PATRIOT TRADING GROUP

800-951-0592

Headline News Archives

Monday 06.06.2016

Switzerland's voters rejects basic income plan

Swiss voters have overwhelmingly rejected a proposal to introduce a guaranteed basic income for all. Final results from Sunday's referendum showed that nearly 77% opposed the plan, with only 23% backing it.

The proposal had called for adults to be paid an unconditional monthly income, whether they worked or not. The supporters camp had suggested a monthly income of 2,500 Swiss francs (£1,755; $2,555) for adults and also SFr625 for each child.

The amounts reflected the high cost of living in Switzerland. It is not clear how the plan would have affected people on higher salaries. The supporters had also argued that since work was increasingly automated, fewer jobs were available for workers.

Switzerland is the first country to hold such a vote. There was little support among Swiss politicians for the idea and not a single parliamentary party came out in favour, but the proposal gathered more than 100,000 signatures and was therefore put to the vote under the Swiss popular initiative system.

Japan Banks Cut Bonds, Keep Cash on Negative Rates

Negative interest-rate stimulus is half working in Japan, as lenders cut government bond holdings by the most in almost three years, only to hoard proceeds at the central bank.

Japanese government bonds owned by banks fell 5.5 percent in April from a month earlier, the fastest pace since June 2013, as most yields slumped below zero, Bank of Japan data show. Their deposits at the BOJ, where only a small part of reserves are charged fees, rose 3.4 percent in the period. That doesn’t bode well for loan growth now riding near a three-year low.

“Banks aren’t rolling over JGBs as they mature, because of negative interest rates,” said Yoshinobu Yamada, a senior analyst at Deutsche Bank AG in Tokyo. “Funds are generally ending up in the macro balance at the central bank, which carries a zero percent rate.”

Japanese banks’ holdings of JGBs slumped by about 43 percent since Kuroda began bond-buying stimulus in 2013, reaching 94.7 trillion yen ($871 billion) in April, the lowest level since December 2008. With businesses and households still reluctant to borrow and spend, excess funds are flowing back to lenders’ accounts at the BOJ, where a three-tiered rate system is allowing them to park most new spare cash at zero percent.

Uber Is Now Actively Preying On the Poor

This isn't the first time that Uber's ethics have been called into question. The overvalued ride-hailing start-up had to defend itself from accusations of misogyny back in 2014. Around that same time, the company was also accused of intentionally sabotaging rivals like Lyft by ordering fake rides and then canceling them, wasting everyone's time. There have also been criticisms around surge pricing, particularly during emergency situations (Uber has since walked back the practice during emergencies).

But the company has now hit a new low.

Earlier this week, Bloomberg reported on Uber's controversial leasing program, Xchange. Launched almost exactly a year ago, Xchange is a leasing program that's offered to Uber drivers with poor credit. Now that people have had some experience with Xchange, we're starting to see a very real and very dark underbelly.

Xchange is very much an attempt to grow Uber's army of drivers, which the company desperately needs considering its high turnover rates. Uber even scored a $1 billion credit facility from the big investment banks to help fund the program. Routine maintenance is included in the lease terms, which can potentially be slightly better than traditional leases. Drivers are also allowed unlimited mileage, another incremental benefit compared to traditional leases. It's also a lot easier to break the lease without the hefty fees associated with traditional leases.

May Jobs Report Takes June Rate Hike Off The Table - Peter Schiff

Going green, Paris bans older cars.

In what may turn out to be worrying trend, officials in Paris have placed a ban on older cars and motorcycles.

As first reported by Le Monde, cars registered before 1997 and motorcycles before 1999 will be outlawed from entering the city center during the week starting from July 1.

Cars will be divided into six categories based on their age and level of emissions, and a windshield sticker will be used to allow authorities to easily identify them. Violators will face fines of up to €35 ($39), though this is set to rise as early as next year.

The new rules, which will affect around 10 percent of the vehicles in Paris, is just the latest measure to reduce smog and traffic in the popular tourist destination. Previously, cars were blocked from entering the city center on certain days based on license plate information and other factors, and complete bans on trucks already came into effect last year.

Fed's Mester says gradual rate hikes still appropriate after jobs report

The latest disappointing U.S. jobs number has not changed the overall economic picture and gradual rate hikes remain appropriate, Cleveland Federal Reserve President Loretta Mester said on Saturday.

The Fed raised rates in December for the first time in nearly a decade. But further tightening has proven hard to achieve, and most economists now see the next move in September.

"I still believe that in order to achieve our monetary policy goals, a gradual upward pace of the funds rate is appropriate," Mester, a voting member on Fed policy this year, told reporters in the Swedish capital. "The timing of actually when the rate hikes would occur and the slope of that gradual path is data-dependent."

Fed policy-makers next meet on June 14-15 to decide on rates. The U.S. economy added just 38,000 jobs in May, well below the consensus estimate of 164,000 and the smallest gain since September 2010. "You can't read too much into one number, but it is certainly part of the data that will be taken into account as we go into the June FOMC meeting and for the rest of the year," Mester said.

Lean Times Ahead?

The economy has been full of surprises this year, starting with economic troubles in China that helped fueled two months of financial market turbulence and raised worries the U.S. economy could be headed for a recession. Economic forecaster Mark Zandi shares his thoughts on what investors can expect going forward.

Q: Once again, we had a weak start to the year. In the first quarter, gross domestic product expanded at a lackluster annual rate of 0.8 percent. What are you expecting over the next three quarters?

A: In the current April-June quarter, GDP is now tracking closer to 3 percent. I think we will settle in around 2.5 percent growth for the second half of the year. For the year as a whole, growth will come in at just about 2 percent, which is what we have averaged for each year since the recovery began seven years ago.

Q: Federal Reserve officials included a surprise in the minutes of their April meeting, indicating that they might raise rates at their next meeting on June 14-15, something that investors had not expected. What is your outlook for the Fed?

A: I don't think the Fed has prepared markets sufficiently for a June rate increase. But I do expect a rate hike at the July meeting, and if not in July, then in September. And I do anticipate a series of rate hikes through 2017 and 2018, in large part because the U.S. economy is closing in on full employment very rapidly. I think the Fed will pretty soon run the risk of an over-heating economy if they don't normalize rates more quickly.

After economy posts worst job numbers in 6 years, Obama slams Trump economic policies as ‘crazy'

Ummm, something’s not quite adding up here… In what was labeled “a pretty gloomy report,” the Labor Department announced Friday that the U.S. economy had the worst monthly jobs gain since 2010 in May, yet in the same week President Barack Obama had the temerity to slam Donald Trump’s economic policies as “crazy.”

Unemployment fell to 4.7 percent, the lowest rate since 2007, but that is due to a record 94.7 million Americans not in the labor force and Obama is on track to close out his eight years in office with an average annual GDP growth rate under 2 percent, which would place his presidency fourth from the bottom of the list on economic growth.

But the president opted to make the economy a central part of his first official foray into the 2016 presidential election while speaking Wednesday at a high school in Elkhart, Indiana, according to NBC News.

“America’s economy is not just better than it was eight years ago, it’s the strongest and most durable economy in the world,” he said. “By almost every economic measure, America is better off than when I came here.”

Is a tech bubble forming?

Debt-Ridden Millennials can now roll student debt into a 30-year mortgage

The Everest-high price of most college educations—and the impact of massive student debt on an entire generation of would-be home buyers—has become one of the defining issues of this crazy presidential election season. So it shouldn’t come as a shock that a lending company has rushed into the void to capitalize on the unease and frustration of loan-burdened millennials desperate to muster up a down payment on a home or qualify for a mortgage.

The BurkeyLoan, developed by financial company Burkey Capital, is expected to hit the market this fall with a seductive and unique sales pitch: to help college grads become homeowners by rolling their student debt into a 30-year fixed mortgage.

The groundbreaking new loan is raising eyebrows in the mortgage community due to its revolutionary nature—as well as the skimpy information that’s available so far about the mortgage or its sponsor company. At this writing, the loan’s bare-bones, one-page website was noticeably stingy on, you know, details. So is it too legit to quit—or too good to be true?

So here’s how it’s supposed to work. The target borrower will be the crème de la crème of college grads (think doctors or lawyers instead of store managers). They’ll be in the top 20% or so of earning households, have stellar credit, and have at least three to four years of work experience where they raked in at least $150,000 a year, according to the company.

IRS reveals list of conservative groups targeted for extra scrutiny

More than three years after it admitted to targeting tea party groups for intrusive scrutiny, the IRS has finally released a near-complete list of the organizations it snagged in a political dragnet.

The tax agency filed the list last month as part of a court case after a series of federal judges, fed up with what they said was the agency’s stonewalling, ordered it to get a move on. The case is a class-action lawsuit, so the list of names is critical to knowing the scope of those who would have a claim against the IRS.

But even as it answers some questions, the list raises others, including exactly when the targeting stopped, and how broadly the tax agency drew its net when it went after nonprofits for unusual scrutiny.

The government released names of 426 organizations. Another 40 were not released as part of the list because they had already opted out of being part of the class-action suit.

Your complete preview of the week's big economic events

The jobs report was bad. Last Friday, the week's big headline event was a stinker, with the May jobs report showing the US economy added just 38,000 jobs in the year's fifth month, way less than expected.

The BLS noted in its report that a negative impact of 34,000 jobs was felt by the Verizon strike that was in place during the reference week for the report, but even adding these numbers back, it was a bad number.

The two upshots here are that we're once again hearing folks who are more bearish on the US economy speak up a little louder, and any hope there might've been for the Federal Reserve to raise interest rates later this month or next month went out the window.

This week will be a quieter one for US economic data, with the biggest event taking place Monday as Fed Chair Janet Yellen will speak in Philadelphia before the Fed enters its pre-FOMC meeting blackout period.

Robots on the rise

Morgan Stanley Is Confused: "The Probability Of A Global Recession Still Dominates Our Discussions On The Economy"

In Morgan Stanley's Sunday Start note explaining "what's next in global macro", the firm's go-head of economics, Chetan Ahya notes that he remains confused by a "unique cycle" in which "our current conversations would have been centred on whether the global economy is overheating. Instead, the probability of a global recession and possibility of further stimulus still dominate our discussions on the global economy." Here is why, according the Morgan Stanley, the current cycle is so different, and why "global growth will likely remain below trend for a while longer and recession risks will likely remain a more topical subject than overheating risks."

From Morgan Stanley's Sunday Start | What’s Next in Global Macro, authored by Chetan Ahya: It’s Just Not What Used to Be. This cycle has been unique. Had it been a typical cycle, our current conversations would have been centred on whether the global economy is overheating. Instead, the probability of a global recession and possibility of further stimulus still dominate our discussions on the global economy.

The private sector’s behaviour and mind-set is the root cause of the uniqueness of the current cycle. Among the top 10 DM and top 10 EM economies, private sector debt in 12 of the 20 economies is above 200% of GDP. The shock from the financial crisis has left both the private sector and financial intermediaries seeking to restore health to their balance sheets. This motive has taken on paramount importance and might have even superseded the usual profit maximisation motive.

Reflecting the subdued animal spirits, the private sector has not responded to monetary stimulus with as much vigour as would have been expected. Moreover, monetary and fiscal policies have not really been employed in tandem in the past five years. Concerns that government spending tends to be less productive in nature and crowds out private spending, coupled with the issue that high levels of public debt would restrain longer-term economic growth prospects, have meant that public demand has not been a meaningful offset to weak private demand. The net result is a global economy which is still affected by the problem of demand deficiency and lowflation risks.

CTS Corp. shifting 200-plus jobs from Elkhart to low-wage countries designer and manufacturer of electronic components, shifting 200-plus jobs to "low-wage countries"

After more than a century of production in Elkhart, CTS Corp. announced Friday it will cease manufacturing operations at its West Beardsley Avenue plant by mid-2018 — a move that will eliminate about 230 jobs.

CTS said the production jobs will be phased out starting next year as part of corporate-wide “simplification strategy,” and that the existing facility will continue to be used as a research and development center to support the company’s global operations.

Employees who did not want to be named told The Truth that they received the news Friday from corporate managers of the Lisle, Ill.-based company. The workers said they were told manufacturing work would be shipped to low-wage countries such as Mexico, Taiwan and China.

A 13-year veteran of the company who works in the shipping and receiving department said employees had no warning that their jobs would be eliminated. She hadn’t heard any rumors of job cuts and, in fact, management had sent around surveys in recent weeks asking employees about how much they liked their jobs and how long they anticipated staying with CTS.

The Pointlessness Of Helicopter Drops

Money is just another financial instrument. However, for historical reasons, economic theory has been warped by the concept of money. As a result, any debate involving money usually takes place behind a cloak of unreality.

As I will discuss below, the use of "helicopter money" offers no new policy space. At best, there is a reshuffling of central government liabilities amongst holders.

If someone presented us with a theory that by issuing floating rate notes instead of fixed coupon bonds, all our economic ills would suddenly disappear, people would not take the theory seriously. But by replacing "floating rate notes" with "money," we end up with an interminable debate.

The rest of this article explains why Helicopter Money offers us no new policy options, instead it is akin to fooling around with the mix of types of Treasury bonds and bills issued.

Dow 5,000-Big One Starts in 2017-Charles Nenner

Western Digital plans to eliminate 405 jobs in Bay Area

The wrenching consolidation of the chip industry has unleashed a fresh round of job cuts in Silicon Valley, with Western Digital being the latest to disclose plans to reduce its workforce by more than 400 in the Bay Area.

Western Digital is eyeing a reduction of 405 jobs in the Bay Area, according to official filings with state labor officials. The staffing reductions are scheduled to occur this month and next and will affect employees in San Jose and Fremont.

The cuts are part of a wave of consolidation in the semiconductor industry. Chip companies are attempting to cope with sales that have slackened since demand for personal computers, tablets and smartphones peaked.

"There are not a lot of things out there that are bright spots in the chip industry," said Ben Bajarin, a principal analyst with Creative Strategies, a Campbell-based market research firm. "The dynamics have really changed."

Record 94,708,000 Americans Not in Labor Force

A record 94,708,000 Americans were not in the labor force in May -- 664,000 more than in April -- and the labor force participation rate dropped two-tenths of a point to 62.6 percent, near its 38-year low, the Labor Department's Bureau of Labor Statistics reported on Friday.

When President Obama took office in January 2009, 80,529,000 Americans were not participating in the labor force; since then, 14,179,000 Americans have left the workforce -- some of them retiring and some just quitting because they can't find work.

"By almost every economic measure, America is better off than when I came here at the beginning of my presidency," President Obama told the people of Elkhart, Indiana three days ago. "We cut unemployment in half, years before a lot of economists thought we would."

The unemployment rate in May dropped to 4.7 percent, BLS reported, less than half of its Obama-era high of 10 percent in October 2009. But the labor force participation rate has deteriorated over Obama's two terms.

Monday 06.06.2016

NEWS to Disturb the Comfortable...

We don't tell you what to think,

but we give you something to think about.