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Friday 11.11.2016

U.S. election outcome leaves Fed on track, could end gridlock: Bullard

The Republican sweep of the White House and Congress could break the current gridlock over national policy in a potential boon to the U.S. economy, St. Louis Federal Reserve bank president James Bullard said on Thursday.

Bullard said the potential positives from Tuesday's outcome, including the possibility of regulatory reform and a boost to growth through new infrastructure spending, for now outweighed any concern about volatility in financial markets surrounding President-elect Donald Trump's surprise victory.

"It is not a level of volatility that is troubling ... It certainly breaks gridlock in Washington, which has been a key complaint of how the economy has operated," Bullard said to reporters after a morning presentation here. "We are basically on track the same way we were before the election."

The Fed has positioned itself for a likely interest rate increase in December. Despite expectations that a Trump victory might disrupt financial markets, or even threaten a trade war with his promise of new tariffs, equity markets have moved higher so far and investors maintained their expectation that the Fed will move next month.

India rupees: Chaos at banks after 'black money' ban

There have been chaotic scenes outside banks in India, two days after 500 ($7) and 1,000 rupee notes were withdrawn as part of anti-corruption measures. Some banks ran out of cash. At others police were called in to manage queues of anxious customers hoping to change their savings for legal tender.

The surprise government move is aimed at tackling corruption and tax evasion. But many low-income Indians, traders and ordinary savers who rely on the cash economy have been badly hit.

Banks were shut on Wednesday to allow them enough time to stock new notes following Tuesday night's announcement. There are also limits on cash withdrawals from ATMs. The two notes accounted for about 85% of the cash in circulation.

The BBC's Geeta Pandey in Delhi says some banks extended working hours to deal with the rush on Thursday, and hired extra temporary staff. Bank officials told the BBC that they had also brought in extra cash to deal with the situation - things had generally gone smoothly apart from the police having to deal with sporadic fights that broke out among customers.

Goldman CEO Blankfein says Trump's plans may be good for economic growth

Goldman Sachs Group Inc CEO Lloyd Blankfein said the surprising U.S. election results show "democracy at work" and could bode well for the firm and its clients, in a voicemail to employees on Wednesday.

"Change is often the agent of progress in ways that we can't always readily see in the early days," he said, according to a transcript reviewed by Reuters.

President elect Donald Trump's stated commitment to infrastructure spending, government reform and tax reform, "will be good for growth, and therefore, will be good for our clients and for our firm."

Blankfein acknowledged that the presidential campaign cycle had been divisive and that many Goldman employees "may feel uncertain, or perhaps even disheartened or uncomfortable with the outcomes of these political cycles."

No one can take working class voters for granted anymore

Back in September, I wrote an article for CNN Opinion arguing that there was evidence that white, working class Democrats in places like Youngstown, Ohio, were switching their allegiance to the Republican Donald Trump, and that this could prove very dangerous to Hillary Clinton's aspirations for the White House.

At the time, I was taken to task by columnists such as Connie Schultz, who argued that I had little data to back up my assertions, and that I was assuming that these working class voters could be duped into believing that Trump was not really a Republican.

I had relied on the actual numbers from the Ohio primary in places like Mahoning (where Youngstown is the county seat) and Trumbull counties. And to demonstrate just how important these voters might be to the Democrats, I also linked to a study that showed how important white working-class union voters were to President Obama's victory in Ohio and Wisconsin in 2012.

Since so many working-class Democrats in northeast Ohio have a labor background, and since they had clearly crossed over to vote for Trump in the primary, it was clear to me that Clinton's only hope was to steal an equal number of Republican voters from Trump. Perhaps because of the open seat on the Supreme Court, or maybe because the revived Comey investigation reminded Republicans just how much they disliked the Clintons, she did not succeed in this task.

ObamaCare on the Brink

On Monday, October 3, former President Bill Clinton, in a series of unexpected and perhaps unscripted comments while stumping on behalf of his wife’s presidential campaign in Flint, Michigan, took the political world by surprise when he singled out Obama­Care for scathing criticism. “You’ve got this crazy system where all of a sudden, 25 million more people have health care, and then the people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half and it’s the craziest thing in the world,” Clinton told a crowd of supporters.

He added that “the current system works fine if you’re eligible for Medicaid, if you’re a lower-income working person, if you’re already on Medicare or if you get enough subsidies on a modest income that you can afford your health care.”

But overall, Clinton concluded, Obama­Care is hurting the very people it was intended to help, pointing out that “the people getting killed in this deal are the small-business people and individuals who make just a little bit too much to get any of these subsidies.”

During Bill Clinton’s own presidency a generation ago, Hillary Clinton was put in charge of creating a system of socialized medicine (so-called Hillarycare), an effort that met with political failure. The Clintons have long been ardent public supporters of socialized medicine (and socialism in general). What would prompt Bill Clinton to attack ObamaCare during a heated presidential campaign? Have the failings of Obama’s disastrous experiment in socialized medicine become so obvious that even Democrats now want to distance themselves from it?

Trump unveils plan to dismantle Dodd-Frank Act

Now that the dust is starting to settle from the election, a clearer picture is beginning to emerge of what types of actions President-elect Donald Trump will pursue once the “-elect” is removed from his title.

Chief among those planned actions appears to a plan to “dismantle” the Dodd-Frank Wall Street Reform Act. Trump’s plans for the first days of his term as president are being revealed on a website launched by his transition team.

Under a section titled “Make America Great Again,” the website lists the three main tenets of Trump’s plan: Making America Secure Again; Getting America Back To Work Again; and Government for the People Again.

Each of those main sections has several subsections, and those in the financial services industry should pay close attention to the “Getting America Back To Work Again,” as it contains much of Trump’s plan for the economy.

Trump and the Coming of Helicopter Money

One of the great mysteries of the past eight years is why there has not been more consumer price inflation despite the fact that the Federal Reserve has printed over $3 trillion in new money.

Many economists hypothesizes that such money printing must prove inflationary, and many consumers assumed the same. The answer is that money printing by itself is not inflationary — it has to be combined with velocity (that’s the turnover, or rapid use, of money) in order to produce inflation.

Most of the money printed by the Fed was simply deposited with the Fed by the big banks in the form of excess reserves. That money was never borrowed or spent. Therefore, it never had the kind of velocity needed to produce price increases. Another answer is that inflation occurred not in consumer prices but in asset and commodity prices. Bubbles in stocks, real estate and some commodities over the past eight years are a kind of “inflation” all by themselves.

Yet we may have reached a turning point where consumer price inflation is kicking in. This is dangerous because it feeds on itself. Once inflation starts, individuals expect more. They start to change their behavior by borrowing and accelerating purchases. As expectations switch from deflation to inflation, it is difficult to switch them back again.

Lloyd Blankfein: Jamie Dimon as Treasury Secretary would kill 2 birds with one stone

Goldman Sachs CEO Lloyd Blankfein is on board with the idea of Jamie Dimon as Treasury Secretary.

CNBC reported earlier Thursday that President-elect Donald Trump may ask Dimon, who is the CEO of JPMorgan, to take on the role.

"Wow, terrific," Blankfein said in a conversation with The New York Times' Andrew Ross Sorkin at the DealBook Conference Thursday. "Look there's certainly attractive aspects to that — I can think of a couple," Blankfein said.

"He'd be a great Treasury Secretary, and he's been a terrific competitor. And I'd say in that one move we could kill two birds with one stone!" The move, essentially, would put a Wall Street ally in the Treasury while simultaneously eliminating one of Blankfein's chief business rivals.

ConocoPhillips aims to sell up to $8B in assets, cut spending

Houston-based ConocoPhillips announced Nov. 10 it plans to sell billions in assets and trim its 2017 capital budget. ConocoPhillips aims to divest between $5 billion and $8 billion in assets, most of which will come from North American natural gas assets, executives said at a Nov. 10 analyst meeting.

Next year, the company plans to budget $5 billion for capital expenditures, down about 4 percent from $5.2 billion this year. ConocoPhillips has been reducing its capital expenditure guidance throughout 2016, most recently announcing in late October a reduction from $5.5 billion to $5.2 billion. In 2015, capital expenditures totaled $10.1 billion.

Also in 2017, the company expects flat to 2 percent growth in total production year over year. Officials also announced a $3 billion share buyback program on Nov. 10.

The announcements are part of ConocoPhillips’ plan to reduce its debt and turn a profit at lower oil prices. “The acceleration actions we’ve announced today will allow us to achieve our value proposition priorities at Brent prices of about $50 per barrel,” CEO Ryan Lance said in a press release. “These priorities include a debt target of $20 billion ( by the end of 2019), a 20 to 30 percent payout of operating cash flows to shareholders, and modest production growth to drive margin and cash flow expansion."

Why We Need The Electoral College

IEA: If OPEC Doesn't Cut, We'll Drown In Oil

Various OPEC members have been busy looking for ways to get all members of the cartel to agree to a production cut, but outside the spotlight, as it turns out, they have been pumping ever-growing amounts of crude.

According to the IEA’s latest Oil Market Report released today, OPEC produced 230,000 bpd more in October, hitting yet another record with a total daily production of 33.83 million barrels. This, according to the authority, will make the task of cutting production more challenging than previously thought.

The proposed band for production that was hoped would help the market return to balance is 32.5-33 million bpd. The challenge becomes nearly insurmountable in light of the OPEC members that caused the rise. These were Libya, Nigeria, and Iraq, where production hit an all-time high. The first two of these countries have been exempted from the production cut because of loss of market share unrelated to oil prices trends. Iraq is adamant that it should be exempted, too.

The situation is heating up, with Saudi Arabia last week flexing its muscles after playing the good and reasonable guy for a couple of months. According to OPEC sources cited by ZeroHedge, the desert kingdom threatened to turn up the taps and add to the glut. It seems Saudi Arabia is losing patience with its co-members, which are refusing to follow its lead at their own expense.

Grubhub CEO Suggests Trump-Supporting Employees Should Quit

The CEO of Grubhub, an online food delivery service, sent a company-wide email on Wednesday that suggested employees who support President-elect Donald Trump should resign, according to Fox News.

“If you do not agree with this statement then please reply to this email with your resignation because you have no place here,” wrote Matt Maloney, the chief executive and cofounder of Grubhub.

“We do not tolerate hateful attitudes on our team,” Maloney continued. The subject line of the Grubhub email read, “So…that happened…what’s next?”

“I want to reaffirm to anyone on our team that is scared or feels personally exposed, that I and everyone else here at Grubhub will fight for your dignity and your right to make a better life for yourself and your family here in the United States,” Maloney said. “While demeaning, insulting, and ridiculing minorities, immigrants, and the physically/mentally disabled worked for Mr. Trump, I want to be clear that this behavior–and these views–have no place at Grubhub.”

Is your local Macy’s closing? Department store lays out real estate plans

Macy’s Inc. announced a series of real estate deals on Thursday including the $250 million sale of the Union Square Men’s store in San Francisco, an alliance with Brookfield Asset Management, and the sale of the downtown Portland, Ore. Location, with the store closing in early 2017.

So far, Macy’s M, has announced plans or actually shut the doors on eight stores, a portion of the 100 store closures that were announced previously, said Karen Hoguet, Macy’s chief financial officer, on the company’s earnings call earlier Thursday, according to a FactSet transcript.

The sale of the 250,000-square-foot Union Square Men’s store is expected to close in January, with part of the proceeds to be used to consolidate that merchandise into the main Union Square store. Macy’s will lease the men’s building for two to three years while construction is under way. The approximately $235 million gain will be booked in Jan. 2018.

Macy’s announced that five stores have been sold to General Growth Properties Inc. GGP, for $46 million last week. The stores are located in Pineville, N.C., Oakwood Mall in Eau Claire, Wis., Quail Springs Mall, in Oklahoma City, Okla. Tysons Galleria in McLean, Va., and Greenwood Mall in Bowling Green Ky. The Quail Springs Mall store closed in the spring, and Macy’s will continue to lease back the Tysons Galleria store while GGP determines how best to use the property. The other three will close in early 2017, Hoguet said.

Making America Great Again will be much harder than voters think

Build-That-Wall Pledge Has Companies Bracing for Labor Shortages

For corporate America, there’s a lot to like about President-elect Donald Trump’s platform: fewer regulations, lower taxes and a singular devotion to deal-making.

Yet there’s one signature campaign pledge -- to round up and deport millions of undocumented immigrants -- that has many executives across the country on edge. The proposal, if implemented even remotely as vigorously as Trump at times promised, would squeeze a labor pool that companies like Dunkin’ Brands Group Inc. and Bojangles Inc. say has already been tightening for months. That in turn stands to further drive up labor costs at a time when many businesses are facing jumps in state-set minimum wages.

All of that may be precisely the desire of many Trump supporters: Prop up stagnant wages for working-class Americans. But for companies in industries such as construction, restaurants, hotels and technology, it could make filling jobs more difficult.

“We supply ready-mixed concrete to the housing industry, and if there’s not enough workers to build houses, guess what? We don’t get to supply the concrete,” said Tom Hill, chief executive officer of Summit Materials Inc.

Here's what could happen if California had a 'Calexit' and left the US

"Calexit," a campaign in California for the state to become an independent nation, has gone viral after Donald Trump won the race to the White House.

The Yes California Independence Campaign aims to put a referendum on a 2018 ballot that, if passed, would bring California one step closer to legally seceding from the union.

Far-fetched as it may sound, the campaign exploded from a fringe political group to a nationwide social media trend in a matter of hours as Californians came to terms with a Trump presidency.

The movement has at least one impressive backer in Shervin Pishevar, an early backer of Uber and a well-known angel investor who offered to bankroll the campaign on Twitter. Yes California released a 33-page blue book on its website this year explaining its path to secession. It also provides clues as to what life might be like in a post-secession California.

Stan Druckenmiller is 'very optimistic' about the economy

While a Donald Trump victory hasn't been as detrimental to markets as previously predicted, Wall Street analysts still don't quite know what to make of his policies.

In the short term, analysts predict some of Trump's proposals to be positive, providing the fiscal stimulus that the country needs. The long-term, however, is a different story as trade threats and a protectionist agenda could spell low GDP growth amid uncertainty over how his policies will play out.

While uncertainty looms, Duquesne Capital founder Stanley Druckenmiller remains "very optimistic" on the economy, according to an interview with CNBC's Squawk Box on Thursday.

He points to the unwinding of regulation, expectations of a "serious tax reform" including cuts to the corporate tax rate, and an increase in interest rates as a hopeful scenario for the economy. "I think interest rates are going to go up. I think they're going to go up a lot," he said. "I think it's just a more optimistic view about economic growth, and when you have absurd interest rate levels and you combine it with a change in expectation on economic growth, interest rates have to go up and I think they're going to go up a lot more worldwide."

U.S. Foreclosure Activity Went Way Up in October

Foreclosure activity in the U.S. spiked about 27% from September to October — the largest month-over-month increase in foreclosures since August 2007, according to a report from the real-estate focused company ATTOM Data Solutions.

One in every 1,258 residential housing units had a foreclosure filing in October, and while the foreclosure rate is higher than it was in September, it’s still lower than it was at the same time last year.

ATTOM defines foreclosure activity as a property whose owner has received a notice of default on the mortgage, is scheduled for auction or has been repossessed by the bank (basically the beginning, middle and end of the foreclosure process, though these terms and procedures vary by state). Much of the foreclosure activity in recent months came by way of bank repossessions, but foreclosure filings of all kinds increased from September to October.

“The increase in October isn’t enough evidence to indicate a new foreclosure crisis emerging in these states, but it certainly demonstrates that this housing recovery is not completely devoid of risk,” said Daren Blomquist, senior vice president at ATTOM, in a press release about the report. “The loans used in this housing recovery that appear to be most susceptible to foreclosure are those such as FHA and VA with low down payments.”

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