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Monday 05.02.2016

Halliburton, Baker Hughes Said to Call Off $28 Billion Deal

Halliburton Co. and Baker Hughes Inc. are preparing to call off their $28 billion merger, which has met stiff antitrust resistance from regulators in the U.S. and Europe, a person familiar with the situation said.

The companies, the second- and third-largest oil-service firms, may announce as soon as Monday morning that they have terminated the combination, said the person, who asked not to be identified. The companies had set a deadline for the end of April to complete the deal or walk away. Halliburton will have to pay Baker Hughes a $3.5 billion termination fee.

Halliburton announced the Baker Hughes takeover in November 2014 in a bid to better compete against industry leader Schlumberger Ltd. The U.S. Justice Department filed a lawsuit in early April to stop the merger, saying it threatened to eliminate head-to-head competition in 23 products and services used in oil exploration. Shares of Halliburton and Baker Hughes have declined amid the worst oil slump in a generation, reducing the deal’s value from $34.6 billion when it was announced.

Analysts voiced further doubts on the deal getting done after Halliburton announced April 22 a delay in its first-quarter earnings release to May 3 from April 25. "Because they delayed, this was expected," Rob Desai, an analyst at Edward Jones, who rates Halliburton shares a buy and Baker Hughes shares a hold and owns neither, said Sunday in a phone interview. "Clearly the way the DOJ and regulators have been going the last handful of years, it’s getting harder to do this type of horizontal combination."

Was The Fed. Just Given The Launch Codes?

Let me be clear right from the outset: this is not an article about politics when it comes to whose guy or gal is currently seated or running. This is about the current state of affairs as it pertains to business; how they seem to be in motion; and, how it may affect one’s business, or, business in general. As for the “who’s in,” or “who’s out” – that’s for others to debate.

So, with that said, I want to outline a few developing issues that have the potential (true potential, not the hyperbolic) for outright disruption of all business as we know it. And no – not the type of “disruption” that emanates from the tech world. No, this one is far more disruptive, and, has implications for not only the business world, but the citizenry as well. After all: if you don’t think a business disruption can wreak havoc quickly – watch how fast calamity ensues once it’s realized a lowly roll of toilet paper will no longer be available.

Back in October of last year I penned an article titled: A Perilous Possibility: Weaponizing The Fed. In it I made a few arguments about both the dangers, as well as, how differing circumstances may implement such a scenario. Whether intentional, or not.

As always the so-called “smart crowd” within media circles balked at the idea. However, I heard from quite a few in the business community that shared the same concerns once they understood precisely what “the game afoot” and its ramifications just might entail. And, I am of the opinion that “game” is not only afoot, but rather, blindly running at full speed in search of a cliff. The real problem for the rest of us is this: games that end with cliffs don’t bode well for either the 1st place finisher – or last.

She Oversaw Obamacare's Implementation. Now She Has a Chilling Forecast Regarding Its Future

On paper, the Affordable Care Act, which you probably know better as Obamacare, looks to be chugging right along in spite of naysayers. By the end of the 2016 enrollment period, according to the Centers for Medicare and Medicaid Services, about 12.7 million people had enrolled, including more than 9.6 million through the federally run HealthCare.gov and 3.1 million through the one dozen states operating their own marketplace exchanges.

More importantly, the rate of uninsured adults in the U.S. continues to fall. Gallup-Healthways' latest Well-Being Index on uninsured rates showed a drop of 90 basis points in the first quarter of 2016 to 11% from 11.9% in Q4 2015, the lowest reading since the duo began tracking this statistic in 2008. A lower uninsured rate would suggest that hospitals and physicians are writing off fewer services rendered as uncollectable, and that insurers are spreading their medical expenses over a greater percentage of the population.

But dig below the headline numbers and things aren't exactly going according to plan. How do we know? Look no further than the white flag that the nation's largest health insurer, UnitedHealth Group (NYSE:UNH), has been waving for the better part of six months. UnitedHealth, which actually operates in nearly two-thirds of all U.S. markets, has predicted it could lose $500 million on its individual Obamacare plans in 2016 and recently announced that it's planning to exit the vast majority of exchanges come 2017. UnitedHealth CEO Stephen Hemsley has blamed higher medical utilization rates for Obamacare members, as well as the ease of switching plans, for his company's Obamacare woes.

t's pretty scary thinking about the largest healthcare provider being unable to turn a profit in most states. But it's an entirely different story when the data suggests this isn't just a UnitedHealth problem. A huge study released by the Blue Cross Blue Shield Association recently analyzed the medical claims of millions of Obamacare and employer-based members and found that Obamacare members are 22% costlier than employer-based members. Obamacare enrollees also tend to be sicker, coming with a host of chronic or expensive-to-treat conditions.

Gold and Currency Markets Expose U.S. Recovery Myth

Puerto Rico to default further on debts

The confrontation between debt-swamped Puerto Rico and its creditors is intensifying as the U.S. territory will default on payments due Monday, deepening the island's financial crisis and placing additional pressure on Congress to intervene.

The debt crisis threatens to resuscitate moribund ideological debates over the propriety of federal bailouts and the impact of fiscal mismanagement on the lives of real people faced with insufficient services.

Puerto Rico Gov. Alejandro García Padilla said Sunday afternoon in a televised address that he had ordered the island's Government Development Bank not to make certain payments owed Monday, stacking another round of missed payments on multiple previous defaults.

"This was a painful decision. We would have preferred to have had a legal framework to restructure our debts in an orderly manner," García Padilla said. "But faced with the inability to meet the demands of our creditors and the needs of our people, I had to make a choice. I decided that essential services for the 3.5 million American citizens in Puerto Rico came first."

Does Anyone See Sadness in Recent Housing Figures?

Garnering much less attention than last week’s GDP report were the housing figures. In particular, we received figures on homeownership, vacancies, housing stock, and a host of other relevant indications on the state of the American housing market.

Perhaps the saddest figure of the bunch is the Homeownership Rate. Often referred to as the American Dream, homeownership appears to be slipping out of reach for many (mostly) Millennials.

Since peaking at 69.2% in 2004, the Homeownership Rate has precipitously declined to a recent low of 63.5%.

Now, there are, of course, multiple ways to read the drop in the Homeownership Rate. Perhaps the drop in homeownership isn’t due to lack of financial resources. Perhaps Millennials simply don’t want to be tied down to a home. Perhaps they’d rather spend their money on traveling and eating out, instead of possessions like homes and cars. Perhaps. But, probably not.

Gold Rising, Dollar Going Down

The Nasty Secret About America’s Job Market

By all appearances, it seems like the American economy is back on its feet. Businesses are getting back on their feet, and as a result hiring additional employees to staff their firms. Many of the best jobs out there pay high wages, and the unemployment rate has held steady at around 5% for the past six months, according to the Bureau of Labor Statistics. For all intents and purposes, there are reasons to be optimistic about the economy.

But once you dig past the headline unemployment rate, things get a little cloudier. A significant portion of Americans are considered to be “long-term unemployed,” and haven’t been able to find a job for extended periods of time. In other cases, older generations are finding jobs, but at the expense of younger workers looking to fill those same positions. But the biggest unresolved problem is that American’s part-time workforce has grown significantly, and experts aren’t sure it will ever shrink back to pre-recession levels.

It’s amazing what 10 years and a recession in between can do to the part-time labor force. According to data from the Federal Reserve Bank of St. Louis, in March 2006 there were about 3.9 million part-time workers in the United States who preferred to have full-time positions, but were forced to take part-time jobs instead because of the economy. The Bureau of Labor Statistics, who tracks those employment numbers monthly, refers to these people as “involuntary part time” workers.

In the throes of the recession in March 2010, the number of involuntary part-time workers was up to more than 9.2 million people, roughly a 132% increase from four years earlier. That number has since come down to just over 6.1 million people in March 2016, a 33.7% drop from recession levels. However, it’s still about 54% higher than pre-recession figures, a significant increase to say the least. Many experts believe the number of involuntary part-time workers could stay at a similar level indefinitely — if not become the new “normal.”

"Gold Isn't An Investment - Gold Is Money"

In this succinct interview with Casey Research Director Brian Hunt reveals some of the biggest misconceptions about gold… and why you should own it. Casey Research: Brian, as you recall, we probably get more questions and reader feedback on gold than on any other subject here at Casey Research… And we've noticed there are quite a few myths and misconceptions about gold out there. Can you go over some of the big ones for us?

Brian Hunt: Sure. Probably the biggest misconception investors have about gold is that it's an investment. They'll listen to people on CNBC pick apart and analyze every $30 move in the metal, just as they would talk about a move in crude oil or stocks or bonds. They'll check the price quote every day… to see how their "investment" in gold is performing.

That just isn't a useful way to view gold. Gold isn't an investment. A thousand shares of Coca-Cola is an investment. An income-producing rental property is an investment. Coke is a business that stands a good chance of growing its cash flows… which will allow it to pay increasing dividends to its shareholders. Bought at the right price, a rental property will return all of your original capital in the form of rent checks… and the rest is gravy.

Gold isn't like those two examples at all. Gold is money. Gold has been used for money for thousands of years because it's easily di­visible, it's easily transportable, it has intrinsic value, it's durable, and its form is consistent around the world. And, as Doug Casey reminds us, it's a good form of money because governments can't print it up on a whim. It’s the only form of money that is not someone else’s liability. Gold doesn't pay interest or a dividend. It doesn't have profit margins. Your gold holdings amount to lumps of metal held in storage.

BOJ Easing Won’t Fix Japan's Structural Issues

Obama Admin Denies Saying “No Boots On The Ground” In Syria After Saying It 16 Times

What does a government do when it’s caught in a flagrant lie? If you are the U.S. government, you simply tell another lie — and laugh at anyone who tries to call out your hypocrisy.

Setting aside his oft-parroted no-boots-on-the-ground imperative, President Obama announced Monday the U.S. would be quintupling the number of special forces troops deployed to Syria to fight Daesh (the so-called Islamic State). In fact, the announcement was made later on the same day Obama claimed to have “ruled out” the deployment of ground troops.

Though this reneging on stated foreign policy has become somewhat par for the course, State Department spokesman John Kirby not only missed the hypocritical move, he flatly and bafflingly denied the Obama administration’s repeated claim there would be “no boots on the ground.”

In fact, instead of taking responsibility for initiating military maneuvers the public might find displeasing, the Obama administration has developed an apparent affinity for nitpicking semantics. In a press conference, this farcical denial of reality reached stupefying proportions when Kirby was asked by an Associated Press reporter about this stark reversal of policy.

Deutsche Bank 'has serious failings'

Deutsche Bank has 'serious' and 'systemic' failings in its controls against money laundering, terrorist financing and sanctions, according to a confidential letter by the UK's financial regulatory agency, the Financial Times has reported. The watchdog agency, the Financial Conduct Authority (FCA), has now ordered a separate independent review, the FT reported the letter as saying.

The FCA declined to comment. 'Our overall conclusion was that Deutsche Bank UK had serious AML (anti-money laundering), terrorist financing and sanctions failings which were systemic in nature,' the FT quoted the FCA letter, dated March 2, as saying.

'Effective senior management engagement and leadership on financial crime had been lacking for a considerable period of time.' Deutsche Bank said it is co-operating with regulators to fundamentally reform its anti-financial crime program.

We understand the importance of this issue and are committed to and engaged in fixing it,' a company spokesman said in an emailed statement on Sunday. In late 2014, the FCA had put Deutsche Bank's London office under enhanced supervision owing to concern about the bank's governance and controls.

'If we vote to leave the EU we'll get rid of Cameron too'

Speaking on the Andrew Marr Show on BBC One today, the UKIP leader said voters have the chance to make Britain a “self-governing, self-confident” country by supporting the Leave campaign.

He also said he believed a vote to leave the EU would force Cameron from No 10. Claiming UKIP is "the only party in this country who want people to vote to leave the EU", he told the Andrew Marr show that the local elections could help give a big push to the Brexit campaign if UKIP members are elected.

Britain goes to the polls on Thursday, 5 May in the biggest set of local elections for some years. Voters will get their chance to have a say in elections to the Scottish parliament, Welsh assembly, Northern Ireland assembly and local councils and Police and Crime Commissioners in England.

In London, voters will elect a new mayor and members of the London assembly. Speaking this morning, Mr Farage said: "Every local council in this country is under serious pressure just to cope with immigration levels. "We have to build a new house every seven minutes to cope with the current levels of immigration."

Chevron Suffers Loss, Plans More Job Cuts

Chevron reported a net loss of $725 million, or 39 cents per share, compared with a net profit of $2.57 billion, or $1.37 per share, in the year-ago period. Revenue tumbled 31% to $23.55 billion. Analysts projected a loss of 20 cents on $21.43 billion in revenue, according to Thomson Reuters.

"First quarter results declined from a year ago," John Watson, Chevron's chairman and CEO, said in a statement. "Our Upstream business was impacted by a more than 35 percent decline in crude oil prices. Our Downstream operations continued to perform well, although overall industry conditions and margins this quarter were weaker than a year ago."

Chevron's $54 billion Gorgon LNG project in Australia shut down earlier this month after mechanical problems, just weeks after it first came online. Gorgon is expected to resume production by June at the latest.

Chevron would cut another 1,000 jobs as it reported a wider-than-expected loss as oil prices continued to languish during the first quarter. The newly announced layoffs, which will happen later this year, will bring Chevron’s job cuts to 8,000 employees, or 12% of its workforce.

Stay-at-Home Dad Numbers Surged During The Recession

The number of stay-at-home dads surged during the recession, but a stronger job market is drawing many of them back into the workplace.

In 2015, 5.3% of U.S. families with children under 18 and married parents featured an employed mother and a father who was either unemployed or not in the labor force, the Labor Department said Friday. That was down from 5.6% in 2014, the fifth consecutive year of decline and erasing most of the rise seen during the 2007-09 recession.

“Certainly it seems there was a huge economic factor playing a role there,” said Gretchen Livingston, a senior researcher at Pew Research Center.

Still, the practice of fathers staying home has risen in recent decades, reflecting a shift in social roles as well as economic forces. The share of married-couple families with a working mom and a nonworking dad rose during the 2007-09 recession from 4.8% in 2005 and 2006 to 7.4% in 2009 and 2010, according to Labor Department data. As of last year, it was equal to its long-run average of 5.3% since 1994.

John Kerry owns stock in 94 of the oil and gas companies he says he hates

Venezuela On The Brink Of Collapse Hikes Minimum Wage By 30%

Minimum wage advocates here in the US have a long way to go before they match Venezuela President’s “generosity” to the working class. On Saturday, President Nicolas Maduro announced a 30 percent hike in the minimum wage. That’s the 12th increase since Mr. Maduro became President.

Once, Joseph Stalin was burning villages to rebuild them for the working class. In recent years, President Maduro and his predecessor Hugo Chavez drove Venezuela to the brink of collapse, and hike the minimum wage to fight the economic war against the right wing opposition! And they had plenty of company in Western Europe where the right wing governments have been hiking the minimum wage under pressure from left wing coalitions. Never mind that these minimum wage hikes sent more young people to the unemployment lines.

Greece and France are two good cases in point. They never became communist countries, officially. Nonetheless, they adopted many of the features of communism, like a host of labor promises and guarantees that had labor union bosses and government bureaucrats set and hike wages, rather than markets.

The consequences of these policies are many, and well documented. But the most notable is that they sent domestic entrepreneurs away to other European countries, which deprived young people of new job opportunities.

$458 billion in taxes go unpaid every year

The United States routinely lives above its means by spending more than it takes in. But that's not entirely intentional. Part of the problem is that every year there's an estimated $458 billion 'tax gap' -- taxes that are owed but not paid.

That's according to the latest estimate from the IRS. It's based on data from 2008 through 2010. To put that amount of money in perspective, it represents about three-quarters of this year's projected budget deficit.

The IRS said it manages to recapture about $52 billion of that money through tax enforcement efforts like audits, which brings the net annual tax gap to $406 billion. So, why the loss of so much revenue?

After all, Americans are famously good about paying their taxes. The United States has a voluntary compliance rate of 82%. The IRS cites three reasons for the persistent yawning gap: Underreporting, underpayment and failure to file, in that order.

Yahoo CEO Mayer's $55 million severance package

Yahoo’s CEO has the most to lose if rumors of an impending sale come true, but she also has a lot to gain. The company’s controversial chief executive, Marissa Mayer, could be out of a job if Yahoo is sold, but at a reported $55 million, her severance package is nothing to sneeze at.

Yahoo’s share value has tanked recently, with stock prices dropping 33 percent over the past year. Ms. Mayer hasn’t stopped fighting yet, but the company has seen recent leadership changes that could presage a sale.

On Wednesday, Yahoo came to an agreement with shareholder group Starboard, which saw four Starboard affiliated directors added to Yahoo’s board, and two of Yahoo’s old directors axed.

If Mayer gets a $55 million in severance deal, it would be far more than her take-home pay over the past year. In 2015, Mayer took a substantial pay cut, earning $36 million in reported pay and $14 million in actual pay, compared to $42 million in reported pay the previous year. Yahoo’s executives also reportedly refused to accept bonuses last year, due to the company’s lagging financial performance.

U.S. Economy: A One-Trick Pony

It wasn't a great week for world markets, with most equity markets down 0.2% to 2.0%, and bond yields down also, with the 10-year U.S. Treasury yield sliding to 1.82% from 1.89%. These moves seemed to be a result of an uninspiring corporate earnings season and soft economic news out of the U.S. Poor Apple (AAPL) results and down iPhone sales certainly didn't help technology stocks. Oddly, commodities, which usually move markets in the same direction, had a great week, with commodities, gold, and oil all up over 3%. We didn't see any real news on that front. Nevertheless, some decent weekly oil price gains added up to a full 20% jump in oil prices in April. Good news for oil companies and equipment producers--not such great news for consumers.

Central banks were in the spotlight again this week, too. The Bank of Japan refused to provide more monetary easing at its most recent meeting, and the U.S. Federal Reserve managed to not say much at all at this week's meeting. The Japanese announcement had meaningful market impact and caused the U.S. dollar to weaken further.

Unfortunately, central bankers are having increasing difficulty fighting slowing demographic growth pressures with easy money policies. Also, with so many countries adopting similar policies, it hasn't provided some of the currency depreciation benefits that helped earlier adopters of easy money policies.

The GDP report was about on target with recent whispers, with sequential, annualized growth of just 0.5% in the March quarter. That extended the run of poorly performing first quarters to potentially four of the last five years. Some of the forecasts from the Atlanta Fed helped cushion expectations. Its exceptionally detailed projections, more of a compilation of already-released data than a from-scratch forecast, were awfully close to the mark, with an overall forecast of 0.6% growth versus the actual 0.5% result. The category data was almost as equally correct. Year-over-year GDP growth of 1.9% was much more benign. Still, as some of this recovery's rocket engines fade (shale oil, autos, smartphones), even year-over-year growth has softened some. We are holding fast to our full-year forecast of 2.0% to 2.5% growth, with the high end of that range looking to be at risk.

Monday 05.02.2016

NEWS to Disturb the Comfortable...

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