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Thuday 08.11.2016

Macy’s to close 100 stores

Department store giant Macy’s said Thursday that it plans to close 100 stores, a dramatic step aimed at better equipping the retailer to survive the rise of online shopping.

Macy’s regularly prunes its store fleet, often announcing the closure of several dozen underperforming stores after the busy holiday season wraps up. But this summertime announcement that it will close 15 percent of its 728 locations suggests that the chain has become more aggressive in girding its ailing business today’s shopping environment. Many of Macy’s stores are located in the small, regional malls whose foot traffic has been decimated in the digital era.

Macy’s has been in a rough patch recently, delivering six consecutive quarters of sales declines at its stores open more than a year. On Thursday, the company said it saw a 2.6 percent drop in comparable sales in the most recent quarter. The retailer’s revenue was $5.87 billion in the quarter, down 3.9 percent from the same period last year. The retailer has blamed the poor performance on a variety of factors: A strong dollar has kept international tourists from spending big at its international flagships. Meanwhile, unseasonable weather last holiday season weighed heavily on their sales of coats, gloves and other cold weather apparel.

In some ways, it should not come as a surprise that Macy’s is closing more locations. Terry Lundgren, the retailer’s chief executive, has said that the chain simply had too many stores for an era in which shopping is moving online. Executives have previously said they were embracing a strategy that put particular emphasis on roughly 150 of their top-performing stores, trying to wring more sales out of those already productive locations.

Reasons to Invest in Gold

In recent months, precious metals including gold have surged ahead as growing global economic and geopolitical uncertainty trigger a flight to safety among investors. The lustrous yellow metal is up by 23% over the last year, trading at its highest point since mid-March 2014. Despite claims among some analysts that gold is poised to pull back, there are signs that indicate it has further to run.

Firstly, the growing consensus among analysts is that gold has entered a new bull market after being trapped in a bear market over the last years. In mid-May of this year JP Morgan was advising its clients to position themselves for a new and very long bull market in gold. The reasoning behind this was that in an economic environment where negative interest rates dominate and bond yields are at historical lows, gold is an attractive hedge and risk-off investment. This sentiment appears to stretch across the major banks; Bank of America subsidiary Merril Lynch expressed a similar view.

Meanwhile, investment guru George Soros, who once famously broke the Bank of England, has been loading up on gold and gold miners, and Barrick Gold Corp. (TSX:ABX)(NYSE:ABX) is among his largest holdings.

Secondly, growing economic and geopolitical insecurity makes gold an invaluable hedge against uncertainty and market volatility. Gold is perceived to be a store of value and a safe-haven asset in times of turmoil. With the global economy filled with fissures and entering an era of uncertainty both economically and politically, investors are growing increasingly wary and are hedging their bets against another financial crisis.

Fresh Off His Campaign to Make Socialism Great Again, Bernie Sanders Buys $600,000 Summer House

After losing to Hillary Clinton, Bernie Sanders is back to his day job as a US Senator for Vermont. Sanders campaigned against the 1%, promising to bring America closer to his Democratic Socialist ideal and to take corporations and rich people down a peg or two.

But now that his campaign is over, he’s picking up a sweet new pad. According to Seven Days, a news publication in Vermont, the Democratic Socialist from Vermont shelled out 600 grand for a lake house.

The Burlington resident last week plopped down nearly $600,000 on a camp in North Hero. Sanders’ new waterfront crib has four bedrooms and 500 feet of Lake Champlain beachfront on the east side of the island — facing Vermont, not New York. The Bern will keep his home in Burlington and use the new camp seasonally.

“We’ve traveled up to the islands many times over the years — almost always on day trips,” Sanders’ wife, Jane O’Meara Sanders, told Seven Days in a written statement. “We’ve been impressed with the North Hero community, eaten at the North Hero House and Shore Acres and have suggested them to friends who were looking for a beautiful place to stay or have dinner. St. Anne’s Shrine in Isle La Motte is my favorite church and it is nearby.”

Why Central Bankers are unable to admit failure despite running out of ammunition

When central bankers pause for thought these days, there’s just one idea they’re unlikely to entertain: backing down. Take Haruhiko Kuroda, governor of the Bank of Japan. Having helped push his institution further into the realms of unconventional, reflationary stimulus than any of his major peers, he has now instigated a comprehensive review to study its effects, which have waned. The only thing the BOJ won’t conclude when the assessment is completed for its September board meeting, Kuroda has said, is to do less.

That resembles the conundrum global central bankers are likely to debate when they gather later this month at the U.S. Federal Reserve’s annual symposium in Jackson Hole, Wyoming. While governments are starting to break from the grip of austerity that has handcuffed growth in recent years, the support from authorities in Europe, Japan and even the U.S. may be modest at best and fall short of long-term solutions, maintaining pressure on central banks to extend their own stimulus efforts.

“While central bankers are pulling their hair out about being overburdened and going on about structural reforms, they know that they can’t be seen to be giving up,” said Janet Henry, global chief economist at HSBC Bank in London. Policymakers “have to be very, very careful about sending a signal that they’ve done all they can.”

That’s partly because of market sensitivity to the perception that central banks are taking their foot off the gas — witness the jump in the yen on July 21 after reports emerged that Kuroda had ruled out helicopter money, or the slump in global stocks on Dec. 3 after the European Central Bank disappointed on extra stimulus. It’s also about policy makers being unable to admit failure.

Study: Obama Regulations Have Cost U.S. $747 Billion

The American Action Forum (AAF) published a study Sunday revealing that President Obama has implemented 618 major regulations during his 7.5 years in the White House -- 40 percent more than President Bush passed in his two full terms.

But that isn’t what is most shocking about this report. President Obama’s major regulations are estimated to have imposed a $747 billion dollar burden on America’s economy (updated to reflect today's data), and have cost each taxpayer approximately $2,294. The paperwork associated with these regulations reportedly took more than 232 million hours to complete.

More from the official report: Through the final July of his term, President Obama has issued 600 major rules. Compare this to President Bush at 426 major rules; President Obama has already imposed 40 percent more major regulations than his predecessor, in spite of President Bush’s regulatory response to 9/11 and implementing Sarbanes-Oxley rules.

An average of 81 major regulations have been issued annually, with 40 having been issued so far in 2016. If President Obama maintains this same pace, AAF projects he could easily impose well over 650 regulations by the time the next president is sworn in next January.

The Typical Home in San Jose Now Costs More Than $1 Million

Rising home prices and growing affordability concerns showed no signs of abating in the second quarter, as San Jose, Calif. became the first city where the price of a typical home eclipses $1 million.

Home prices rose in 83% of metropolitan areas across the U.S. in the second quarter compared with a year earlier, according to data released Wednesday by the National Association of Realtors. That is a slight decline from the first quarter, when price increases were reported in 87% of metro areas.

Still, there were some signs the market is starting to cool, bringing welcome relief for home buyers. Twenty-five out of the 178 metropolitan areas included in the report experienced double-digit price gains, down significantly from the same period last year, when 34 metro areas saw double-digit gains.

Twenty-nine metros also experienced price declines this quarter, according to NAR. Nonetheless, home prices hit record highs during the quarter, driven by rapidly rising prices in California and northwestern cities, such as Portland and Seattle. The national median home price was $240,700, according to NAR, up nearly 5% from the previous peak in the second quarter of 2015.

Credit Card Issuance To Subprime Borrowers Nearing Pre-Recession Levels

The issuance of new credit cards to subprime borrowers — the group most-severely affected during the 2008 recession — is reaching pre-recession levels, the Federal Reserve Bank of New York warned in a new report released Tuesday. According to the Quarterly Report on Household Debt and Credit, roughly half the borrowers with low credit scores — 660 or less — now have credit cards, compared with over 60 percent in 2007.

“Nearly half of all card closures in 2010 and 2011 belonged to borrowers with credit scores of 660 and below, although they comprise only 33 percent of card borrowers. Reversing the sharp net decline in the number of credit cards during 2008-10 ... in recent years, the level of new card issuance to this group has been strong and is now approaching pre-recession levels,” the New York Fed said in its report. “Moreover, while less creditworthy borrowers are increasingly receiving new cards, the median limits on those new cards have increased, from $500 in 2009 to $1,000 in 2015.”

However, the report adds, the increase in share of lower score borrowers over the past two years is modest, and is “commensurate with an increasing number of new cards.” Meanwhile, overall extension of new credit — as measured by the increase in aggregate credit limits — continues to go overwhelmingly to those with credit scores over 720.

Of the total credit extended to all borrowers, roughly 72 percent of it went to such individuals — a drop from the high 70s in the years immediately following the financial crisis. Borrowers in the 720-779 range and those with credit scores over 780 have seen their median new card credit limits increase from $3,600 and $4,200 in 2009 to $5,500 and $8,000 respectively in 2015.

Bill Holter-World Facing Very, Very Dangerous Time

Billionaires Are Holding $1.7 Trillion In Cash

The world's billionaires are holding more than $1.7 trillion in cash — the highest amount since one firm began recording the measure in 2010. Because of what they perceive to be growing risks in the economy and world, the world's 2,473 billionaires are keeping 22.2 percent of their total net worth in cash, according to the Wealth-X Billionaire Census.

The group has also benefited from the recent surge in so-called liquidity events from corporate acquisitions and mergers. Altogether, their cash hoard is now roughly the size of the Brazil's GDP.

"Billionaires are taking money off the table where available, while uncertainties in the economy and the historical highs found in deals have resulted in cash-flush portfolios," the report said.

The firm's findings are in line with those from other recent surveys. A study released by UBS last month said wealthy Americans are keeping around 20 percent of their portfolios in cash, in line with their post-2008 average. More are considering reducing their exposure to the markets because of uncertainty over the presidential election, UBS said. The Wealth-X report said billionaires may also be sitting on the sidelines waiting for stock and asset valuations to fall to bargain levels.

People In EU And USA Are Worse Off Than A Decade Ago

Welcome to this week’s edition of “World Out Of Whack” where we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all it’s glorious insanity. While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the “World Out Of Whack” as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.

Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live. Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, I’m a capitalist.

Talking with old people is a “helluva” lot of fun. I mean really old people – those closer to having a lid over their heads. People who grew up watching the advent of cars, TVs, and who still marvel that we have shaving cream in a can and chicken in packaging. You realise how damn lucky we are today on so many fronts. Women very rarely die in childbirth, we can reasonably expect that our kids won’t die from some horrific disease before making it to adulthood, and we take for granted food and wine from the other side of the world and sundry other goods which we find in our local supermarkets and shopping malls. Foods and goods that a generation ago either simply didn’t exist or were available only to people with bow ties and butlers.

Most people living in advanced economies used to take for granted the idea that tomorrow would likely be better than today. Real positive incomes have been the norm since World War II. Sure, there have been very brief periods, one notably during the 70’s where inflation was high and this wasn’t the case, but the trend has been positive and steady. Up until around 1993 when it all ended.

Gold Meets the “Perfect Storm”

Gold is set to benefit from a “perfect storm” of dwindling investment alternatives and greater investor risk, according to the August report of the World Gold Council (WGC). It says central banks are increasingly pulling out all the stops to stimulate growth, which has driven yields on government bonds to absurdly low levels. Fewer than 40% of government bonds around the world available to average investors have a positive yield, and only 17% yield more than 1%.

Investors have to take on additional risk to generate any sort of meaningful returns. And this search for returns is pushing investors toward gold to balance the risk, according to the WGC: “In this environment, we believe investors are using gold to hedge portfolio risk as they add more stocks and low-quality bonds to their asset mix.”

In its report, it pointed to weak demand for 10-year Japanese government bonds at a recent auction as evidence that investors are losing faith in “unconventional monetary policies.” This is all extra evidence that we’re living in the early days of a strong bull market for gold and mining shares.

So far this year, gold prices have moved up by just under 30%. There appears to be solid, market-based support for gold prices. New gold supply is contracting. Plus, there’s continuing demand for yellow metal from China and the West — and certainly from the U.S., for investment reasons. There’s also demand from Europe, due to uncertainty about the euro, the European Union post-Brexit and general sociopolitical problems there. This along with central banks across the globe pursuing low interest policies and “negative rates,” which tend to reduce the holding costs for gold. Thus, it’s all good for gold.

Collapse of Political World

Why Wages Aren’t Rising—–There Is Still Immense Slack In The Labor Market

Basic economics has proven that when the supply of something dwindles, absent an offsetting drop in demand the price should rise. When translating these fundamental terms to the labor market especially of the past few years, the supply means “slack” or the available pool of workers not yet working; demand has been, we are told repeatedly, very robust; therefore the price of labor, the hourly wage rate, should be rising and rapidly so if only to match the rhetoric (“best jobs market in decades”).

Monetary policy is already at a great disadvantage because its core philosophy seeks to discourage rapid growth in wages. Figuring that wage inflation leads to actual inflation, central banks believe they must act to control it even though, as noted above, it’s basic economics that shows and truly delivers the best basic economy. This policy handicap isn’t one-sided, however, as this “recovery” has proven beyond any doubt. In other words, central banks have also philosophical problems about getting wages to rise in the first place.

In the past nearly decade, it all works around and toward “slack.” Economists claim that the unemployment rate is the best indicator of it largely because of what we find of the past. Despite positive growth since the Great Recession, it was never at any point enough to erase the deep hole with which this post-crisis period started.

But because the BLS surveys the labor force and that survey is taken as scientific verification of it, this initial deficit is just ignored as if covered by demographics or other non-economic factors. The unemployment rate says those who want to work are doing so and rapidly enough since the middle of 2014 that the recovery is full and the economy will only getter better from here (so that monetary policy must shift before it gets “too” good).

Venezuelans flood Brazil border in 36-hour grocery run

Government employee Jose Lara this month used some vacation days to take a long scenic bus ride through the verdant plateaus and sweeping savannas of southern Venezuela, but the trip was anything but a holiday. It was a 36-hour grocery run.

Lara took an overnight bus and then a pick-up truck to get across the border to neighboring Brazil to buy food staples that have gone scarce in Venezuela's crisis-stricken economy.

"Workers can't even enjoy vacation anymore. Look where I am! Buying food for my children," said Lara, 40, who was preparing to load 30-kilo (66-pound) packages of rice and flour onto a bus to complete a journey that takes close to 36 hours.

Venezuelans seeking to escape their socialist economy's dysfunction are flooding into the remote Brazilian town of Pacaraima in search of basic goods that are prohibitively expensive or only available after hours in line. Shoppers have been coming for months, primarily from the industrial city of Puerto Ordaz - already a 12-hour bus ride - but lately they're also arriving from even more far flung regions across the country.

New owner of Cablevision to cut 600 jobs, close call center in Connecticut

The Netherlands-based company that bought Cablevision Systems Corp. at the end of June in an $17.7 billion deal made another move Tuesday to remake the company, announcing it will eliminate 600 jobs in Connecticut between now and November.

Altice is closing a customer call center in Shelton and a back office operation in Stratford that serves repair crews in Connecticut. Since Altice acquired Cablevision, the company now uses the moniker Optimum, which prior to the deal had been a brand name for its cable television, internet and phone service.

The services provided by the two Connecticut facilities will now be distributed among Optimum operations in New Jersey, the Bronx and Long Island, said Lisa Anselmo, a spokeswoman for Altice USA. Even after the closing of the two Connecticut facilities, several hundred field service workers and employees at walk-in locations will continue to serve Optimum’s customers in the state, Anselmo said.

“Over the last few years, there have been investments and enhancements to our Optimum products and services, making them more reliable and providing more customer service touch points than ever before,” she said. “As a result, we have seen a significant improvement in customer call volume and patterns. As we look to strengthen our operations in the nation’s most competitive market, we are aligning our contact center organization to meet the current needs of our customers.”

'Bad News' For Millions of American Borrowers

The Federal Reserve's Open Markets Committee seemed to signal when it hiked rates in December that interest rates were heading northward for the first time since the financial crisis.

In the seven months since the historic move, however, the federal funds rate has not budged, and language from the Fed has markets believing that another rate hike isn't coming for a while.

For many borrowers, that news may be surprising because based on their loan payments it looks as if the Fed has already moved rates up.

According to Morgan Stanley economist Ted Wieseman, the increase in Libor has already jacked up interest rates for many Americans' loans to the point that it would appear another rate hike has happened. "3-month LIBOR at 0.92% in mid-September would be a more than 25 [basis point] hike from the 0.63% it averaged in the first five months of the year," Wieseman wrote in a note to clients on Wednesday.

Boeing won't raise 787 production unless market demands it

Boeing Co said on Wednesday it will not increase 787 output unless sales improve, its clearest indication yet that its large jetliner production may have peaked for now.

"If the market's not going to demand it, we're not going to go," Chief Financial Officer Greg Smith said on the sidelines of an investor conference in New York organized by global investment bank Jefferies, confirming remarks made during the formal program.

"It's not the end of the world" if Boeing keeps 787 production at 12 a month instead of lifting it to 14 as planned, Smith said during the event. "We can still be profitable in the program as I see it today at 12."

Analysts said Smith's statement confirmed that Boeing will not overproduce widebody planes and, most importantly, does not foresee an accounting charge for the 787 if output stays at 12. Boeing recently took an US$847 million after-tax charge in its latest result for the 787 program. It also took an US$814 million charge for the 747 because sales outlooks did not justify assuming output of that aircraft would rise in 2019 as planned.

This is When the Jobs “Recovery” Goes KABOOM

This cannot be good for jobs: In the second quarter, nonfarm business sector labor productivity – defined as output per hour worked – fell by an annual rate of 0.5% from the first quarter, the Bureau of Labor Statistics reported today. The third quarterly decline in a row.

The last time it dropped for three quarters in a row was from Q3 1973 through Q3 1974 (5 quarters). Alas, in November 1973, the economy entered a recession. Several quarters in a row of declining productivity is not kind to the economy.

The productivity decline in the second quarter this year was the result of output edging up at a seasonally adjusted annual rate of 1.2% while hours worked to obtain this output rose 1.8%. Year-over-year, productivity fell 0.4%.

At the same time, unit labor cost rose 2.0% in the second quarter, the result of a 1.5% increase in hourly compensation and the 0.5% decline in productivity. Year-over-year, unit labor costs increased by 2.1%. Ideally, compensation rises to give workers more spending money, and productivity rises as much or more, so that workers and employers both come out ahead. But that’s not happening.

Nation's First Pizza ATM Opens at Xavier University in Cincinnati

Late-night pizza is as much a staple of college life as classes, dorms and exams. But fresh pizza in the middle of the night isn't always easy to find.

This past week, Xavier University in Cincinnati eased students' quest for round-the-clock munchies by installing Pizza ATM, America's first pizza vending machine. Open 24/7, Pizza ATM dispenses fresh pizza to hungry students within three minutes of ordering. The 12-inch pies cost $9 to $10, depending on toppings. The vending machine holds 70 pizzas at a time.

It's located in the lobby of Xavier's Fenwick Place residence hall, just outside the school's main dining facility, which closes by 8 p.m. each night. Pizza ATM is made by Paline, a French company. The dispensers have a long history of popularity in Europe.

"We were looking for a cost-effective way to solve this problem of having a late-night pizza option on campus," Xavier Assistant Vice President Jude Kiah told NBC News. "We liked the idea of being the first school to have this high-quality machine."

Wendy’s Blaming Weak Sales Growth On Cheap Groceries That Keep People At Home

When you’re a national fast food chain, you can’t just sit back and coast — you’ve got to constantly increase sales to show you’re growing. Wendy’s is the latest chain to report weaker-than-expected sales growth, results the company is blaming on the fact that groceries are cheap, meaning more people are eating at home.

Wendy’s said on Wednesday (try saying that three times fast) that sales rose 0.4% at North American restaurants that have been open at least 15 months in the second quarter, a sharp contrast to a predicted 2.4% increase, The New York Times reports.

During a conference call reported by the NYT, Wendy’s CEO Todd Penegor said customer traffic has been slipping since earlier this year at many fast food restaurants, because commodity costs have kept grocery prices down, while chains might keep prices the same or raise them, depending on operating costs and changing profit margins.

When asked by analysts whether Wendy’s had some numbers to back up the assertion that folks are staying home to cook instead of going out, or if executives were just relying on a gut feeling, Penegor said it was “some gut, and some science.” Translation: restaurants aren’t exactly clear what’s going on.

NEWS to Disturb the Comfortable...

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