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Thursday 01.26.2017

Blockchain – Central Banks Banking On It

Fiat currency debasement and failure is why gold has survived and thrived for thousands of years and indeed in recent years. It is why bitcoin is becoming more popular, with its growing market cap and ever-expanding ecosystem.

It is hard for central banks to dictate the value and supply of gold in the long term. Although they have tried and failed. This was seen during and after the London Gold Pool when gold prices surged from $35 to $850 in just 9 years and again in recent years when banks were found to be attempting to fix and manipulate gold prices. Manipulation frequently works in the short term but over the long term, the all powerful forces of supply and demand in the global market place will determine prices.

Similarly, it will be hard for central banks to dictate the value of bitcoin over the long term. Akin to gold, very limited supply and increasing global demand should determine prices rise in the long term. Thus, both operate almost trust-less monetary policies and have a value in and of themselves, regardless of central bank diktats.

As it is both nature and human nature that supports gold, it is a blockchain that supports bitcoin. The bitcoin blockchain was designed so that no central bank would ever be needed to support the currency. The bitcoin network is the bitcoin central bank, it creates new bitcoins and processes the transfer and settlement of the cryptocurrency. Monetary policy was set on day zero and its independence comes from its decentralisation.

Rand Paul just introduced his 'Obamacare Replacement Act'

Sen. Rand Paul, the libertarian-leaning Republican and one-time presidential candidate, introduced his own version of a replacement for the Affordable Care Act (ACA), better known as Obamacare.

The bill, named "The Obamacare Replacement Act," would eliminate a number of provisions from Obamacare including the individual mandate and minimums on coverage standards. The fact sheet of the bill makes no mention of a provision to allow parents to keep a child on their insurance until they turn 26.

Interestingly, Paul's plan would provide a two-year window for people with pre-existing conditions to sign up for care, then revert back to pre-ACA rules in which people with pre-existing conditions could still get coverage in the group market. It is unclear what would happen to those in the individual market with pre-existing conditions after the two-year open enrollment period.

Additionally, the bill would provide every American with a tax credit worth up to $5,000 for contributions to a health savings account (HSA) to put towards health insurance and other healthcare costs. "Getting government out of the American people’s way and putting them back in charge of their own health care decisions will deliver a strong, efficient system that doesn’t force them to empty out their pockets to cover their medical bills," said Paul, an ophthalmologist, in a press release announcing the bill.

Why Is The Media Perplexed? Because This Is What Business Looks Like – And They Don’t Get It

I was asked by a colleague the other day for my take on what has been roiling out of the mainstream media as it pertained to the now president, from the previous. In particular to the conversation was his questioning on the way in which the executive order process, along with photo ops, are being conducted. Or said differently the questioning was “Why the pomp and circumstance? I thought that was reserved for the signing into law passed by congress, I thought these (meaning executive orders) were done, basically, in private. What do you think is up with that?”

I thought I’d share my response because it seemed to open up a door in which he had never been privy too. And, by my own view of how it’s being treated and reported on via many in the media – neither do they. (Please remember this is meant to explain via a business viewpoint and acumen as to maybe shed some light to others, not a some political stance or viewpoint.) Here’s how I replied:

“It’s a good question and observation, here’s how I see it… This is a classic and well honed protocol for anyone who understands, let alone has been in, a turnaround operation. The first thing you need to do, with immediacy, is let everyone know, understand, and quell any questions as too who is in charge. That’s first and foremost along with – it must be demonstrated publicly, and again – with immediacy. This action must come from you – not underlings, not spokespeople, not anyone else. Period.

The second thing which is just as important is this: You must be seen (literally and figuratively) in the light that you not only understand, but more importantly, are personally reviewing and signing off on any changes that are to be made. i.e., You’re not just seen talking about nebulous proposals, or simply approving or signing things in bulk form based on recommendations of others. No: You have to be seen: reviewing, talking, answering, signing, etc. in public. And by public I mean just that: in front of your employees, customers, suppliers, et all. That’s step one, and by my observations that’s precisely what he is doing, and here’s why: People forget that he’s a billionaire or successful businessman today for one reason, and one reason only: He is a proven turnaround specialist.

Ron Paul Has Early Praise For Trump Presidency

Caterpillar December Retail Sales Still Down, but Showing Gains

Caterpillar Inc. (NYSE: CAT) closed out 2016 at $92.74, for a dividend-adjusted total return of 42% for the year. Just over half the gains were made in the second half of the year, and if you saw the earlier part of 2016, you might wonder how on earth Caterpillar ended up as the Dow’s top stock.

Share-price growth has continued since the beginning of the year, and Caterpillar’s shares are up more than 5% year to date. The stock posted a new high Wednesday morning following a more encouraging report on the company’s retail sales.

At the end of December, worldwide sales were down 12% year over year, but that’s an improvement from November’s decline of 17% for the prior 12 months and on a par with October’s decline of 12%. September sales were down 18%. Retail sales are reported on the basis of a 12-month rolling average by geographic region.

Sales in Caterpillar’s Asia-Pacific region rose 19% in December, with sales of construction equipment up 21% year over year. Asia-Pacific sales have been the only consistent growth area for the company.

The 2017 “Davos Consensus”—More Welfare and Warfare

“It’s a big club and you ain’t in it!” I often think of these words, spoken by the great comedian George Carlin, when I read about the World Economic Forum meeting in Davos, Switzerland.

Every year, global elites descend on Davos to discuss the big issues of the day in a Bilderberg-like conclave. This year, George Soros was there. So was Bill Gates. The most important world leaders go. As do CEOs of the world’s largest companies, mainstream media bigwigs, and prominent academics. Central bankers attend, too.

In short, it’s a bunch of out-of-touch, self-anointed elites meeting to hand down from above their uniformly bad “solutions” to the world’s problems. Then they pat each other on the back for all the good they’re doing. No matter the problem, their prescription is always more welfare, more warfare, more money printing, more taxes, and of course, more centralization of power into global institutions.

Interestingly, Donald Trump has never been invited to Davos. But his many opponents surely have. This year, former Vice President Joe Biden gave a provocative speech. He accused Russia of trying to “collapse the liberal international order.” It was basically a call to arms and only increased tensions.

Audit the Fed? Steven Mnuchin, U.S. Treasury secretary nominee doesn't sound like a fan

As a candidate, President Trump strongly supported auditing the Federal Reserve -- a move that many fear could subject the world's most powerful central bank to political interference. But Steven Mnuchin, U.S. Treasury secretary nominee, doesn't sound like he believes auditing the Fed is necessary.

Senator Bill Nelson sent Mnuchin a written question asking the Trump nominee what he thinks about "politicizing decisions" made by the Fed and the "benefits of an independent central bank." Mnuchin responded cautiously, but made no mention of the dire need to audit the Fed that Senators Ted Cruz and Rand Paul -- and Trump -- have voiced.

"As you know, the Federal Reserve is organized with sufficient independence to conduct monetary policy," Mnuchin wrote. Trump's Treasury pick added, "I endorse the increased transparency we have seen from the Federal Reserve Board over recent years."

An audit would allow the General Accountability Office to review the Fed's decisions on raising and lowering interest rates -- a critical tool the Fed uses to encourage growth or keep the economy from overheating. Compare Mnuchin's statements with pre-election comments made by Mnuchin's future boss. Last February, Trump said on Twitter that it's "so important to audit The Federal Reserve."

Madoff victims cannot sidestep $7.2 billion settlement: U.S. judge

A federal judge has blocked litigation that the trustee liquidating Bernard Madoff's firm said could undermine a $7.2 billion settlement meant to benefit the Ponzi schemer's former customers.

In a decision made public on Wednesday, U.S. District Judge Gregory Woods in Manhattan said A&G Goldman Partnership and Pamela Goldman cannot pursue a Florida lawsuit to recover $11 billion from the estate of Jeffry Picower, who they say helped perpetuate Madoff's fraud.

The decision is a victory for Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC, whose settlement with Picower's estate is the largest since Madoff's fraud was uncovered in December 2008. Picard also won a permanent injunction in 2011 barring competing claims against the estate. Picower died in October 2009.

In court papers, Picard said letting the Goldman plaintiffs sue Picower's estate to recoup some $11 billion of customer losses, on top of the $7.2 billion, would create a "shadow" bankruptcy estate and undermine his authority to settle claims. But the Goldman plaintiffs said they were entitled to sue because their claims differed from Picard's. They said these included how Picower "propped up" Madoff's fraud with $200 million of loans, and agreed to serve in trading records as a fake counterparty on options trades.

Sanctuary Restaurants: The next front for the immigration debate?

The national debate over immigration policy could be coming to a diner near you. From down-home delis to upscale bistros, dozens of restaurants nationwide are seeking "sanctuary" status, a designation owners hope will help protect employees in an immigrant-heavy industry and tone down fiery rhetoric sparked by the presidential campaign. First inspired by churches, the label is something cities and other public entities have sought to offer local protections to immigrants living in the U.S. illegally, whether it's barring police from asking citizens about immigration status or refusing to cooperate with federal agents.

Roughly 80 restaurants are participating, in locations including New York, Minneapolis, Detroit, Boston, Oakland, California, and Ann Arbor, Michigan. The restaurants agree to anti-discrimination policies, put up signs on windows that pronounce their sanctuary status and receive know-your-rights training, such as webinars on how to ask federal immigration agents for proper paperwork if there's an attempted raid. Some will also offer a text line for customers or employees to report any incidents of harassment.

At Detroit's Russell Street Deli, customers walking in the front door of the racially diverse restaurant see a sign that reads: "SANCTUARY RESTAURANT, a place at the table for everyone."

"I have this one little place where I get to decide how people treat each other," said owner Ben Hall, who is biracial and was moved to sign up after a few customers' racially tinged comments. "If someone has the need to insult someone ... then they don't get to participate. I've told them, 'There's another diner next door.'"

Millennials still enjoy living at home with parents and are reluctant to reignite the McMansion Baby Boomer Utopia

City centers from Los Angeles to Miami to Seattle have all seen a massive revitalization thanks to hipster loving Millennials that enjoy good restaurants and access to nightlife versus the white picket fence McMansion propaganda brought on by the baby boomer generation. Zero lot condos and homes make up the new housing demographic where builders try to max out every square inch of their buildable land so they can pack new buyers in like sardines and you can hear your neighbor’s sleep apnea roaring at 3am.

This is the modern day dream. Being able to waste your entire paycheck at Whole Foods and eating organic falafel at your new trendy restaurant. But Millennials are choosing to go their own way. For one reason, many can’t afford to buy an overpriced particle board crap shack so they ended up staying at home living with their parents deep into their late 20s and 30s. Many are also addicted to housing lust shows where reality star wannabes flip or flop on big real estate purchases. A modern day Lifestyles of the Rich and Famous. Yet most are not famous and many are certainly not rich. Ideals have simply changed and the market has transformed for Millennials.

The percentage of young adults living at home has hit multi-generational highs. This isn’t by choice but because of financial necessity. There was a recent study conducted by the Federal Reserve that showed inflation adjusted, Millennials are financially worse off than baby boomers. So this notion that Millennials are simply a bunch of whiny good for nothing crybabies isn’t exactly true. Funny that is the perception when many baby boomers are somewhat technologically illiterate and are screaming how “dumb” Millennials are on Facebook and Twitter (technology built and managed by younger Americans ironically).

Looking at demographic data for this site, most are baby boomers and older Americans although we do have our share of Millennials. Most look at housing prices and realize that it is a pipe dream but also wonder if they even want a big home given their varying lifestyles. Typically buying a home was pushed by emotional reasons and “doing the right thing” especially when it came to starting a family.

These 3 Stocks Are Already Winners Thanks to President Trump’s Mexican Wall

As Donald Trump indicated that he's about to act on his campaign promise to build a wall at the Mexican border, investors quickly bet on the stocks of companies most likely to build it.

The Dow Jones industrial average finally surpassed the 20,000 milestone Wednesday on the back of President Trump's infrastructure project announcements, and American building stocks were among the biggest winners. Shares of Martin Marietta Materials, a maker of ready-mixed concrete and cement based in Raleigh, N.C., surged as much as 3%, building up the company's market value to $15.8 billion. Martin Marietta stock has climbed more than 6% over the past two days.

Shares of construction company Vulcan Materials, based in Birmingham, Ala., also rose more than 2%; overall, Vulcan is up more than 60% over the past year. Stock in U.S. Concrete, a smaller building materials company in Texas, jumped nearly 4%.

Overall, the wall rally added about $2 billion in market value to those three companies. Still, that's nothing compared to the potential opportunity they face in trying to land what is expected to be a lucrative government contract: Estimates for the cost of the border wall run as high as $12 billion, with a potential $10 billion outlay for cement alone.

A nation without borders is not a nation

House flipping is on the rebound — and that’s not good for everyone

Flipping, defined as the sale of a home at least twice within a year, made up 6.1% of all home sales in 2016, up from 5.3% the previous year and the highest level since 2006, real estate research firm Trulia says in a new report.

The trend at least partly signifies rising prices that are attracting investors. The National Association of Realtors said Tuesday the median existing home price rose 4% last year, while the S&P CoreLogic Case-Shiller national index has shown slightly faster increases.

The top markets were Las Vegas, with flips making up 10.5% of all sales, followed by Daytona Beach, Fla., at 9%; Tampa, at 8.4%; and Memphis and Fresno, Calif, both at 8.2%. “Investors are picking up their game after several years of flat or declining activity,” says Ralph McLaughlin, Trulia’s chief economist.

Home flipping was the rage during the mid-2000’s housing bubble, and it cooled during the crash. Home prices increased at a double-digit rate in 2013 and 2014 as the market recovered from the downturn, but credit was still tight, forcing many investors to make all-cash purchases and limiting flips, McLaughlin says. Last year, he says, price gains were more moderate but flipping picked up because mortgages were more readily available.

Watch out for a Trump-Yellen showdown

U.S. equities moved to new records on Tuesday, thanks to an aggressive $1 trillion infrastructure spending plan proposed not by President Donald Trump but by congressional Democrats looking to retake the initiative.

Despite the day’s gains, which saw the S&P 500 and Nasdaq indexes hit new highs, stocks remain rangebound within the tight confines of a multimonth trading range. In fact, last month featured the narrowest trading range for the Dow Jones Industrials since 1900, capping the quietest four-year period ever for the stock market.

Of course, what’s enabling all this crushing of volatility has been the historic experiment with ultra-cheap monetary policy from the Federal Reserve -- a policy that’s set to change this year. The Fed, which has raised rates only twice this cycle, has penciled in three more quarter-point hikes this year.

Moreover, Fed Chair Janet Yellen has recently changed her tune: Before the election (during which Trump accused her of holding rates down to boost stock prices for Obama) she publicly stated it could be advantageous to let the economy “run hot” for a time, but suddenly a few months later, she now thinks that’s a bad idea. Wall Street will be reminded of Yellen’s suddenly hawkish stance when the Fed holds its next policy meeting at the end of the month.

Historical Official Records Reveal Gold’s Value Should Be 20 Times Higher

According to historical official records, the price of gold should be 20 times higher than the current market price. While many precious metals investors have heard about the revaluation of gold to back the outstanding fiat currency, my analysis focuses on monetary gold stocks versus global GDP (Gross Domestic Product).

To understand how the global GDP versus monetary gold stocks has changed, we need to look at information and data published in the U.S. Bureau Of Mines 1932-33 Gold-Silver Mineral Yearbook:

As we can see from the text above, Britain abandoned the gold standard in 1931. However, the most interesting part of the text above was, “It is surprising to learn that within a year 42 countries have abandoned the gold standard or are maintaining it artificially.” Thus, in all actuality, the world abandoned the gold standard in the early 1930’s, even though the United States Gold-backed Dollar became the world’s reserve currency via the Bretton Woods Agreement in 1944.

Now, the Central Banks and Financial elite had a very good reason to drop the gold standard. The financial and banking elite would profit immensely by printing money and charging interest, but only if money wasn’t gold or backed by gold. Because, the increase in above ground gold stocks was limited to its annual gold production. In addition, the industrial revolution had a profound impact on global economic growth.

Dying Sears Blowing Through Money at An Alarming Rate

Leave it to the ratings agencies to stir up fresh concerns on the state of dying retailer Sears Holdings . Sears burned through $1.6 billion in cash last year, said Fitch Ratings on Wednesday, adding that it expects the company to burn through another $1.8 billion this year. As a result, Fitch estimates Sears will have to raise approximately $2 billion in liquidity in 2017, roughly in line with the annual average over the past five years, if it wants to keep the doors open.

Fitch believes restructuring risk for Sears remains "high" over the next 12 to 24 months given the significant cash burn and reduced sources of liquidity. Just last week, Moody's downgraded its credit rating on Sears to Caa2 from Caa1. The downgrade reflected the accelerating negative sales performance of Sears' business, Moody's said.

"Although Sears has been able to fund its continued cash shortfalls through planned asset monetization, and additional financings, a meaningful business turnaround in fiscal 2017 is critical given the continued reduction of its asset base", said Moody's VP Christina Boni. "We expect operating cash flow to approach a disappointing loss of $1.5 billion for fiscal 2016."

On the positive side, Moody's upgraded its rating outlook to stable from negative. Fitch left its outlook unchanged. To be sure, things are getting increasingly bleak for Sears. Shares are down 6.26% to $8.84 in late afternoon trading.

Too Big To Fail - It's Happening Again

Too big to fail is returning with a vengeance. The same risk that major Wall Street banks posed in the 2008 crisis when they were too complex, too big and too risky to the global economy to be allowed to fail is alive and well. According to a recent Bloomberg report the hedge fund industry has officially gone over $3.02 trillion in global assets under its management.

To put that into perspective, that figure is nearly six times the amount that it took for Lehman Brothers to crash and throw the world into financial calamity in 2008. Not only have big banks morphed into a too big to fail ponzi, but now hedge fund managers are pushing global asset numbers into the same stratosphere. The risk to the global economy is alarming. The threat is real.

Jim Rickards sends the alert saying, “Right now investors are skittish, numerous shocks are waiting to happen and the system is highly unstable due to overleverage and nontransparency.”

Jim Rickards is a Daily Reckoning contributor who was on general council for Long Term Capital Management (LTCM) as a negotiator for its bailout in 1998. He knows the bailout system on Wall Street better than most. In his analysis of the markets pricing the new White House administration Rickards remarks that, “despite Trump’s best efforts and positive policies, a collapse could happen any day unless radical steps are taken to prevent it — such as breaking up big banks and banning derivatives.”

Revitalizing America's infrastructure with private funding

America’s “Sanctuary Cities” to Lose Billions

America’s capital city—will lose at least 25 percent of its entire budget in in terms of President Donald Trump’s new Executive Order barring federal funds to cities which protect illegal invaders.

President Trump—who has so far lived up to his campaign promises in spectacular fashion—announced the cutting of federal aid to “sanctuary cities” in one of two executive orders, with the second ordering the construction of an anti-invasion wall on the U.S.–Mexico border.

The cutting off of aid to the so-called “sanctuary cities” will have major repercussions for almost all of the 364 counties and 39 cities officially identified by the Department of Homeland Security’s Immigration and Customs Enforcement (ICE) as “having a policy that is non-cooperative and obstructs immigration enforcement.”

While Washington D.C. will lose $3.35 billion, or 25 percent of its budget, the city of New York is set to be the single biggest financial loser. Currently, New York City gets $10.4 billion—or 12 percent—of its total budget from federal funds.

Fannie Mae Backs Up Blackstone

A Fannie Mae spokesperson confirmed Wednesday the country’s largest owner of single-family rental homes recently won its backing.

The GSE agreed as of Tuesday to backstop up to $1 billion in debt from Blackstone Group's platform Invitation Homes, the first time a government sponsored entity has agreed to guarantee the debt of an institutional owner of single-family houses.

“This transaction is a great opportunity to continue to serve the growing single-family rental market,” said Pete Bakel, Financial and Executive Communications spokesman for Fannie Mae. “Today, single-family homes account for more than 50 percent of the rental market, offering individuals and families access to good neighborhoods, schools, and employment centers. Invitation Homes is a strong partner with deep experience managing a large volume of single-family rental properties. This transaction helps us gather data and test the market to ensure we are delivering the right solutions that meet the increasing demand for single-family rental housing across all demographics.”

Bakel said the collaboration with Blackstone serves their commitment to find new ways to meet the changing needs of families. Invitation Homes went public Monday with the filing of its S-11 form to the Securities Exchange Commission. Invitation homes indicated in the filing it has elected to qualify as a real estate investment trust (REIT) for U.S. federal income tax purposes. Invitation Homes plans to become a Maryland corporation after the completion of the offering, according to the filing.

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