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Wednesday 04.26.2017

Coca-Cola to cut 1,200 jobs as sales slump

Coke (KO) said in its earnings report Tuesday that the layoffs, which will begin in the second half of this year, are part of a broader cost cutting plan aimed at saving $800 million. The layoffs are a relatively small fraction of the company's overall headcount. Coke employs more than 100,000 people worldwide.

Incoming CEO James Quincey said the moves are being made to make Coke more agile and lean. The company is also in the process of refranchising some of its bottling operations in North America to save money.

Quincey, currently Coke's chief operating officer, will take over as CEO on May 1. He is succeeding long-time CEO Muhtar Kent, who will remain at Coke as its chairman. Coke has struggled over the past few years as consumer tastes have shifted away from sugary drinks. Even Coke's diet brands are in decline due to health risks associated with artificial sweeteners.

Coke said on Tuesday that is overall sales were down 11% from a year ago while profits fell 20%. That's a big reason why Coke is pushing more into healthier beverages like water, milk and soy-based drinks.

U.S. Consumer Confidence Index Pulls Back More Than Expected In April

After reporting notable increases in U.S. consumer confidence over the two previous months, the Conference Board released a report on Tuesday showing that consumer confidence pulled back by more than expected in the month of April.

The Conference Board said its consumer confidence index fell to 120.3 in April from a revised 124.9 in March. Economists had expected the index to dip to 123.1 from the 125.6 originally reported for the previous month. "Consumer confidence declined in April after increasing sharply over the past two months, but still remains at strong levels," said Lynn Franco, Director of Economic Indicators at The Conference Board.

The report said the present situation index dropped to 140.6 in April from 143.9 in March, as consumers' assessment of current conditions eased.

Consumers saying business conditions are "good" declined to 30.2 percent from 32.4 percent, while those saying business conditions are "bad" edged up to 13.8 percent from 13.1 percent. The Conference Board also said consumers' assessment of the labor market was moderately less favorable, as those saying jobs are "plentiful" declined to 30.8 percent from 31.8 percent.

Pensions Are On The Way Out But Retirement Funds Are Not Working Either

US law provides for many kinds of tax-advantaged retirement plans. They fall into two broad groups: defined-benefit (DB) and defined-contribution (DC) plans. Defined-benefit plans are mostly the old-style pensions. They came with a gold watch and ensured you some level of benefit for the rest of your life.

Your employer would invest part of your compensation in the plan, based on some formula. In some cases, you, the worker, might have added more money to the pot. But either way, at retirement, your employer was required to send you a defined benefit each month or quarter. Usually a fixed-dollar amount, sometimes with periodic cost-of-living adjustments.

That all sounds very simple, and it was, but the once-common scheme ran into trouble that set standards for private-sector pension plans and defined their tax benefits under federal law. DC plans are what most workers have now—if they have a retirement plan at all. The 401(k) is a kind of defined-contribution plan (as are various types of IRAs/Keogh/SEP plans, etc.). They are called that because regulations govern who puts money into the plan and how much. Typically, it’s you and your employer. Your employer also has to give you some reasonable investment options, but it’s up to you to use them wisely. Good luck.

The rub, of course, is that much evidence now shows that most workers are not able to invest their 401(k) assets effectively. That reality explains some of the retirement angst. But DB plans are no bed of roses, either. Especially when you put elected officials in charge of them and make unionized government workers their beneficiaries.

Trump’s tax cuts won’t pay for themselves: David Stockman

Central Banks Are Now Printing $200 Billion Per Month... Without a Crisis

A tsunami of inflation is rapidly moving through the financial system. Most investors only pay attention to the Federal Reserve. And they are missing the big picture for Central Bank monetary policy. The Fed is tightening policy by hiking rates. But the rest of the world’s Central Banks are printing a combined $200 BILLION in QE every single month.

Yes, $200 billion. At a time when the financial system is out of crisis and the Fed’s put its own “print” button on “pause.” This is an all-time record… greater even that the global money printing that occurred at the depth of the 2008 Crisis when Central banks were desperate to prop the system up.

Indeed, at $200 billion per month, we’re talking about an annualized pace of over $2 TRILLION in money printing every year. If you don’t believe this will unleash inflation, consider that already in the US, inflation has exceeded the Fed’s targets on ALL FOUR of its measures.

Bear in mind, these are the “official” measures of inflation… the ones that don’t include things like food, or energy. When you account for the rise in the REAL cost of living in the US, REAL inflation in the US is closer to 6%.

J.Crew to cut 250 jobs as part of reorganization

Privately held specialty retailer J.Crew is cutting 250 jobs, it announced on Tuesday. The move comes as it embarks on several strategic changes. As part of a reorganization, J.Crew will reduce headcount by approximately 150 full-time and 100 open positions, mostly from its corporate headquarters.

J.Crew expects to realize about $30 million of annualized pre-tax savings by downsizing its staff and will record a charge of approximately $10 million in the first quarter for severance payments and other termination costs.

"We take these difficult decisions very seriously, but believe they are absolutely necessary," said Mickey Drexler, the retailer's chairman and CEO, in a release. "We are streamlining our teams as we evolve our business and processes to cater to the new demands of the retail industry."

It will also shuffle some executives into new roles. As part of the reorganization, J.Crew COO and CFO Michael Nicholson will take on additional responsibility in planning and allocation, merchandising, marketing and design functions. Meanwhile, J.Crew named Lisa Greenwald, who will become the Chief Merchandising Officer, a position that reports to Nicholson.

Fannie Mae announces new programs to break through student loan roadblock

Confirming what sources told HousingWire yesterday, Fannie Mae this morning announced a significant expansion of its student loan cash-out refinance program and introduced new policies to help borrowers with student loan debt get qualified for mortgage loans.

“We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution,” said Jonathan Lawless, vice president of customer solutions at Fannie Mae. “These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.”

The level of student debt in the U.S. has spiraled over the last decade to $1.4 trillion, effectively locking out millions of potential homebuyers from the market. The new Fannie Mae programs address specific roadblocks that these borrowers face, providing a jump-start to a whole generation of homebuyers. Fannie Mae’s new solutions include:

Student loan cash-out refinance: Offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate. Debt paid by others: Widens borrower eligibility to qualify for a home loan by excluding from the borrower’s debt-to-income ratio non-mortgage debt, such as credit cards, auto loans, and student loans, paid by someone else. Student debt payment calculation: Makes it more likely for borrowers with student debt to qualify for a loan by allowing lenders to accept student loan payment information on credit reports.

NASDAQ sees record high

April U.S. auto sales seen down nearly 2 percent: JD Power and LMC

U.S. auto sales in April likely fell almost 2 percent from a year earlier, with consumer discounts remaining at levels high enough to threaten the industry's long-term health, industry consultants J.D. Power and LMC Automotive said on Tuesday. The consultancies also lowered their full-year 2017 forecast for new vehicle sales to 17.5 million units, from a previous forecast of 17.6 million.

April U.S. new vehicle sales will be about 1.48 million units, a drop of nearly 2 percent from 1.51 million units a year earlier, the consultancies said. The forecast was based on the first 13 selling days of the month. Automakers are expected to report April U.S. sales results on May 2.

The seasonally adjusted annualized rate for the month will be 17.5 million vehicles, flat versus the same month in 2016. Retail sales to consumers, which do not include multiple fleet sales to rental agencies, businesses and government, were set to decline more than 0.2 percent in April.

U.S. sales of new cars and trucks hit a record high of 17.55 million units in 2016. But as the market has begun to saturate, automakers have been hiking incentives to entice consumers to buy. Fears that the U.S. auto industry has peaked were stoked earlier this month when automakers released sales figures for March that came in at an annualized rate of around 16.6 million, below market expectations of 17.2 million units.

Marissa Mayer to make $184m from Yahoo's sale to Verizon

Yahoo's chief executive, Marissa Meyer, will be paid $184m when the sale of her company to Verizon completes this year. The huge sum - a combination of various payments - is detailed in a 429-page document lodged with the US Securities and Investment Commission (SEC).

The money includes the value of shares already owned, outstanding share options, a "golden parachute" payment, cash payments and medical benefits. Yahoo investors are being asked to vote on the deal this June.

Yahoo investors are being asked to vote on the deal this June. The total payments to Ms Mayer are far higher than the company first acknowledged last month when it explained that she would be entitled to the "golden parachute" payment for losing her job. Ms Mayer will leave the company when the sale goes through.

The deal with Verizon was first announced last year when the struggling company, agreed to sell its main internet business to Verizon, the huge US telecoms company, for $4.8bn.

Chaos erupts at Wells Fargo meeting as shareholders vent

There’s a holdup on the stagecoach! Wells Fargo’s annual meeting was temporarily suspended Tuesday after an angry shareholder refused to sit down and shut up over the board’s responsibility for the fake-accounts scandal that has tainted the bank’s reputation.

The shareholder, who was identified as Bruce Marks, spurred chaos as he demanded that board members to stand up and tell investors what they knew and when they knew it about the scandal, which led to the bank’s ouster of its previous CEO, John Stumpf.

“Let them speak! Let them speak! Or are they just mouthpieces for the executives who allowed these predatory practices to occur?” Marks said.

Stephen Sanger, the bank’s chairman, tried to get Marks to sit down and wait until a specific Q&A session, telling him he was “out of order.” But for nearly ten minutes the shareholder refused to follow the rules of the board meeting.

Procrastinating on filing taxes may be hurting the US economy

The first reading of the US economy's performance in the first quarter, scheduled to be released Friday, is expected to show growth of 1%. People who delayed filing their tax returns may be partly to blame for that slow pace, since they'll be spending their refunds later in the year, according to David Rosenberg, the chief economist at Gluskin Sheff. Consumer spending makes the largest contribution to gross domestic product, the benchmark for economic growth.

"We are seeing a degree of procrastination that is unprecedented in recent history,"Rosenberg said in a note on Tuesday. Highlighting data from the Internal Revenue Service, Rosenberg showed that personal income filings received for this season to date are at the lowest level since at least 2009.

One explanation relates to the calendar: The April 15 deadline fell on a Saturday this year and Emancipation Day fell on Monday, so taxes were due on Tuesday, April 18. But that doesn't tell the whole story, Rosenberg said, since the calendar was similar last year. And, the number of tax returns received in the week leading up to tax day was down year-on-year in 2017.

"The delay in tax filings (and thus receiving refunds) could very well be pushing out consumer spending that otherwise normally sees a seasonal uptick in Q1, which would mean that the seasonally adjusted data have been depressed to start the year," Rosenberg said.

America’s Middle Class Is Shrinking But Still Rich Compared to Europe

Even as the middle class has been shrinking in the U.S., it’s been growing in places like France, Ireland, the United Kingdom, and the Netherlands. That said, America's middle class is still richer than most of its Western European counterparts, a new report by the Pew Research Center shows.

The study documents how the middle class evolved from 1991 to 2010 in 12 countries including the U.S. and 11 nations in Western Europe. In most of those countries, the middle class has been shrinking, but there are a few exceptions.

To be considered part of the middle class, households had to earn between two-thirds to double their country’s median disposable household income. The data were adjusted for household size, inflation, and purchasing power parity to allow researchers to compare cost-of-living differences across countries and time.

A single person in the U.S., for example, would need to have earned between $20,000 and $61,000 to be considered middle class in 2010. For a family of four, it took household income of roughly $41,000 to $122,000 to make the cut. When it comes to disposable income, middle class households in the U.S. lived on $60,884 at the median, the second-highest level after Luxembourg. But as of 2010, only 59% of Americans were in the middle class—the lowest level of any country in the report. That’s down from 1991, when 62% of Americans were part of the middle class.

Expert Says 60% Chance Of Global Recession Next Year

The odds of global recession 2017 are building, according to some esteemed economists. For people still clinging to the idea that reflation is on the horizon, they may want to think twice. If this upcoming global recession does come, it could be on a scale unlike anything ever witnessed before.

Saxo Bank chief economist Steen Jakobsen in pinning these odds at 60% over the next 18 months, which is not what world leaders want to hear. He expects global growth to falter in the coming months as borrowing levels dominate in both China and Europe while the “Trump bump” in U.S. trading fades. This double whammy could tip the balance toward negative growth.

In essence, Jakobsen expects the “credit impulse” in Europe and Asia to die down, which is another way of saying there’s too much debt. There’s only so much credit that can be forced into the system with budget deficits so high, so this will need to be addressed somehow. Without the gears of credit greasing the economy, stall speed and/or negative growth should stick around as far as the eye can see.

Indeed, the International Monetary Fund (IMF) has already warned of this dire over-indebtedness gripping the planet. Gross debt has more than doubled in nominal terms since since 2000, and it’s still rising. Total non-financial debt sat at $152.0 trillion in 2015, which is a big problem when world gross domestic product (GDP) is only around $79.0 trillion. Slow growth is making it hard for nations to work off their debts, which is, as the IMF puts it: “setting the stage for a vicious feedback loop in which lower growth hampers deleveraging and the debt overhang exacerbates the slowdown.”

Fitch lowers Italy's credit rating to 1 notch above junk

Fitch Ratings has downgraded its rating on Italy's long-term debt, citing the country's huge debts, stagnant economy and divided politics.

Fitch cut the country's rating from BBB+ to BBB, one notch above junk-bond status. Fitch says the outlook for the debt is stable.

Italy's government debt equaled 132.6 percent of the country's economic output last year, one of the highest figures in the developed world and well above its debt targets. Italian banks are struggling with bad loans, and bailouts are planned for three of them. The Italian economy is dragged down by an aging workforce and low productivity. Fitch expects it to grow just 0.9 percent this year, same as last year.

In December, Italian voters overwhelmingly rejected constitutional changes meant to end political gridlock.

Trumpchi cars may change name as it eyes US market

When Chinese automaker GAC Motor was preparing to enter the United States market it foresaw challenges in product localisation and regulation, but didn't see any issue with the name of its flagship brand, Trumpchi.

Executives at the firm and its parent Guangzhou Automobile Group say they may now change the Trumpchi brand - which was meant to sound like its Chinese name Chuanqi, which is a play on the word "legendary" and means passing good fortune - after it drew some ridicule at the Detroit auto show in January.

"We saw people were laughing at this and took pictures looking only at this detail, and also put on Facebook or other websites," GAC Motor Design Director Zhang Fan said. "When we read all that feedback, we realised it might not be very positive promotion for the brand."

The company says any similarity between the brand name and that of the US president was unintentional. Working from similar sounds to the Chinese name, GAC came up with "trump" for being the best and "chi" for China, Zhang said. "This is a complete coincidence, we didn't even have the slightest idea he would be president," Feng Xingya, GAC Group President, said at the Shanghai auto show.

Keiser Report: Silicon Valley Destruction

$100K considered "low income" in parts of Bay Area

New figures from the federal government find that in parts of the Bay Area, some people who bring in a six-figure income can be considered “low-income,” CBS SF Bay Area reports.

Edward Apana, of South San Francisco, who is married with two children, says the cost of living in the Bay Area is a challenge, so to hear that six-figures is now considered “low income” is a bit shocking, but not that hard to believe. “Between the two of us, we can still make San Francisco, San Mateo County home,” Apana said. “But if one of us were to lose our job, it would be kind of tough.”

The new numbers come from the Department of Housing and Urban Development (HUD) and specifically have to do with eligibility for government assistance for housing. HUD says a family of four in San Francisco or San Mateo County with an income of $105,350 is considered “low income.” For Alameda and Contra Costa County, $80,400 is considered low income.

“These are certainly dramatic numbers,” said Michael Bernick, former director of the state Employment Development Department. Bernick said the drama stems from positive economic indicators. Unemployment, for example, is four percent or less in most Bay Area counties. In San Francisco, the unemployment rate is 3 percent; in San Mateo County, it is even lower.

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