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Thursday 06.09.2016

The Gold Bull Is Back

We know that central banks and governments have lost the plot. When the crisis started in 2006, U.S. short rates were 5%. In 2008 they were down to zero and have virtually stayed there ever since.

A crisis package of $25 trillion was thrown at the financial system. This is what the likes of JP Morgan and Goldman told the Fed they had to do to save the bank(-ers). Ten years later the world financial system is in a mess that is exponentially greater. World debt has exploded, most governments are running deficits and the financial system is balancing dangerously on the edge of a precipice.

$8 trillion of government debt is now negative and $16 trillion is below 1%. Negative yields are supposed to stimulate a deflationary global economy and also save bankrupt nations which can’t afford to pay a market interest rate on their exploding debts. But as usual, the central bankers have got it wrong again.

Negative rates are increasing the risks for the financial system and the world economy. Bank profitability is crashing due to the low rates and forces them to take greater risks. For savers, they kill the incentive to save. And without savings, there will be no investments and no growth in the economy. But the biggest disaster is hitting the pension sector. Virtually all pension funds are seriously underfunded, especially if they applied realistic rates of return. Pension funds hold three principal investments: stocks, bonds and property. These are all bubble assets inflated by the credit explosion that central banks have orchestrated.

GM expected to announce 1,000 engineering jobs..... in Canada

General Motors appears set to announce Friday the addition of 1,000 highly skilled engineering and software jobs in Ontario over the next several years.

CBC News has learned that the automaker will expand the company's Canadian operations and focus on development of self-driving cars, shared vehicles and other mobility systems. The jobs will mainly be based in Oshawa and Markham, Ont. GM already has a tech centre in Oshawa, and it's believed that facility will see around 300 new engineering jobs added. Markham will be the home for a new software development centre with around 700 new engineers.

When asked for comment, the company confirmed it would have an announcement on Friday, but declined to offer any more details. "On June 10th, GM Canada will be making an announcement at our Canadian Engineering Centre," GM spokeswoman Jennifer Wright said in an email.

"While there is speculation about the news, GM Canada is looking forward to sharing the news during the event on Friday, June 10th and we cannot confirm or speculate in the meantime."

Recession Signal Talk Rises Again: The Fed Moves Dovish Again

It seems we’re in a rinse-and-repeat cycle as now economists are finding themselves back in the habit of reassuring investors that the U.S. is not about to be plunged into a US recession. The May jobs report and weak manufacturing data have caused the Federal Reserve to delay the next rate hike. Chairperson Janet Yellen’s comments on Monday were more of the same things she’s been saying for some time but with one key omission: the words “in the coming months.”

Yellen spoke those words as recently as last month, so the markets are making much of the fact that they were missing from Monday’s speech at the World Affairs Council of Philadelphia. The Fed chairperson still expects to raise rates gradually, but the central bank won’t do so in June. Although a July hike is possible, it’s now less likely. A hike could come in September, but only if the economic data improves before then.

First Franklin Financial Services Chief Market Strategist Brett Ewing believes Yellen’s comments on Monday demonstrated to Mr. Market that the Fed won’t just keep raising interest rates no matter what happens. In commentary emailed to ValueWalk, he said he believes policy makers learned “the hard way” following the December rate hike, which “produced one of the worst-two-months sell-offs in history.”

“While there is a risk of an overreaction to single reports and weakness being one-offs, it also gives the Fed presidents a reason to take a wait and see approach,” Ewing said. “The proof of this approach should find its way into new Fed speak in the coming months. In our view, the Fed has finally learned what it means to be data dependent and with the data this weak, one would have to be properly senile to believe rates need to be raised in the face of it.”

Goldman warns of a market top; World Bank downgrades growth

Guest Worker Program Slammed In Senate Testimony For Hurting Americans

Witnesses at a Senate hearing Wednesday shot down the idea that there is a shortage of low-skill and unskilled American workers that need to be filled by guest-workers, arguing that the program lowers wages and hurts Americans.

“There is absolutely no evidence that we have a shortage of workers to do the kinds of jobs typically done by H-2B workers. Real wages for less-educated Americans show stagnation or decline,” Steven Camarota, of the Center for Immigration Studies, testified in front of the Senate subcommittee on Immigration and The National Interest.

He added, “Analysis by occupation of the kinds of jobs done by H-2B workers also shows little to no wage growth or outright decline. If there was a shortage of such workers, as proponents of the program argue, wages should be rising rapidly as desperate employers bid up wages.”

The H-2B program was created for American employers to hire temporary foreign labor when U.S workers are unavailable. According to the language of the statute, it is to be used “if unemployed persons capable of performing such service or labor cannot be found in this country.

Companies scale back pace of hiring even as job openings match record

Companies have a record number of open jobs — but are taking their time in filling them. Job openings rose to a seasonally adjusted 5.79 million in April from 5.67 million, the Labor Department reported Wednesday. That matches the previous record in July 2015 for the number of open jobs.

The most open jobs were in the health care and social assistance field, which has 1.02 million open positions as America increasingly needs workers to tend to its aging population. By contrast, there are basically no open jobs — just 16,000 — in mining and logging, which has suffered from the plunge in oil prices.

But companies aren’t aggressively hiring. The hiring rate actually fell in April, to 3.5% from 3.7% in March. And the quits rate, which measures the willingness of workers to exit their current position for another, fell to 2% from 2.1% in April.

The data seem to fit with what some Federal Reserve official see as declining slack in the labor force. The unemployment rate has plunged to 4.7% in May from a high of 10% as the Great Recession ended.

FedSpeak: Lost in Translation

Bill Murray, who has never been one to be stumped for words, is considered to be a veritable master of improvisation. Few appreciate that the star comedian and accomplished actor has also proven himself to be a fair philosopher.

On July 25, 1980, exactly three months and 10 days after Jean Paul Sartre’s death, the comedy classic Caddyshack premiered. It was then that moviegoers nationwide first experienced Murray’s amazing gift for that renowned improvisation. It took all of six days for his character’s role to be filmed. One scripted line notwithstanding, every word Murray’s groundskeeper character Carl Spackler uttered was off the cuff. In one particularly memorable scene, Spackler came eye to eye with an infuriatingly fond and furry rodent and warned: “In the immortal words of Jean Paul Sartre: ‘Au revoir, gopher.’”

When asked in a 1984 interview about his uncanny ability to think in front of the camera, Murray waxed perfectly philosophical: “I don’t believe that you can give the same performance every take. It’s physically impossible, so why bother? If you don’t do what is happening at that moment, then it’s not real. Then you’re holding something back.” Over 50 feature films later, the world is a better place for his never having held anything back.

At the opposite end of the spectrum lie Federal Reserve speakers, most of whom appear to be suffering from an inability to contain themselves to the detriment of their audiences. So damaging is FedSpeak, so to speak, that it’s become the Fed’s greatest liability, chipping away at what little credibility monetary policymakers have left in reserve.

America’s Retirement Crisis Is Here

The Washington Post ran an article recently entitled, “One of the nation’s largest pension funds could soon cut benefits for retirees.” The pension fund requesting a benefits cut turns out to be the Members of the International Brotherhood of Teamsters, and counts among its members more than a quarter million truckers from Texas, Michigan, Wisconsin, Missouri, New York and Minnesota. Notwithstanding its notorious ties to organized crime in the 1960s-70s, the Central States Teamsters is not unlike many defined benefit pension plans; in 1980 they counted 4 active participants for every retiree, today there are 5 retirees for every active participant

While the worker/retiree pyramid inversion is the proximate cause of today’s problem, the catalyst is a law passed in late 2014 that allowed multi-employer pensions like the Central States Teamsters to request permission from Treasury to cut benefits in order to maintain longer-term solvency of the fund. For reference, over 10 million Americans have their pensions through multi-employer pension plans.

Milliman maintains an index that tracks the top 100 corporate US pension funds. Here’s where the index stood on 3/31/16: $1.37 trillion in assets and $1.76 trillion in liabilities producing a shortfall of $390 billion and a funded ratio of 78%. There’s a widely-held myth in pension accounting that plans funded at 80% are in good shape. This is simply not true – pensions need to be funded at 100%. What I found surprising was that the $390 billion funding deficit is close to its all-time high even though the S&P 500 is just inside of its all-time high.

Sears Just Lost a Billion Dollars in One of Its Most Important Categories

According to a new report from market research firm Stevenson, Sears shed an astounding billion dollars in appliance revenue last year. The sales drop reduced its market share among the top 50 U.S. appliance sellers to 19.5% last year from 23.5% in 2014, putting it in third place behind home improvement retailers Lowe's (LOW) and Home Depot (HD) . Sears' sister chain Kmart -- which sells Kenmore appliances in its stores and displays models from Sears online -- saw its sales of major appliances slip 16%, and its market share ranking fell from 24th to 30th place.

Sears' performance is disappointing, especially since the appliance market remained in growth mode in 2015 due to the U.S. housing recovery. Total appliance sales for the nation's 50 largest appliance dealers -- which account for over 90% of the entire U.S. market -- rose 3.7% last year to $27.8 billion.

The report points out that Sears once held a commanding 40% share of the U.S. appliance market just 20 years ago.

Sales figures are based on information that was supplied by retailers responding to a survey by marketing firm Twice and research partner Stevenson. Absent their input, estimates were developed from Stevenson's internal market tracking surveys and industry sizing based on wholesale shipment figures from the Association of Home Appliance Manufacturers, or AHAM, as well as average retail prices by products, housing market data and other sources. Things don't appear to have gotten any better for Sears' appliances sales during the first quarter.

America has 5.8 million job openings, matches all-time high

America has a record number of job openings. In April, there were 5.78 million job openings, according to Labor Department data published Wednesday. That matches the all-time high set in July 2015. The openings are across a range of industries. Manufacturing, trade and transportation each had posted north of 46,000 jobs.

Such a high overall number open positions is both good and bad news. On one hand, it means employers are hiring more. At the worst part of the recession in 2009 there were only 2.3 million job openings.

But on the other hand, it is also a symptom of a growing problem in the U.S. economy, where employers can't find skilled workers for the jobs that they need. That disparity is called the job skills gap, and it's a major challenge in right now.

Overall, Americans are generally feeling more confident about quitting their jobs. One key measure of workers' optimism in the job market is the quits rate -- how many people are quitting their jobs voluntarily.

Feds spend nearly $20,000 to settle every refugee

Federal taxpayers are on the hook for nearly $20,000 just to settle each refugee and asylum seeker, who are then immediately eligible for cash welfare, food stamps, housing and medical aid, according to a new report on the "refugee industry."

The report provided federal budget figures showing that the government spends $19,884 on each refugee the U.S. takes in. And that number is set to jump if President Obama gets his way and brings in an additional 10,000 Syrian refugees in this year.

The report from the Negative Population Growth Inc. said that the U.S. is currently accepting about 95,000 refugees and asylees. That is in addition to the over 500,000 legal and illegal immigrants coming to the U.S.

It focused on the industry created to accept the $1.8 billion in federal support to help refugees settle and sign up for further cash awards from Uncle Sam. The refugee agencies get a small portion, or about $1,875 per refugee they help. The rest goes to the United Nations, which helps to determine eligible refugees, and state agencies. The State Department spends about $1.28 billion, and Health and Human Services another $609 million.

US Debt Clock Shows Gold and Silver Way Undervalued

Online Shoppers Making More than Half of Their Purchases Online

Avid online shoppers, who make two or more purchases online in a typical three-month period, are leading a retail revolution. These consumers are shopping more with their smartphones and demanding a more seamless experience between virtual and physical stores, according to the fifth annual UPS Pulse of the Online Shopper™ study.

This is the first time in the study’s five-year history that more than 50 percent (51%) of all purchases made by respondents are made online, up from 48 percent in 2015.

“Consumers are skilled at using technology to their advantage and thrive on gathering information when shopping,” said Teresa Finley, Chief Marketing Officer at UPS. “This year’s UPS study revealed that 45 percent of online shoppers love the thrill of hunting for and finding great deals, and that physical stores continue to play an important role in that experience. The challenge is how to best engage with shoppers to fulfill their desires.”

The shift from traditional in-store shopping to shopping with multiple channels continues. Seventeen percent of consumers plan to shop less in store, shifting time to their electronic devices. The use of smartphones is up 10 points (to 77%) over the past two years, and retailers are responding. Online shoppers report a better mobile experience with satisfaction up eight points (to 73%) since last year. Social media’s influence on purchasing decisions is up nine points (to 34%) in the last year with nearly a quarter of respondents (23%) having made purchases through social media sites.

Deutsche Bank: The ECB is on course to destroy the eurozone

The European Central Bank risks tearing the eurozone apart for the sake "of short-term financial stability," and the ECB needs to reverse course before it is too late, says Deutsche Bank.

A new note from the bank's group chief economist, David Folkerts-Landau, says that the ECB has gone badly off course and needs to correct itself before it makes some "catastrophic" mistakes.

That correction should come, Deutsche argues, in the form of abandoning the bank's negative interest rate policy (NIRP) and stopping the mass bond-buying it has undertaken in recent years.

President Mario Draghi and other senior staff at the ECB are already causing the central bank to lose credibility in both the markets and with the general public, and is hurting savers, says the bank.

US Credit Card Debt to Hit $1 Trillion in 2016

Since 2010, when Americans actually paid more on their credit card bills than they charged, the annual increases have risen from $2.5 billion in 2011 to $71.0 billion in 2015. Total credit card debt at the end of last year had reached $919.1 billion, and at current growth rates, should wind up 2016 at roughly $1 trillion.

In the first quarter of 2016, Americans paid down $33.8 billion in credit card debt, including a $7 billion charge-off. According to research at CardHub, however, that’s the smallest first-quarter pay-down since 2008 and almost 25% below the post-recession average.

Average U.S. household indebtedness dropped to about $7,600 during the first quarter. That represents an increase of 6% in indebtedness, compared with the first quarter of 2016. Worse, perhaps, it is just $831 below a tipping point (where minimum payments become unsustainable and delinquencies skyrocket) that CardHub has said is unsustainable. CardHub projects that average indebtedness will rise to more than $8,500 by the end of 2016.

With 8 of the last 10 quarters reflecting year-over-year regression in consumer performance, evidence is mounting to support the notion that credit card users are reverting to pre-downturn bad habits. Despite credit card debt levels trending significantly upward, charge-off rates remain near historical lows. Something clearly has to give, and it does not seem to be our spending habits

Greece Cuts 200,000 Pensions by 40%

A new ministerial decree posted on state website Diavgia on Tuesday night calls for cuts of up to 40 percent on supplementary pensions for 200,000 pensioners.

The decree was signed by Deputy Labor Minister Tasos Petropoulos and is published in Tuesday’s government gazette.

Specifically, about 200,000 pensioners who receive aggregate pensions (main plus supplementary) over 1,300 euros gross (1,170 net) and retired with high replacement rates (above 0.45 percent per year), will see their pension checks reduced by up to 40 percent.

The reduced pensions will appear in the checks pensioners will receive in late July. The cuts will be retroactive, with starting date June 1st.

Dave & Buster’s CEO on impacts of higher minimum wage

Millennials’ Healthcare Problems: Insurance Is Terrifyingly Expensive And Highly Confusing For Young Americans, Survey Finds

The millennial generation still hasn't figured out healthcare. It can be prohibitively expensive and painfully confusing yet required by law, so how do they deal? They skip healthcare, struggle to pay bills and ask mom what to do, according to a new report by the nonprofit Transamerica Center for Health Studies.

The center's findings, based on a survey of 1,171 adults aged 18-36 in the United States, also found that those who lacked health insurance were disproportionately female, people of color, younger, less educated and unemployed.

The proportion of millennials who don't have health insurance has declined significantly in recent years, from 23 percent in 2013 to 11 percent today. It was in 2014 that the Affordable Care Act, the landmark healthcare reform law often referred to as Obamacare, went into effect. But having health insurance does not mean they're educated or financially equipped to make use of it.

Nearly half of those surveyed said they were either unable to afford routine healthcare expenses or they struggled to do so. Nearly half also said they skipped medical care to cut back on expenditures. Two-thirds said that paying a premium of $200 a month or more was unaffordable.

Venezuelans Pick Through Trash for Food to Eat or Sell

Until recently, Julio Noguera worked at a bakery. Now he spends his evenings searching through the garbage for food. "I come here looking for food because if I didn't, I'd starve to death," Noguera said as he sorted through a pile of moldy potatoes. "With things like they are, no one helps anyone and no one gives away meals."

Across town, unemployed people converge every dusk at a trash heap on a downtown Caracas sidewalk to pick through rotten fruit and vegetables tossed out by nearby shops. They are frequently joined by small business owners, college students and pensioners — people who consider themselves middle class even though their living standards have long ago been pulverized by triple-digit inflation, food shortages and a collapsing currency.

Venezuela's poverty had eased during the administration of the late President Hugo Chavez. But a study by three leading Caracas universities found that 76 percent of Venezuelans are now under the poverty line, compared with 52 percent in 2014.

Staples such as corn flour and cooking oil are subsidized, costing pennies at the strongest of two official exchange rates. But fruit and vegetables have become an unaffordable luxury for many Venezuelan families. "We're seeing terrible sacrifices across many sections of society," said Carlos Aponte, a sociology professor at the Central University of Venezuela. "A few years ago, Venezuela didn't have the kind of extreme poverty that would drive people to eat garbage."

Royal Mint to sell gold bars for pensions in U.K.

The Royal Mint is to offer savers the chance to own gold bars within their pension funds for the first time. Investors will be able to buy 100g or 1kg bars - or even a fractional amount of a larger 400oz bar - and have it stored at the Royal Mint.

The vault, at Llantrisant in South Wales, is guarded by the Ministry of Defence. Physical gold has been eligible for inclusion in Self-Invested Personal Pensions (SIPPs) since 2014.

However, it needs to be of at least 99.5% purity to qualify. Royal Mint gold bullion has a purity value of 99.9%. Investors will be charged up to 1% a year for the privilege of owning the bars, plus VAT. Previously it was possible to buy gold bullion from the Royal Mint, but not as part of pension savings.

Within a pension wrapper, gold is free from Capital Gains Tax - although withdrawals are taxable at the usual rates.

Thursday 06.09.2016

NEWS to Disturb the Comfortable...

We don't tell you what to think,

but we give you something to think about.