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Wednesday 07.23.2014

CIT’s $3.4 Billion Buyout Makes It Systemically Important to Regulators
CIT Group Inc. (NYSE: CIT) may have delivered on beating its earnings expectations, but this is just a tiny fraction of the story here. CIT’s acquisition of the parent company of OneWest Bank NA for some $3.4 billion in cash and stock is a game changing acquisition that makes CIT a much larger company to follow. In fact, CIT is now going to be back in the systemically important financial institution (SIFI) category. We will not get into the debate of whether this makes CIT go into the ‘too big to fail’ camp, but some will. CIT had $44.1 billion in assets as of the end of the June 30 quarter. That was shy of the $50 billion threshold for the systemically important regulatory line. It is not the purchase price of $3.4 billion for the IMB Holdco parent of OneWest that investors need to consider here. It is the size of the assets under consideration. Now consider that CIT had to undergo bankruptcy protection back in 2009 after the recession wiped out so many financial firms.

Labor Department’s Minimum Wage Increase Campaign Raises Eyebrows
The Obama administration’s Department of Labor is running a social media campaign this week to encourage people to lobby Congress for a minimum wage increase — a move raising eyebrows because it is similar to the campaign messaging being used by Democrats to drive voters to the polls this year. “It’s been five years since the last time the federal minimum wage was increased,” Lia Gallitano of the Labor Department wrote in a blog post on the government website. “The cost of living has increased significantly since then, but wages have not.” In her post on the government-funded website, Gallitano explained that on Thursday, the Labor Department is asking people to tweet support for a minimum wage increase with a #1010now or #5Reasons hashtag. That is to highlight the “#5Reasons to raise the wage to #1010Now,” the staffer said. “We believe that hard work should be rewarded with fair pay, and that no one working a full-time job in America should have to live in poverty,” Gallitano wrote.

They want a baby. The economy won’t play along.
Her husband gets home close to 4 p.m., first day in 20 he’s been back on the job as an electrician. He walks through the house, past the outlets with safety covers, the gated basement stairs, a bookcase bracketed to the wall — babyproofing measures they took a few years ago in still-simmering anticipation. The house is quiet. Just Rick Myrick and his wife. He kisses her hello. Then he checks to see how many hours he’s worked this year: 130 in four months. Not nearly enough. Not if they ever hope to start a family. Melissa Myrick is 33, blonde and quick to smile. She thought for sure she’d be a mother by now. She could picture it: One boy, one girl, both with her bright blue eyes. That was the plan when she and Rick married in 2008. Get pregnant right away. But first he lost his job, then she lost hers. They decided to wait. A year later, barely back on their feet, a doctor’s visit revealed they’d struggle to conceive. The best shot for Melissa and Rick to have a baby would cost at least $15,000...

Great Opportunities At These Gold Levels: iiTrader

Layoffs Prove the Deceit of Amnesty
The shocking announcement that Microsoft is cutting 18,000 jobs is still sinking in. Most of those employees do not have a realistic chance of obtaining as good a job as the one they are losing. In the United States, the number of engineering jobs has been sharply declining. In 2002 the number of electrical engineering jobs in the United States was 385,000, but despite increased demand for technology, the job total dropped to only 300,000 last year. And that number is not even for American workers, because thousands of these jobs are soaked up by the H-1B visa racket, whereby companies like Microsoft can import and pay foreign workers less than it costs to hire an American. High-tech companies have thousands of foreign employees working on H-1B visas who are almost like indentured servants to the company, because they lose their right to be in our country if they leave their job. Microsoft's massive layoff makes downright ridiculous the op-ed recently published by Bill Gates....

A Few Comments on Existing Home Sales
The most important number in the NAR report each month is inventory. This morning the NAR reported that inventory was up 6.5% year-over-year in June. This is a smaller increase than other sources suggest (Housing Tracker shows inventory up 15% year-over-year in July), and it is important to note that the NAR inventory data is "noisy" and difficult to forecast based on other data. The headline NAR inventory number is not seasonally adjusted, even though there is a clear seasonal pattern. Trulia chief economist Jed Kolko has sent me the seasonally adjusted inventory. NOTE: The NAR does provide a seasonally adjusted months-of-supply, although that is in the supplemental data. Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, many "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market....

The Truth about China’s Massive Gold Hoard
I don’t want to say that mainstream analysts are stupid when it comes to China’s gold habits, but I did look up how to say that word in Chinese… One report claims, for example, that gold demand in China is down because the yuan has fallen and made the metal more expensive in the country. Sounds reasonable, and it has a grain of truth to it. But as you’ll see below, it completely misses the bigger picture, because it overlooks a major development with how the country now imports precious metals. I’ve seen so many misleading headlines over the last couple months that I thought it time to correct some of the misconceptions. I’ll let you decide if mainstream North American analysts are stupid or not. The basis for the misunderstanding starts with the fact that the Chinese think differently about gold. They view gold in the context of its role throughout history and dismiss the Western economist who arrogantly declares it an outdated relic.

Detroit’s record bankruptcy is likely to hit investors much harder than pensioners
As Detroit slowly makes its way toward a possible emergence this fall from the nation’s largest-ever municipal bankruptcy, one group of stakeholders stands to make out better than many imagined early on: city retirees. Make no mistake, the city’s 32,000 retirees stand to absorb significant cuts, but they are nothing like the reductions of 27 percent or more that were envisioned in the emergency manager’s restructuring plan released earlier this year. Under the revised plan, approved overwhelmingly in a vote of current workers and retirees, former rank-and-file city employees would face 4.5 percent pension cuts, while losing cost-of-living increases. Retired firefighters and police officers would give up a portion of their annual cost-of-living increases. The more modest reductions were made possible by an agreement by the state, private donors and foundations to provide $816 million for the city’s underfunded pension funds.

Useless Pay Phones Are the Wi-Fi Future
The homely pay phones of New York City are ghostly, graffiti-scarred reminders of an earlier era. But they could play a role in the city's digital environment if New York gets its priorities straight. The crucial step is for the city to treat these pay phones as it does its bridges or trees: like basic infrastructure, not just opportunities for short-term revenue. Last week, New York received bids from companies interested in replacing the nearly 10,000 existing pay phones throughout the five boroughs with upgraded, attractive structures. The city is calling for free public Wi-Fi, among other amenities, to be provided by the winning bidder. What's the connection between Wi-Fi and pay phones? Wi-Fi works by opening up the end of a telecommunications wire for shared use by devices using public airwaves for transmitting and receiving communications. Pay phones are connected to communication lines and power, which makes the city's call for them to serve as Wi-Fi hot spots reasonable.

FAA cancels flights to Tel Aviv

Supreme Court Justice Anthony Kennedy: Constitution 'Flawed'
Supreme Court Justice Anthony Kennedy, speaking at the annual conference of the Ninth U.S. Circuit Court of Appeals in Monterey, waxed eloquent on the deficiencies of the Constitution and implied that those who believe in the original intent of the Constitution by swearing fealty to the original, literal meaning are misguided. Most of Kennedy’s nearly hour-long speech focused on the Magna Carta, originally signed in 1215 and due for its 800th anniversary next year. But he couldn’t resist taking a swipe at the Constitution, noting, “The Constitution of the United States is a flawed document,” its “thinly veiled language… basically reaffirmed the legality of slavery.” Kennedy was referencing the section of the Constitution in which each slave was defined as three-fifths of a person in the estimation of how many congressional delegates each state was allotted. He added that the soldiers who died in the Civil War were “one of the things it cost for having a Constitution that was flawed.”

Human Smuggler: ‘Business Is Very Good’
The man-in-the-know nursed a late-morning beer at a bar near the Suchiate River that separates Guatemala from Mexico, and answered a question about his human smuggling business with a question: “Do you think a coyote is going to say he’s a coyote?” Dressed as a migrant in shorts and sandals but speaking like an entrepreneur, he then described shipments of tens of thousands of dollars in human cargo from the slums of Honduras and highlands of Guatemala to cities across the United States. “It’s business,” he said, agreeing to speak to a reporter only if guaranteed anonymity. “Sometimes, business is very good.” Judging by the dramatic increase in the number of minors apprehended in the United States in recent months, it seems the human smuggling business from Central America is booming. The vast majority of migrants who enter the U.S. illegally do so with the help of a network of smugglers known as “coyotes,” so named for the scavengers that prowl the border.

Janet Yellen thinks social media is overvalued
Fed Chair Janet Yellen has a hot stock tip for you: stop throwing so much money at anything that calls itself a social network. Specifically, the Fed thinks the "valuation metrics" for "smaller firms in the social media" sector "appear substantially stretched." And it's not hard to see why. Yo, an app that only lets you send messages that say "yo," just received $1 million in funding. Cynk, a nonexistent social network for buying friends online, somehow—fraudulently—got a $6 billion valuation despite having no assets and no revenue. And now NBA star Carmelo is pivoting to a second career as a venture capitalist with his own seed fund. As he told the Wall Street Journal, he has "long been interested in technology." In other words, Larry Summers was right: there are idiots, look around. But the question is how hard the Fed should look at our collective idiocy.

Barclays, Deutsche Bank in US tax scheme: Senate report
Two of Europe's largest banks, Barclays and Deutsche Bank, have sold complex financial products that allowed hedge funds to avoid US taxes, a Senate report said on Tuesday. The scheme has cost the federal government billions of dollars in tax revenues, according to the report by the Senate permanent subcommittee on investigations of the Committee on Homeland Security and Governmental Affairs. The committee said an investigation revealed how British bank Barclays and Germany's Deutsche Bank developed two types of so-called "basket options" - instruments indexed on market values, such as stocks and commodities - to help the hedge funds skirt US taxes. From 1998 to 2013, Barclays and Deutsche Bank sold 199 basket options to more than a dozen hedge funds, which used them to conduct more than $100 billion in trades. The banks and the hedge funds used the basket options to open proprietary trading accounts in the names of the banks, making it look like the banks owned the account assets.

Local police departments acquire more military surplus firepower
Some of the equipment looks as if you might find it on a battlefield in Afghanistan — not the streets of Mishawaka, North Liberty or Bourbon — but the inventory lists show how much military gear local police departments have stockpiled. MRAP armored troop carriers, night-vision rifle scopes, camouflage fatigues, Humvees and dozens of M16 automatic rifles are just some of the tools that have found their way to Michiana police, courtesy of the federal government. Just this year, the Mishawaka and Michigan City police departments each obtained the latest, and perhaps most controversial, item to become available: The MRAP, or "mine resistant ambush protected" troop carrier, a hulking, six-wheeled $733,000 armored vehicle. The latest acquisitions come as critics raise concerns that the U.S. government's 1033 program — which lets the military donate unneeded weapons and equipment to law enforcement across the country — encourages police to increasingly look and act like small armies.

9/11 Commission: Americans can't be complacent about threats

Consumer Prices Pump Up on Higher Cost for Gasoline
U.S. consumer prices rose in June as the cost of gasoline surged, but the underlying trend remained consistent with a gradual build-up of inflationary pressures. The Labor Department said Tuesday its Consumer Price Index rose 0.3 percent last month, with gasoline accounting for two-thirds of the gain, after May's 0.4 percent rise. In the 12 months through June, the CPI increased 2.1 percent after a similar rise in May. Inflation is creeping up as the economy's recovery becomes more durable, a welcome development for some Federal Reserve officials who had worried that price pressures were too low. The steady increases have led some economists to predict that a separate inflation gauge watched by the Fed, currently running below the U.S. central bank's 2 percent target, could breach that target by year-end as an acceleration in job growth lifts wages.

Economists say you're more likely to get a raise this year
Workers rejoice: Economists say their companies are granting more pay raises this year. Forty-three percent of economists surveyed by the National Association for Business Economics (NABE) said their firms have increased wages in the last three months. That's up from last year, when only 19% of economists were reporting wage gains. Even if wages aren't going up at your workplace, the tide of cutting wages might be done. No one reported pay cuts at their firm, while 57% said wages were flat. As for the future, 35% of economists said they expect their firms to raise wages in the next three months with the other expecting wages to stay the same. The survey is of 79 economists who represent a variety of industries. About 40% of their firms employ 1,000 people or more. While the survey is encouraging, other data show wages are rising but not enough to keep up with rising prices. In fact, once inflation is factored into the equation, so-called "real wages" were actually 0.1% lower in May,....

More U.S. companies caught up in China food scandal
The ongoing food scandal in China, affecting both Yum Brands' (YUM) KFC and McDonald's (MCD) restaurant chains, has spread outside of the People's Republic, and to several other U.S. outlets. On Tuesday Starbucks (SBUX) said some of its cafes in China had sold chicken products produced by Husi Food. The Shanghai-based company was closed down over the weekend, after a local TV exposé claimed Husi was using expired meats in its products. "Starbucks will continue to apply on our rigorous quality assurance program to ensure that all our of products meet Starbucks global standards," the company said in a statement, "as well as all local China safety and quality standards." Starbucks says it has removed the one product it has identified as coming from Husi from its affected outlets in China. And Burger King (BKW), according to Reuters, has also removed Husi-processed meats from its operations in the People's Republic.

Keiser Report: Goldfish Cryptocurrency

The Argentina Debt Case
Almost everyone now knows that the world of international finance is not a particularly robust one, nor is it particularly just or fair. But it has just got even weirder and more fragile, if this can be imagined. A recent ruling of the U.S. Supreme Court, refusing to hear an appeal by the government of Argentine against a decision of a lower court on a case relating to its debt restructuring agreement with creditors over a decade ago, is not just a blow against the state and people of Argentina. It has the potential to undermine the entire system of cross-border debt that underlies global capitalism today. The case has its origins in the 1990s, when the government of Carlos Menem fixed the Argentine peso at the value of one U.S. dollar, through a currency board arrangement that restricted base money supply to the amount of external reserves and sought to increase its spending through the build-up of external debt.

Fruit Recall Hits Trader Joe's, Costco, Wal-Mart Stores
Fears of possible listeria contamination have led to a national recall of whole peaches, nectarines and other fruits packed by a California company. No illnesses have been reported, but the Wawona Packing Company has told retailers such as Wal-Mart, Costco and Trader Joe's to pull its products. The recall applies to "certain lots of whole peaches (white and yellow), nectarines (white and yellow), plums and pluots packed between June 1, 2014 through July 12, 2014," according to a recall bulletin from the Food and Drug Administration. The FDA has posted product images of the recalled fruits' packaging. "Fruit sold as individual pieces should have a sticker on it; the recalled product stickers will read 'Sweet2Eat,' " Wawona says. Wawona sells produce to national wholesalers; as of Tuesday, "Costco, Trader Joe's, Kroger and the Walmart Corp. — which operates Walmart and Sam's Club stores, have all posted notices about the fruit recall on their websites," CNN reports.

LinkedIn Just Bought A Business Marketing Company For $175 Million
LinkedIn just bought a business marketing company called Bizo for $175 million. LinkedIn's David Thacker writes that Bizo's team has been part of its API Partner Program for a while and the acquisition will help it establish "a comprehensive B2B marketing platform for brands." Bizos helps advertisers find and target new businesses. This news comes soon after LinkedIn announced that it was buying Newsle last week. LinkedIn is funding this deal 90% with cash and 10% with stock. Here's the full blog post from Bizo, which was founded in 2008 and has raised about $20 million in capital: When we started Bizo just over six years ago, our goal was to build an unbeatable team, culture and product to help B2B marketers drive greater revenue and results. We have come a long way towards delivering against this vision and at the same time see a huge amount of opportunity ahead of us. As we focus on the road ahead, I couldn’t me more thrilled to share the exciting news that LinkedIn has agreed to acquire Bizo.

Michael Moore Owns Nine Homes - Divorce case exposes bickering between filmmaker, wife
A lakefront mansion. Dueling movie producers. Super agents joining the fray. A drunken driving arrest. The possible hiring of private investigators. The divorce of Michael Moore has this normally sedate community northeast of Traverse City all atwitter. The filmmaker, 60, who split his time between a home here and one in New York, is leaving his wife of 22 years, Kathy Glynn. The breakup is scheduled to be finalized in a settlement Tuesday at Antrim County Circuit Court in nearby Bellaire. “It’s a big thing,” resident Sheila Cockerline said at a public boat launch near the Moore home. “He’s a big player, our local celebrity.” By reaching a settlement, Moore avoids a trial that could have aired dirty laundry common in high-proile breakups and impugned his long-hewn image as a common man by disclosing details of his comfortable life.

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