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Disappointing U.S. January jobs report

U.S. stock index futures turned lower on Friday after a disappointing U.S. jobs report. The U.S. economy added 151,000 jobs in January. Economists expected a gain of 190,000. The unemployment rate, however, fell to 4.9 percent from 5.0 percent.

The job market has been a pillar of strength for the U.S. economy and a key reason that the Federal Reserve was able to hike interest rates, so January's employment report has become even more critical amid new signs the economy has hit a soft patch.

Elsewhere on the data front, consumer credit is set to come out at 3:00 p.m. In oil markets, Brent crude traded around $34.75 a barrel on Friday morning, up by 1 percent, while U.S. crude was at around $32 a barrel, up 1.13 percent.

On the earnings front, CME Group and Estee Lauder, among others, reported before the bell.

The middle class wants more government help

A majority of Americans say the feds don't do enough to help the middle class, according to a Pew Research Center survey released Thursday. The middle class is more neglected than the poor or children, survey respondents said.

On the flip side, some 61% of respondents say that the federal government is giving too much assistance to the wealthy. Pew did not inquire just what help Washington should provide for the middle class or what lavish benefits they are showering on the rich. But a prior Pew survey found that the middle class was not happy with the federal government's economic policy since the recent recession.

"If people think that the policies the government put in place to help the economy benefit big banks, corporations and the wealthy, that may help explain why they think the government is not doing enough to help the middle class or the poor," said Kim Parker, Pew's social trends research director.

The survey comes just as the 2016 presidential candidates try to court the middle class. Democrats Hillary Clinton and Bernie Sanders argue that the federal government should do more for middle and working class Americans, including easing the cost of college and healthcare and boosting paid family leave and the minimum wage. The Republican frontrunners, on the other hand, want to assist the middle class by minimizing the role of the federal government. The candidates argue that reducing federal taxes and regulations will boost the economy and allow people to prosper.

Sports Authority preparing to file for bankruptcy

Sports Authority is preparing to file for bankruptcy, according to a Bloomberg report that cited sources with knowledge of the situation

The sporting goods retailer has a debt payment due in less than two weeks and is discussing a reorganization deal with lenders, the sources told the news service. Part of the plan includes the previously rumored move to close as many as 200 of its roughly 450 stores.

In January, there was speculation that Sports Authority would be preparing to shut almost half of its locations, sending shares of competitor Dick's Sporting Goods higher. It was estimated that Dick's could gain $238 million on its rival's store closings due to rapid same-store sales growth and regained market share.

On Jan. 20, Moody's downgraded Sports Authority's credit rating after it missed a subordinated debt interest payment due on Jan. 15. The retailer was given a 30-day grace period.

Jobless Claims in U.S. Rise Amid Post-Holiday Adjustments

The number of Americans filing applications for unemployment benefits rose last week as employers continued to adjust staffing levels following the holidays. Jobless claims climbed by 8,000 to 285,000 in the week ended Jan. 30, from a revised 277,000 in the prior period, a report from the Labor Department showed on Thursday. The median forecast of 47 economists surveyed by Bloomberg called for 278,000. The four-week average exceeded 280,000 for a third consecutive week, indicating the pace of firings has sped up a bit from historically low levels.

While the uptick in claims bears watching, it may also represents the week-to-week volatility common to claims data around holidays, economists said. Other recent reports show employers are holding on to existing staff and are still adding workers as they anticipate sales will improve.

“Claims seem to be in an upward drift toward 300,000,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “The labor market is solid but not as strong as it was earlier. I certainly wouldn’t extrapolate from it that the economy is headed toward a recession.” One state, Oklahoma, estimated data for jobless claims last week because of a glitch in its computer system. Otherwise, there was nothing unusual in the figures, a Labor Department spokesman said as the report was released.

Economists’ estimates in the Bloomberg survey for weekly jobless claims ranged from 265,000 to 295,000. The previous week’s figure was initially reported as 278,000. The four-week moving average, a less volatile measure than the weekly claims numbers, increased to 284,750 last week from 282,750. The last time the average exceeding 280,000 for at least three consecutive weeks was in April. The number of applications dropped as low as 255,000 in mid-July, the lowest in four decades.

Shell confirms 10,000 job cuts worldwide

Shell has confirmed today it is cutting 10,000 jobs worldwide. The company indicated the cuts were coming last month. They blame it on low oil prices, which has cut into their profits.

In a trading statement unveiled just before shareholders voted on the BG merger, Shell said last month that streamlining and integration from the deal would include the loss of 10,000 staff and contractor positions across both companies in 2015-2016. We're working to find out whether Houston employees will be affected.

Royal Dutch Shell said fourth-quarter earnings tumbled 44 percent as the collapse in oil prices took its toll on another European oil company. Profit adjusted for changes in the value of inventories and one-time items dropped to $1.83 billion from $3.26 billion in the same period a year earlier, the Anglo-Dutch energy giant said Thursday.

The results came days after Shell sealed a 47-billion-pound takeover of BG Group Plc, which will increase the company's proven reserves of oil and natural gas by 25 percent. While critics questioned the deal because of the plummeting price of oil, CEO Ben Van Beurden compared it to the bold moves that have defined the industry and promised it would rejuvenate Shell. The BG deal comes as Shell and other oil companies are slashing jobs and postponing investments to adjust the bottom line to the dramatic circumstances.

Great Recession of '09 Will Need New Name After This Greater Recession

The American Dream Is Dead, And Now Even The Mainstream Media Is Starting To Admit It

Are you living “the American Dream”? If so, you should consider yourself to be very fortunate, because most Americans are not. In fact, as you will see below, a new survey has found that there is nowhere on the entire planet where the average wage earner is making enough money to live “the American Dream”. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now the middle class makes up a minority of the population, 51 percent of all American workers make less than $30,000 a year, and poverty is growing rapidly. The American Dream is essentially dead, and even the mainstream media is starting to figure this out.

Just today, someone sent me a U.S. News & World Report article entitled “Even Americans Can’t Afford the American Dream”. The following is an excerpt from that article…

The study goes country by country, factoring in average local wages and prices to calculate the regional costs of luxuries such as midsize homes (by U.S. standards, 1,480 square feet); electricity and high-speed Internet; cars and enough money for gasoline; food for a family of four; and enough disposable income to periodically dine out and attend movies or other events.

Researchers ultimately found there isn’t a country on the map whose average wage earner could afford all of these expenses together. What’s more, average consumers in Saudi Arabia and Oman are actually closer to financing these socioeconomic goals than the average American. The average Saudi household would only need to see monthly salaries climb by about $74 to realize the American dream in their own country, while U.S. workers would need hundreds of dollars in additional income.

Why Only Rich People Can Afford Super Bowl 50 Tickets

Football is an everyman’s game. Chances are, your love for the sport grew from tuning in every Sunday afternoon while your father had a beer in his La-Z-Boy and you practiced being the next great quarterback in your backyard. But despite its appeal to people of all incomes and walks of life, the reality is that attending football games is off-limits for a majority of the fans – especially the Super Bowl. While the Denver Broncos and Carolina Panthers play for a chance to say they’re going to Disney World after their win, most people would have to forfeit their own chance to head to the amusement park in order to pay for the cost of attending the NFL’s season-ending championship game.

At the height of ticket sales right before the AFC and NFC championship games around 10 days ago, ticket sales were on track for record high numbers. Tickets were selling for an average of $5,570 apiece, according to ticket site SeatGeek, with the cheapest options costing more than $3,000. The average ticket price has since dipped, likely because more seats became available after the conclusion of the playoff games (perhaps posted for sale by disappointed New England Patriots and Arizona Cardinals fans.) Even so, the average price sits at $3,801.

In most cases, those prices will just get you into Levi’s Stadium in Santa Clara, Calif., the stadium home to the San Francisco 49ers during the regular season. It might get you a seat in the nosebleed section or at an end zone, if you’re lucky. But if you’re looking for prime seating on the 50-yard line, you’re more likely to be shelling out $7,000 to $18,000, depending on how close to the field you want to be. Tickets for suites on StubHub range from $7,250 to around $10,000, with one suite ticket priced at a totally amenable $260,000. (For that price, you’d better also be sharing your suite with halftime performers Coldplay, Beyonce, and Bruno Mars.)

But, say you’ve been a Panthers fan all your life and you can’t wait to see Cam Newton in the spotlight. Or, say you’ve followed Peyton Manning’s career and you’d like to be at the game that could very well be his last. Perhaps you’ve saved up for a splurge, and the $7,000 or so to take you and a plus one to the game is worth it. (Because who really wants to go to a once-in-a-lifetime game alone?)

IMF chief sees risks in emerging markets slowdown

International Monetary Fund chief Christine Lagarde warned on Thursday (Feb 4) that the slowdown in emerging market economies could lead to rising inequalities in the global economy. In the wake of China's cooling economy and the steep fall in commodity prices, the emerging market economies are seeing growth falter and are facing "a new, harsh reality," Lagarde said in a speech at the University of Maryland.

"Growth rates are down, capital flows have reversed, and medium-term prospects have deteriorated sharply," the IMF managing director told a forum, according to the prepared text of her speech.

China, the world's second-largest economy, posted its weakest growth in a quarter of a century in 2015, and Brazil and Russia are in recession. The IMF now projects that income levels of the emerging and developing economies will converge to advanced economy levels at less than two thirds the pace it predicted a decade ago, Lagarde said.

"This means that millions of poor people are finding it more difficult to get ahead. And members of the newly created middle classes are finding their expectations unfulfilled," she said. The consequences of the interconnected global slowdown will not be merely economic, she pointed out: "It also carries with it the risk of rising inequality, protectionism, and populism."

Share buyback machine remains in overdrive and experts warn it will end badly

In the midst of a gloomy earnings season, the share buyback machine has remained in overdrive, and some experts are cautioning it will all end badly. Companies, even those that are missing profit and sales estimates and cutting outlooks, or restructuring and cutting jobs, are still announcing buybacks. Coming after a long period of intensive spending on shareholder returns, the news is bad for investors hoping to see a return to growth.

“We continue to be skeptical about how companies are deploying capital, especially when it’s tied to stock-based compensation,” said Ben Silverman, vice president of research at InsiderScore, a research firm that tracks buybacks and legal insider trading for institutional clients. “We believe buybacks can be used to mask management’s inability to grow the business and be innovative thinkers.”

William Lazonick, professor of economics at University of Massachusetts Lowell and director of the Center for Industrial Competitiveness., went a step further, suggesting that buybacks have the potential to push the U.S. into recession. He argues that companies are using them to prop up share prices at the expense of reinvesting in the business and supporting job stability and long-term growth.

“It has the potential to really drive the economy into the ground,” he said. “Companies have given away so much money, it’s been a long-run secular problem that has contributed to why income is so concentrated at the top.” Data shows that 78% of the total compensation paid to executives at the top 500 U.S. companies in 2014 went on stock options and stock awards, he said. “Executives are basically incentivized and rewarded for getting the stock up, and buybacks are a prime way of doing that,” he said.

Factory Orders Down 3% in December

A report out Thursday shows mixed results in factory activity, shipping and new orders in the United States. The U.S. Department of Commerce reported that factory orders slipped by 2.9% ($13.5 billion) in December to $456.5 billion. Bloomberg had its Econoday consensus estimate at a -2.8%. The November drop of 0.7% was unrevised.

Shipments are now down in eight of the past nine months. The December reading fell by some $5.1 billion, or 2.1%, to $236.1 billion. The month of November saw an increase of 0.6%. Shipments of petroleum and coal products, have now fallen for six consecutive months, and led the December decrease, falling by $1.2 billion or 2.8% to $40.6 billion.

Unfilled orders fell following two consecutive monthly increases. That portion of the report dropped $5.8 billion, or 0.5%, to $1.187.4 trillion. This unfilled orders report followed a 0.1% increase in the month of November. The unfilled orders-to-shipments ratio was 7.11, up from 6.94 in November.

Inventories that had been down in five consecutive monthly reports rose in December by $1.9 billion, or 0.5%, to $397.6 billion. Inventories declined by 0.3% in November. The inventories-to-shipments ratio was 1.38, up from 1.35 in November.

The Great Crisis Has Officially Begun (Oil is Just the Start)

It would be a lot easier to be bullish today if the entire financial system wasn’t based on fraud and BS. Every explanation we see regarding the bull market in stocks is really just a cover for the fact that Central Banks spent $14 trillion propping up the bond bubble. All claims that stocks went up because of the “recovery” or because of “expansion” or whatever really translate to “stocks went up because TRILLIONS in liquidity went into the system and a lot of it ended up in stocks.”

Here’s the reality of things. Bonds, particularly sovereign bonds, are the bedrock of the financial system. US Treasuries are considered the “risk free” rate of return. Every other asset in the world is valued based on its perceived risk relative to Treasuries. However, Treasuries have become horribly mispriced because the Fed and other Central Banks have tried to corner the global sovereign bond market. When sovereign bonds are mispriced, EVERYTHING is mispriced. This includes US stocks, emerging market stocks, commodities, corporate bonds, municipal bonds, etc.

This worked for about five to six years until the dark economic realities that Central Banks attempted to paper over began to appear. In this particular instance, the economic realities concerned the fact that China, which was thought to have pulled the world out of recession in 2009, (courtesy of trillions of Dollars in credit expansion), was in fact an enormous debt Ponzi scheme dressed up as a “miracle.”

Indeed, you can think of China as the poster child for the Keynesian believe that you can print your way to growth. The only way China pulled off the fraud for so long was by publishing fictitious economic numbers. Speaking of which, as far back as 2007, current First Vice Premiere of China, Li Keqiang, admitted to the US ambassador to China that ALL Chinese data, outside of electricity consumption, railroad cargo, and bank lending is for “reference only.”

Obama to Seek New Tax on Oil in Budget Proposal

U.S. President Barack Obama will propose a $10-a-barrel fee on oil in his budget plan next week, as the White House seeks to boost the nation's investments in clean transportation projects, the White House said on Thursday. The fee, which would be paid by oil companies and phased in over five years, is likely to fall flat in the Republican-controlled Congress.

In the last year of his presidency, Obama has said the country must stop subsidizing the "dirty" fossil fuels of the past and focus on clean, renewable fuels that do not exacerbate climate change. "By placing a fee on oil, the President's plan creates a clear incentive for private sector innovation to reduce our reliance on oil and at the same time invests in clean energy technologies that will power our future," the White House said in a statement.

A $10 tax would come at a time of tumbling oil prices. Oil prices fell last month to below $30 a barrel, the lowest level since 2003, as demand fails to keep pace with a glut of new supply and the world's biggest oil producers resist cutting production.

"At a time when oil companies are going through the largest financial crisis in over 25 years, it makes little sense to raise costs on the industry," Neal Kirby, a spokesman for the Independent Petroleum Association of America, said in a statement. Kirby said the tax would ultimately be passed along to U.S. consumers, who have benefited from low gasoline prices.

US Auto Sales Off to a Slow Start in 2016

Although US automakers managed to achieve double-digit sales growth in January, they fell short of expectations. Sales were down 0.3%, to 1.15 million vehicles for the month, according to a report by Autodata Corp. Overall, US new vehicle sales remained flat at a seasonally adjusted annual rate of 17.58 million vehicles, slightly above 17.34 million sales recorded in December.

Analysts expected auto sales in January to reach 17.3 million vehicles, down from the 17.34 million figure expected in December. Of the three leading Detroit auto makers, General Motors Company (NYSE:GM) and Fiat Chrysler posted single-digit percentage gains in January, while Ford Motor Company reported weak but better-than-expected sales. The increase in sales was mainly driven by low gasoline prices and easy financing options.

The largest auto maker in US, General Motors, reported sales increase of 0.5% year-over-year (YoY) to 203,745 vehicles in January — exactly what the analysts had predicted. In a recent press release, the company said that Chevrolet witnessed its best retail performance since 2005, with car sales up 25%, truck sales up 5%, and crossover deliveries up 5%. The brand has now enjoyed 10 consecutive months of retail sales gains. Even Buick reported its best retail performance since 2005 for January, with retail deliveries up 45%.

Kurt McNeil, US VP sales operations, stated: “GM began 2016 in very strong competitive position.” The company also saw a 4.1% increase YoY, in average transaction prices, to $38,594 during the month. GM spokesman Jim Cain stated that the automaker is considering cutting its fleet sales to 20% of its overall mix this year, lower from 22% last year. Mr. McNeil further added: “We built on that momentum in January, with Chevrolet, Buick and GMC outperforming the retail industry by a wide margin. In fact, Chevrolet continues to grow faster than any other full-line brand.”

Are the Gold and Silver Bulls Back in Control?

John Kerry told to explain $1.7 billion to Iran

House Republicans are demanding Secretary of State John Kerry explain a $1.7 billion payment siphoned to Iran last month, right around the time Tehran agreed to free five U.S. captives, leaving many of Capitol Hill to wonder: was this a pay-out to secure their release?

Rep. Ed Royce, R-Calif., sent a letter to Kerry complaining the Foreign Relations Committee he chairs was not informed about the payment, Fox News reported. The White House explained the money as a previously agreed to settlement for $400 million in frozen Iranian funds dating back to 1979, with the remaining $1.3 billion considered “interest,” the news outlet said.

But Royce wasn’t appeased. “It is unclear how this $1.7 billion is in the national security interests of the United States,” he said in his letter, which included a list of 10 questions for Kerry to address.

Specifically, he wanted to know how the White House figured the $1.3 billion interest, and he wanted to know why the money wasn’t instead used to “compensate American victims of Iranian terrorism who have been awarded judgments against Iran,” he wrote.

Two-Thirds Of People On Welfare Are Working Or Have A Family Member Who’s Working

It’s one of the most familiar tropes of American politics: The “welfare queen” — a pejorative term popularized by Ronald Reagan in his 1976 primary campaign — is supposedly lazy, unemployed and living it up on Uncle Sam’s dime. It also has little factual basis, according to some new research.

Two-thirds of people on needs-based public assistance are either working or have a family member who’s working, a briefing paper published Wednesday by the left-leaning Economic Policy Institute states. Additionally, about half of all recipients of public assistance are working full-time.

Indolence and apathy aren’t driving up the welfare rolls, according to the research. Low pay is the more likely culprit. “As corporations achieve extraordinarily high profit levels and executive pay reaches new heights, it is appropriate to question whether employers are effectively passing off a portion of their societal responsibilities on to taxpayers,” wrote the paper’s author, David Cooper.

Workers in certain industries are disproportionately affected: Nearly half of all workers in the agriculture, forestry, fishing and hunting sector receive public help of some kind, benefiting either directly or through a family member from programs like food stamps, Medicaid and housing assistance, among others. That’s also the case for more than a third of those employed in the retail trade sector and the entertainment, recreation, accommodation and food services sectors, according to the EPI study.

‘Big Short’ Guy Says China’s Banking System Is Near Implosion

Hayman Capital Management founder Kyle Bass has been ringing the alarm bells about China’s banking system and the yuan for months, and now he says the day of reckoning could be just months away. The premise of Bass’ bet goes like this: China’s banking system has grown to $34.5 trillion, equal to more than three times the country’s GDP. The country is due for a loss cycle as cracks begin to show in its economy.

When that happens, central bankers will have to dip into China’s $3.3 trillion of foreign exchange reserves to recapitalize the banks, causing a significant depreciation in the value of the yuan, according to Bass.

On Wednesday, he said China’s export-import industry requires China to maintain $2.7 trillion in foreign exchange reserves to continue operating smoothly, citing an International Monetary Fund assessment. “They’ll hit that number in the next five months,” he said in an interview on CNBC’s “Squawk on the Street.” “Those that think they can burn it to zero and they have many years ahead of them, they really only have a few months ahead of them before they get into a real danger territory.”

Bass is best known for making a winning bet on the subprime mortgage crisis and later profiting from his call that the Japanese yen would fall in tandem with a projected round of monetary stimulus by the Bank of Japan. Bass confirmed Wednesday he is devoting much of his fund to his bet the yuan will depreciate. He characterized shorts against the currency, including his, as totaling “billions.”

American Greed: Madoff Behind Bars

Savers Are About to Get Railed...

We were sitting in a small parlor in his Manhattan penthouse yesterday… “Everyday savers are getting a raw deal,” explained colleague David Stockman. “But it’s about to get even worse…” Addison and I met with David to discuss the landscape for investors like you… and how he could be of further help to you. Bill Bonner joined us. (That’s Bill with David in the featured image atop today’s issue. They’re reminiscing over a cartoon lampooning David’s efforts in the ’80s to slash defense spending.) Over $1 trillion in paper wealth has been lost since we popped the cork on 2016. Forty stock markets around the globe are in a bear market. The other major three stock markets — the U.S., Australia and Germany — are in 10% correction territory.

The mother of all financial bubbles is deflating, just as David said it would during the free live training event we hosted on the eve of December’s rate hike. At writing, all three stock indexes have rolled into the red again. But look out below — the “Big Drop” has yet to happen. The market sowed way more in the last seven years than the small correction it’s reaped during the last 28 trading days.

This is why we’ve worked with David to create his Bubble Finance Trader. Investing in this new era of deflating asset prices will be a different ballgame than has been played since 2009. Four months into publishing, he’s three for three on closed-out positions.

“When Nixon broke the link to gold in ’71,” Stockman continued later over lunch, “he and his ‘estimable free market advisers’ did not in their wildest imaginations foresee that this would unhinge the monetary and financial nervous system of capitalism. They had no premonitions at all that it would pave the way for a 40-year storm of financialization and a debt-besotted symbiosis between central bankers possessed by delusions of grandeur and private gamblers intoxicated with visions of delirious wealth.”

US layoffs surge to 6-month high: Challenger

Layoffs surged in January to the highest levels since July as employers in the retail and energy sectors pulled out the pink slips, according to a private survey out Thursday.

U.S.-based companies announced 75,114 planned job cuts last month, up more than 200 percent from a 15-year low in December , according to global outplacement firm Challenger, Gray & Christmas. That figure was also 42 percent higher from a year ago.

Retailers were the biggest job cutter, despite a nearly 8 percent bump in U.S. holiday sales in 2015. The sector slashed 22,246 positions, a seven-year high. Wal-Mart (NYSE: WMT) accounted for much of the payroll reductions. The nation's largest retailer said it plans to close 269 stores and expects to let go 16,000 workers. Macy's (NYSE: M) said it will also shutter some locations this year, costing 4,820 employees their jobs. Challenger, Gray & Christmas CEO John A.Challenger said the shift from in-store selling to online transactions is playing a major part in the scaling back of retail work forces.

Macy's "had a 25 percent jump in their online sales, but their retail sales at bricks and mortars fell by 5 percent, so they are cutting stores," he told CNBC's " Squawk Box " on Thursday.

National Debt Tops $19T… Or Is It Really $65T?

With very little fanfare, the national debt topped $19 trillion on Wednesday for the first time ever. The debt has been expanding at its most rapid pace ever, and most likely will continue unchecked with the suspended debt ceiling in place until March 2017. But some argue that the national debt is much, much higher — possibly $65 trillion or more. Former Comptroller General of the United States David Walker claims that the amount is much higher and should include what the government owes in the future. This includes future payable benefits to social security to give a more realistic figure

Walker’s claim is based on the GAAP (Generally Accepted Accounting Principles) methodology that states that if one entity owes another at a future date, that amount is carried as a liability for the payor and an asset for the payee.

This is no different than what we see in daily life: a person with a car loan holds a debt payable in the future, while it is counted as an asset by the bank. The major difference, however, is that the government does not use GAAP accounting for its expenditures.

When a business buys an asset (for instance a vehicle) it must be held as an asset and then depreciated over time — this is how the business is able to reclaim the value of the capital by earning nontaxable revenue. But when the government buys an asset (for instance an aircraft carrier), it is treated as an expense. It is not represented as an asset to the federal government (see the government’s balance sheet). Likewise, debts payable in the future are not included in the government’s balance sheet, only debts that are immediately payable.

Friday 02.05.2016

NEWS to Disturb the Comfortable...

We don't tell you what to think,

but we give you something to think about.