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Monday 04.04.2016

The U.S. Dollar Is A Shadow Gold Currency - The New Case For Gold

Get ready to dispose of your preconceived notions regarding the Federal Reserve and its take on gold! Is it possible that the Fed wants a higher gold price after all? That is what Jim Rickards reveals.

Upon quick review, the Federal Reserve today looks like a really bad hedge fund with leverage of roughly 100:1. However, Jim made a discovery in the Fed's balance sheet, revealing a treasure trove of gold at Fort Knox and West Point worth a staggering $300,000,000,000!

Adding $300 Billion to the Fed's capital account reduces Fed leverage from 100-to-1 to a much more respectable 12-to-1, the capital ratio for most well-capitalized banks. This hidden asset is more than enough to absorb the mark-to-market losses on the bond portfolio when they arise.

"Countries around the world are acquiring gold at an accelerated rate in order to diversify their reserve positions. This trend, combined with the huge reserves held by the United States, the Eurozone, and the IMF, amounts to a shadow gold standard!"

IMF chief moves to ease tensions with Greece on $98B bailout

The head of the International Monetary Fund moved to smooth tensions with Greece Sunday after a transcript of a leaked phone call drew a backlash from Greek officials and raised questions about whether Athens can obtain more loans as part of its $98 billion bailout.

“I agree with you that successful negotiations are built on mutual trust, and this weekend’s incident has made me concerned as to whether we can indeed achieve progress in a climate of extreme sensitivity to statements of either side,” IMF managing director Christine Lagarde wrote in a letter to Greek Prime Minister Alexis Tsipras.

“On reflection, however, I have decided to allow our team to return to Athens to continue the discussions.”

The transcript, published by WikiLeaks on Saturday, shows IMF officials plotting to press German Chancellor Angela Merkel to reduce Greece’s debt burden or face the IMF’s withdrawal from the bailout program. “Look you, Mrs. Merkel, you face a question,” Poul Thomsen, the head of the IMF’s European unit, told Delia Velkouleskou, the IMF’s mission chief for Greece. “You have to think about what is more costly, to go ahead without the IMF… or (to) take the debt relief that we think that Greece needs in order to keep us on board?”

Bo Polny-Biblically Bad Economic Crash Coming

April Fools in March

It may be almost impossible to underestimate the gullibility of professional Fed watchers. At least Lucy van Pelt needed to place an actual football on the ground to fool poor Charlie Brown. But in today’s high stakes game of Federal Reserve mind reading, the Fed doesn’t even have to make a halfway convincing bluff to make the markets look foolish.

Just two weeks ago, the release of the Fed's March policy statement and the subsequent press conference by Chairwoman Janet Yellen should have made it abundantly clear that the Central Bank policy had retreated substantially from the territory it had previously staked out for itself. In December it had anticipated four rate hikes in 2016, but suddenly those had been pared down to two. Based on the conclusion that the era of easy money had been extended for at least a few more innings, the dollar sold off and stocks and commodities rallied.

But in the two weeks that followed the dovish March guidance, some lesser Fed officials, including those who aren't even voting members of the Fed's policy-setting Open Market Committee, made some seemingly hawkish comments that convinced the markets that the Fed had backed off from its decision to back off.

The campaign began on March 19 when St. Louis Fed President James Bullard said that the Fed had largely met its inflation and employment goals and that it would be “prudent to edge interest rates higher.” (H. Schneider, Reuters) Two days later Bloomberg reported that Atlanta Fed President Dennis Lockhart had said, “There is sufficient momentum…to justify a further step…possibly as early as April,” (J. Randow, S. Matthews, 3/21/16). And it didn't stop there. On March 22, Philadelphia Fed President Patrick Harker said,“there is a strong case that we need to continue to raise rates…I think we need to get on with it.” (J. Spicer, Reuters) On March 24, Bullard chimed in again, saying that rate hikes “may not be far off,” appearing to back Lockhart’s suggestion for a surprise April hike. Suddenly, chatter erupted on Wall Street that the April FOMC meeting should be considered a “live” one, where a rate hike was possible. With such caution spreading, the markets reacted predictably: the dollar rallied, gold and stocks declined.

Here's How Much a Baseball Game Will Cost You This Year

So you want someone to take you out to the ballgame. With the start of this year’s Major League Baseball season underway, here’s how much it would cost for a day out at the ballpark.

The average cost would be $77.92 for two people, according to a study of MLB stadium prices by interest rates aggregator GOBankingRates. That estimated total is made up primarily of the anticipated cost of MLB tickets this year, which the company expects will come in at $41.41 for a pair of tickets, averaged across all 30 major league ballparks.

Spending doesn’t stop there. The estimated total also includes purchases that most fans make at a typical baseball game: food, beverages and parking. Using last year’s stadium prices, you can expect to pay around $8.73 for two hot dogs, $11.89 for two beers and $15.89 for a few hours’ worth of parking at a game.

How much you’re likely to fork out at an MLB game, however, does differ from ballpark to ballpark. The gap between the cheapest and most expensive stadium is around $110, and that’s not including the cost of other possible items like souvenirs and merchandise.

Goodrich Petroleum headed for Chapter 11 filing

Houston’s Goodrich Petroleum Corp. has reached an agreement with creditors to use its “best efforts” to file for Chapter 11 by April 15 with a prepackaged plan to reorganize and emerge from court as an operating business.

The new plan of reorganization would give second-lien lenders an equity stake in the newly reorganized company, according to a statement.

The agreement comes after Goodrich’s debt-for-equity exchange offer failed to gain enough traction among debtholders. The company extended the offer a final time to April 8. As of March 31, it fell short of the participation levels it required, with only 61 percent of its unsecured notes tendered of the 95 percent needed.

On March 16, Goodrich delayed releasing its annual report, citing a large loss that auditors have determined may affect the company’s ability to operate as a going concern. The loss comes “mainly as a result of substantial impaired asset writedowns,” Goodrich said in the filing.

Why Silicon Valley’s “It’s Different This Time” Is Now A Broken Record

Like a broken record whenever a profit measure was asked of “Silicon Valley” (i.e., everything social or tech) as to when something would either be profitable or, begin returning investor cash with either net profits or dividends. The response was always the same “It’s different this time.” Meaning: there aren’t any now, but just you wait! Some are still waiting, and waiting, and waiting, and….

The only reason this retort was tolerated for as long as it had been is for that other “it’s different this time” meme that took hold in unison when it came to everything one thought they understood about investing, free markets and capitalism itself: quantitative easing e.g., QE.

As long as the Fed. enabled “free money” to chase momentum plays – the gravy train to cash-out-riches was running on rails. Yet, here too investors, savers, and more would ask “When does normalization type policies begin that benefit the prudent balance sheet or fiscally responsible?” And here the retort was much same, “Not now, but just you wait!” And again they too are still waiting, and waiting, and waiting, and…

Of course the answer to the question of why we’re waiting is, you guessed it – “it’s different this time.” Four words that replaced a teenager’s one word answer to everything: “Because!” But that’s what a Ph.D is for I guess – making the simple more complex. But I digress.

The Tyranny Of Central Banking And The End Of Free Markets

In August 1855, Abraham Lincoln wrote a letter to his good friend Joshua Speed who had lived in Springfield but had since returned to his childhood home in Kentucky. The Missouri Compromise of 1820 had recently been overturned in Congress by the Kansas-Nebraska Act and the nation was somewhat enthralled by the “know nothings” and their quasi-party. Lincoln had been mostly out of politics since his one term in the US Congress ended in March 1849.

In writing to Speed, Lincoln was excited by the political prospects of getting involved in the slavery question again. Speed had been raised on a plantation that had owned slaves and counted himself, as near as anyone might tell, as a straddling friend of both sides of the great divide; not unlike Lincoln’s eventual opponent Stephen Douglas who had engineered the Kansas-Nebraska Act. Lincoln was incensed that when Illinois legislature was called to Springfield to debate it, even though it was overwhelmingly in Democrat hands (as Lincoln writes) the Act was not willfully approved. It was instead supported by politics:

Douglas introduced the Nebraska bill in January. In February afterwards, there was a call session of the Illinois Legislature. Of the one hundred members composing the two branches of that body, about seventy were democrats. These latter held a caucus, in which the Nebraska bill was talked of, if not formally discussed. It was thereby discovered that just three, and no more, were in favor of the measure. In a day of two Dougla’s [sic] orders came on to have resolutions passed approving the bill; and they were passed by large majorities! The truth of this is vouched for by a bolting democratic member.

Lincoln’s charge to Joshua Speed was duplicity among not just politicians. “You say if Kansas fairly votes herself a free state, as a Christian you will rather rejoice at it. All decent slaveholders talk that way; and I do not doubt their candor. But they never vote that way.” Everyone says they are for freedom and liberty, but more often than not they act in self-interest, as they see it, alone.

Revealed: How the rich and powerful hide their wealth

Trump: America is headed for a ‘very massive recession’

Donald Trump said in an interview that economic conditions are so perilous that the country is headed for a "very massive recession" and that "it's a terrible time right now" to invest in the stock market, embracing a distinctly gloomy view of the economy that counters mainstream economic forecasts.

The New York billionaire dismissed concern that his comments - which are exceedingly unusual, if not unprecedented, for a major party front-runner - could potentially affect financial markets.

"I know the Wall Street people probably better than anybody knows them," said Trump, who has misfired on such predictions in the past. "I don't need them."

Trump's go-it-alone instincts were a consistent refrain - "I'm the Lone Ranger," he said at one point - during a 96-minute interview Thursday in which he talked candidly about his aggressive style of campaigning and offered new details about what he would do as president. The real estate mogul, top aides and his son Don Jr. gathered over lunch at a makeshift conference table set amid construction debris at Trump's soon-to-be-finished hotel five blocks from the White House. Just before, he had met there with his foreign-policy advisers and just after he visited officials at the Republican National Committee - signs that, in spite of his Trump-knows-best manner, the political novice is making efforts to build a more well-rounded bid.

Gold Rush by Russia Makes Up for Billions Lost in Currency Rout

Here’s why Governor Elvira Nabiullina is in no haste to resume foreign-currency purchases after an eight-month pause: gold’s biggest quarterly surge since 1986 has all but erased losses the Bank of Russia suffered by mounting a rescue of the ruble more than a year ago.

While the ruble’s 9 percent rally this year has raised the prospects that the central bank will start buying currency again, policy makers have instead used 13 months of gold purchases to take reserves over $380 billion for the first time since January 2015. The central bank will wait for the ruble to gain more than 12 percent to 60 against the dollar before it steps back into the foreign-exchange market, according to a Bloomberg survey of economists.

Central banks including Russia added to their gold reserves with “renewed vigor” in the second half of 2015, accelerating their purchases as diversification of foreign reserves remained a top priority, according to the World Gold Council. Nabiullina then piggybacked on a 16 percent jump in bullion prices in the first three months of the year to move closer to the Bank of Russia’s target of $500 billion for its stockpile. It burned through a fifth of its reserves to prop up the ruble in 2014.

Cheap oil 'too much of a good thing' for US economy: Goldman

The U.S.'s embarrassment of oil riches may not have been that beneficial after all. Those are the findings of a recent Goldman Sachs report, in which the bank explained that the net effects of cheaper crude on growth have been "negative so far," given the impact on oil producers who are now finding it hard to churn out more black gold while maintaining needed levels of capital expenditures.

Although Goldman acknowledged a lift to consumer spending, the summary constituted an admission that the virtues of the boom that sent U.S. oil production skyrocketing, leaving world markets awash in inexpensive crude, may not have delivered the economic boost many observers had anticipated at its outset.

"While cheap oil has … become 'too much of a good thing' for growth, the employment impact of lower oil prices is likely still positive, reflecting the modest effect on employment of the capital-intensive energy sector," Goldman wrote.

Last year, the U.S. produced nearly 10 million barrels per day — the largest amount in decades and second only to Saudi Arabia. As a consequence of the massive buildup of supply that flooded world markets, oil prices slumped by more than half, placing intense pressure on domestic energy producers.

The Federal Government's $146 Billion Obamacare Boo-Boo

There are mistakes, and then there are big mistakes. What the Congressional Budget Office's latest report on federal subsidies revealed was a mistake of monstrous proportions on the part of the federal government.

Here's what a forecasting error looks like..The Congressional Budget Office, or CBO, has been making projections on the future of Obamacare, and healthcare in general, for years. Initially, the CBO had projected that up to 21 million people would sign up for private health insurance using Obamacare's transparent marketplace exchanges by 2016. However, that estimate has been substantially reduced to just 12 million. According to the Department of Health and Human Services, Obamacare enrollment totaled "about 12.7 million" as of the end of third enrollment period (Jan. 31, 2016). Ultimately, the CBO foresees private health enrollment via Obamacare topping out at between 18 million and 19 million people between 2018 and 2026.

Why such a huge difference in actual enrollment versus initial projections? To begin with, the government appears to have overestimated just how many people would sign up on private exchanges versus being enrolled via their employer. The data has thus far shown that nowhere near as many people as expected dropped out of employer-sponsored insurance to sign up on Obamacare's marketplace exchanges, meaning there was a considerably smaller uninsured pool than initially anticipated.

The other possibility is that the shared responsibility payment (SRP) isn't working as initially expected. The SRP is a penalty charged to consumers who fail to purchase health insurance and who don't have a qualified exemption. The average SRP in the first year of Obamacare (2014) totaled $190, according to H&R Block, with the Kaiser Family Foundation predicting an average penalty of $661 for 2015 tax returns and $969 in 2016. Despite this increasing penalty, young adult enrollment is still well below initial expectations, most likely because the cost of the penalty is still much less than the annual cost of purchasing health insurance.

Economic spring in the US? | FT Markets

Most Americans spend two full workdays a month on Facebook

Procrastinating on Facebook appeals equally to the young and old, but sending disappearing messages on SnapChat is truly for millennials.

The latest figures on digital traffic that the audience measurement company comScore released this week suggests Snapchat (and, to a lesser degree, Instagram) are huge draws for those under 35 while older demographics don’t show much interest in the app. Facebook is by far the most popular for every age group.

Americans are spending more time on Facebook than every other service combined, comScore reports. More than 90% of adult Americans devote 15 to 18 hours per month—two workdays!—to the social network. (The measurement company collects data from two million users in its monitoring program, as well as tracking software participating companies install on their web pages, apps and other digital content.)

Snapchat, which launched in 2011, reaches just 7% of people over 35 years old. Millennials, on the other hand, have taken to it: 38% of people between 18 to 34 years old use the service for 380 minutes on average per month (compared to 111 minutes among the few in the older demographic that use it). The reach is highest among the youngest group: 64% of US smartphone users between 18 and 25 years old logged into Snapchat last year.

New York reaches deal to raise minimum wage to $15/hour, mandate paid family leave

New York legislators have reached a budget agreement that will raise the minimum wage to $15 per hour by 2018 … in some parts of the state.

NBC New York reports that the increase passed the state senate Friday as part of a broad budget deal announced late on Thursday. As with many things in New York politics, there is good news and bad.

The good: The minimum wage in New York City will rise from the current paltry $9 per hour to a hopefully-still-living-by-then wage of $15 per hour over the course of three years, starting December 31, 2016. (Businesses with fewer than 10 employees will get four years.)

The budget also includes provisions mandating paid family leave time which workers may use to care for sick family members or bond with new children. How much paid family leave time? Twelve weeks, to be phased in starting in 2018.

Keiser Report: Economics of Crime & Stupidity

California accuses Morgan Stanley of pushing toxic mortgage bonds

The alleged malfeasance that surrounded the rating and sale of mortgage-backed securities in the run-up to the financial crisis lead to multiple multi-million and multi-billion dollar settlements, but it appears that the companies involved are not yet out of the woods.

Case in point: The state of California filed suit against Morgan Stanley over alleged misrepresentations of the quality of pre-crisis mortgage bonds that cost the California Public Employees Retirement System and the California State Teachers Retirement System hundreds of millions of dollars.

According to the office of California Attorney General Kamala Harris, Morgan Stanley allegedly made misrepresentations about complex investments such as residential mortgage-backed securities, which in turn, lead to major losses by investors including California's public pension funds.

California’s lawsuit, filed in San Francisco Superior Court, alleges that Morgan Stanley violated the False Claims Act, the California Securities Law and other state laws by concealing or understating the risks of intricate investments involving large numbers of underlying loans or other assets. “Morgan Stanley’s conduct in this case evidenced a culture of greed and deception that helped create a devastating economic crisis and crippled California’s budget,” Harris said. “This lawsuit is necessary in order to hold Morgan Stanley accountable for the destruction it caused to California, our people, and our pension funds.”

All Hancock Fabrics Stores Will Close

Back in February, the long-troubled craft store chain Hancock Fabrics filed for bankruptcy for the second time in a decade. This time, there will be no reorganization. The chain planned to close 70 stores and tried to find a buyer for the remaining 185 that would keep the open and preserve thousands of jobs across the country. The winning bidder in yesterday’s auction in bankruptcy court was Great American Group, a liquidator.

If that name sounds familiar, you’ve probably come across the company while bargain-hunting in the past. Great American Group is part of what Consumerist once called a “notorious cabal” of liquidators known for garish signs, terrible deals, and taking the “all sales final” policy very seriously.

Liquidation sales start today, and include the chain’s website. In traditional liquidation sale style, the deals aren’t very good yet.

While the chain’s closing is welcome news to some of the nation’s 8-year-olds, it leaves fans of sewing clothing with fewer in-person shopping choices. While home sewing is making a comeback, things aren’t as they were when the chain opened and sewing one’s own clothes was a common skill and the more economical choice.

Monday 04.04.2016

NEWS to Disturb the Comfortable...

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