivery to a banking supervision conference in Bali, Indonesia.

What Happens If Uber Fails?

The thing about a market bubble is that you don’t really know how big it is until it pops. So it doesn’t pop, and doesn’t pop, and doesn’t pop, until one day it finally pops. And by then it’s too late.

The dot-com collapse two decades ago erased $5 trillion in investments. Ever since, people in Silicon Valley have tried to guess exactly when the next tech bubble will burst, and whether the latest wave of investment in tech startups will lead to an economic crash. “A lot of people who are smarter than me have come to the conclusion that we’re in a bubble,” said Rita McGrath, a professor of management at Columbia Business School. “What we’re starting to see is the early signals.”

Those signals include businesses closing or being acquired, venture capitalists making fewer investments, fewer companies going public, stocks that appear vastly overpriced, and startup valuations falling.

Then you have a company like Uber, valued at $70 billion despite massive losses, and beleaguered by one scandal after another. In 2017 alone Uber has experienced a widely publicized boycott that led to an estimated half-a-million canceled accounts, high-profile allegations of sexual harassment and intellectual property theft, a leaked video showing its CEO cursing at an Uber driver, a blockbuster New York Times scoop detailing the company’s secret program to trick law enforcement, and multiple senior leaders either resigning or being forced out.

Subprime on Wheels

It’s a good time to be a repo man. . . again. Lots of business picking up used cars people stopped making payments on.

According to S&P Global Ratings and an article in Bloomberg News, defaults on these subprime loans are at their highest water mark since the subprime collapse of 2008 and the “recovery rate” – what the lender ends up recouping of the original debt principle – is a mere 34.8 percent.

It’s a lot of money flushed. But how is it that cars – all of them, not just the used ones – bleed value this quickly and this much? It’s because they’re not really worth that much, to begin with.

As distinct from what their price was, to begin with. New car prices are hugely inflated – mostly because of electronic gadgets that dazzle when new and for which people will pay (that is, finance) top dollar . . . but which get old and lose value quickly. They don’t get old in a calendar year or wear-and-tear sense but in terms of their “latest thing-ness,” which vanishes like a late April snow shower. Think how quickly your smartphone or computer hags out. Now consider the screens and apps and other such they’re installing in cars.

American’s Need over $1 Million to Retire, Unfortunately very few have a ‘over’ million

Two out of every five working Americans say they need at least $1 million saved up before they can comfortably retire. A vast number of workers apparently have no idea exactly how much it will cost to securely retire—and just thinking about it makes them stress out.

While 37 percent of workers, overall, said they’d need at least $1 million or more to successfully retire, 50 percent of people who grossed on average $75,000 said they’d need at least $1 million in the bank, according to the Employee Benefit Research Institute’s annual Retirement Confidence Survey. Only 17 percent of workers grossing under $35,000 said they’d need about $1 million to retire.

When it came to actually building up their bank accounts, though, Americans weren't doing that well. Only 20 percent of U.S. workers actually had $250,000 or more in savings, not including the value of their homes or pension plans. Forty-seven percent of would-be millionaire retirees had saved about $25,000 while 24 percent had less than $1,000 saved.

Workers weren’t spending much time developing their retirement plans, either. Only 41 percent said they had taken time to figure out a reasonable retirement plan while every three in 10 workers in the U.S. said they felt mentally or emotionally stressed just thinking about retirement savings.

We went inside a JCPenney and saw why the company is struggling

This is how you destroy an American icon

Sears Holdings, once the largest US retailer, is warning investors about its ability to continue as a going concern after years of losses and declining sales.

“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” Sears said in its annual report for the fiscal year ended Jan. 28.

The company said an inability to generate additional liquidity might limit its access to new merchandise or its ability to procure services. Continued operating losses also could restrict access to new funds under its domestic credit agreement, according to the filing.

The warning comes less than six weeks after the company announced what it called the “next phase of its strategic transformation,” in which it hoped this year to reduce costs by $1 billion and cut its debt and pension obligations by at least $1.5 billion. Sears also is considering selling some of its businesses, such as the Kenmore appliances and DieHard car battery brands.

China’s economy is on the verge of a painful credit crunch

One of China’s most widely used interbank borrowing rates surged to its highest level since late 2014 earlier this week, stoking worries that a painful credit crunch could be looming as the country’s central bank moves to tighten monetary conditions, according to a research note from Goldman Sachs.

China’s seven-day repurchase (repo) rate shot to 5.5% on Tuesday from 3.85% on Monday, before settling at 5% on Wednesday. For anyone who follows Chinese politics, the sudden jump in interest rates is hardly surprising: At an annual meeting of China’s parliament that concluded a week ago, the country’s leaders said that tackling risks related to the country’s growing pile of risky debt would become a priority.

The Goldman team, led by MK Tang, the investment bank’s senior China economist, said it expects interbank rates to remain fairly volatile in the coming days as the People’s Bank of China (PBOC) prepares for its quarterly macroprudential assessment, which will take place at the end of March.

Persistently higher rates could create problems for Chinese companies and financial institutions that are heavily reliant on short-term credit to finance their operations.

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