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Tuesday 11.15.2016

This week: Fed's Yellen to testify on economy, rates

Federal Reserve Chair Janet Yellen testifies before Congress this week on the economy in a hearing that should clarify whether the Fed remains on track to hike interest rates next month after Donald Trump’s win in the presidential race. Meanwhile, reports on retail sales, inflation, industrial production and housing starts will provide the Fed a window onto the economy that could help determine whether it acts at a mid-December meeting.

Retail sales surged in September on rising gasoline prices and stronger auto purchases, but a core measure that strips out such volatile categories edged up just slightly after two straight declines. Consumers, however, are generally on solid footing after this year’s steady job growth and solid wage gains, which accelerated in October. Economists expect the Commerce Department on Tuesday to report that retail sales jumped another 0.6% last month while a core reading bounced back, advancing a healthy 0.4%.

On Wednesday, the Fed turns toward a creaky gear in the economy’s engine — industrial production. Since 2014, manufacturers have grappled with the oil sector downturn and weak exports. With oil prices rising and the dollar stabilizing in 2016, factory output has recovered somewhat but remains choppy. Economists expect the Fed’s October report to show a modest 0.2% increase.

Yellen’s appearance before the Joint Economic Committee on Thursday offers her the first chance to weigh in on any economic fallout from Trump’s election. In response to his claims during the campaign that Yellen was keeping interest rates low to help President Obama, she simply said the Fed is unaffected by politics. Some economists believe Trump’s win has intensified uncertainty about trade, immigration and other issues that could prompt businesses to curb hiring and investment. But markets have rallied since the vote, and many economists say the Fed is still likely to hike its key rate next month for the first time in 2016.

For ECB and Fed, Trump Complicates Decisions on Rate Policy

Donald Trump's surprise election victory has helped solidify expectations for an interest rate increase next month by the U.S. Federal Reserve — but may have complicated a decision for the European Central Bank, which faces a difficult choice over more stimulus.

For the ECB, the issue is what to do about its bond-buying program, which pumps new money into Europe's struggling economy each month to try to accelerate growth and inflation.

The Fed and the ECB — two of the world's most important central banks — will be making its policy decisions before Trump is inaugurated Jan. 20, while still weighing what he might do as president.

At its meeting Dec. 8, the ECB must decide whether to keep its money spigot open or slowly start closing it by reducing, or tapering, the bond purchases. Uncertainty about the policies Trump will pursue — and whether, and by how much, they might help spur global growth — has made the ECB's decision more difficult. Some analysts think the ECB will decide to extend its bond buying program by at least six months beyond its scheduled end in March.

The head of the SEC will step down at the end of the Obama administration

Mary Jo White, the chair of the Securities and Exchange Commission, has announced that she will step down at the end of the Obama administration.

Her departure from the SEC had been expected. Financial stocks have rallied in the aftermath of the election of Donald Trump as president, in expectation of deregulation.

"A Republican Sweep is positive for all financial stocks," Morgan Stanley said in a note to investors early Monday. "More growth, higher rates, less regulation, lower taxes."

Credit Suisse analysts meanwhile said Monday that they considered Congressman Jeb Hensarling's CHOICE Act and House Speaker Paul Ryan's A Better Way a s "among the most likely blueprints/starting points for potential regulatory reform."

As National Debt Nears $20 Trillion, Senator Takes Aim at Government Waste

How do you begin addressing the U.S. government’s nearly $20 trillion debt? For one senator, the answer begins with wasteful spending. In an interview with The Daily Signal on Monday, Sen. James Lankford, R-Okla., unveiled the second edition of his “Federal Fumbles” report. The first report, which exposed 100 wasteful government spending examples, was released in 2015.

Lankford is offering solutions for stopping the growing national debt, which has exploded under nearly eight years of Barack Obama’s presidency. “I think [the national debt] is an enormous issue and a long-term issue for the nation,” Lankford told The Daily Signal. “It is something that affects our day-to-day economy.”

The first step to successfully address the problem, according to Lankford, is to build consensus among colleagues in the House and Senate. “There is legislative work that needs to be done and we’re trying to identify the fellow senators and the House members to say, ‘Do we like this waste? No, we don’t. Let’s fix it. Here’s a solution to how we actually fix it,’” Lankford said.

The second step is to work with the next president to identify the myriad of areas where waste can be cut. Lankford explained: [W]e are trying to identify [programs] and say, ‘Here’s what any administration can to do be able to step in and to be able to fix this wasteful spending.’ So, we identify a grant, for instance, that they should have never given or a regulation where it is clear that this regulation was something that was not within the statutes and the administration’s order to do. And so for all those, one after another, [we] try to identify who can fix it, whether it is Congress or whether it is the administration.

In the Year 2024

As I awoke this morning, Sunday, Oct. 13, 2024, from restless dreams, I found the insect-sized sensor implanted in my arm was already awake. We call it a “bug.” U.S. citizens have been required to have them since 2022 to access government health care.

The bug knew from its biometric monitoring of my brain wave frequencies and rapid eye movement that I would awake momentarily. It was already at work launching systems, including the coffee maker. I could smell the coffee brewing in the kitchen. The information screens on the inside of my panopticon goggles were already flashing before my eyes.

Images of world leaders were on the screen. They were issuing proclamations about the fine health of their economies and the advent of world peace. Citizens, they explained, needed to work in accordance with the New World Order Growth Plan to maximize wealth for all. I knew this was propaganda, but I couldn’t ignore it. Removing your panopticon goggles is viewed with suspicion by the neighborhood watch committees. Your “bug” controls all the channels.

I’m mostly interested in economics and finance, as I have been for decades. I’ve told the central authorities that I’m an economic historian, so they’ve given me access to archives and information denied to most citizens in the name of national economic security.

Will Trump push his economic agenda in the first 100 days?

China's Rising Prices Are a Sign of Trouble

By December 2015, China had endured four years of declining producer prices. Coal was down 38 percent on the year, and steel down 31 percent. That month, the Communist Party hit on a new plan for reversing this dynamic. They called it "supply-side reform," and it was widely perceived as an attempt to eliminate the surplus capacity at mines and mills that was depressing prices and making debt difficult to repay.

Almost immediately after these proposed reforms hit the press, prices started going up. From Dec. 15 through the end of October, coal prices surged 114 percent and steel rose by 47 percent, more than making up for the previous year's losses. The increase was so pronounced, in fact, that the country's top economic planner actually asked miners to cap prices next year.

The problem is that these price increases had almost nothing to do with the fundamentals of supply and demand. And the government's attempts to reassert control are likely to make things worse.

The price surge had a number of causes. First, Beijing turned on the credit spigots. Year-to-date total social financing is now up 13 percent, compared to 6.7 percent growth in gross domestic product. With a high percentage of new credit going to public-works projects and real estate, much of it passed through into primary commodities -- that is, coal and steel.

Chase Bank customers could get surprise fees from old ATMs

You might need to take a pill to figure out if you'll be hit with a surprise ATM fee from this huge bank.

Customers using Chase ATMs at Walgreens and Duane Reade locations are now being warned of surcharges when using the machines. In April, Cardtronics announced it bought 2,586 ATMs from Chase, primarily in Walgreens and Duane Reade locations, as well as several airports and other retail locations across the U.S.

Pat Kiernan, a weekday morning anchor with NY1 and a Chase customer, was using a Chase ATM at the Duane Reade by New York Penn Station on Monday morning. He was about to withdraw cash from the machine when he realized he was going to incur a $3 surcharge.

"I don't understand how hard it is to take the sign off the ATM before you change the software," he told CNBC. Penn Station is the busiest station in North America, serving 1,000 passengers every 90 seconds, according to Railway Technology.

American Apparel files for second bankruptcy

American Apparel on Monday filed for its second bankruptcy protection in just over a year, weighed down by intense competitive pressures facing teen retailers and a rocky relationship with its founder.

The second bankruptcy comes as the retailer struggles to overcome years of losses and rising online competition. The company became a part of popular culture for its racy advertising and mercurial founder, Dov Charney.

American Apparel, known as much for its sexually charged advertising, listed assets and liabilities in the range of $100 million to $500 million, according to a Delaware court filing.

Separately, Canadian apparel maker Gildan Activewear said it agreed to buy intellectual property rights related to the American Apparel brand and certain assets from American Apparel for about $66 million in cash. Gildan will not be purchasing any retail store assets, it said in a statement.

Dark web hackers boast of Tesco Bank thefts

Cybersecurity company Cyberint said it had discovered posts on a variety of dark web forums whose members had described the lender as being a "cash milking cow" and "easy to cash out". It is not clear, however, whether there is any link between these claims and the money stolen just over a week ago.

The bank has repeatedly declined to give details of the crime. It says it is unable to do so while a criminal investigation is being carried out.

Elsewhere, the Sunday Times suggested that the raid had involved the use of contactless payments triggered by smartphones. And a second cybersecurity company said it had warned Tesco of problems with several of its mobile apps four months ago, but had been ignored.

The Financial Times was first to report that Cyberint had carried out its own probe of hidden web pages following the thefts over the weekend of 5-6 November. The Israeli company said it had found discussions about a tool that "brute forced" access to Tesco's accounts by testing thousands of login and password combinations until one was found to work.

Internet Freedom Wanes As Governments Target Messaging, Social Apps

For decades Freedom House has been ranking the world on free speech, political and civil rights. In recent years, this nongovernmental organization has extended its research into the state of the Internet. And for the sixth consecutive year, it has found Internet freedom on a decline.

In 2013, it was a rise in surveillance. In 2014, governments shifted more from behind-the-scenes control to overt repression and arrests. In 2015, it was more of the same, plus a push against encryption.

Over the past year, the pressure fell increasingly on social media and messaging tools, often to quash protests or dissent, according to the latest Freedom on the Net report, which covers the period from June 2015 through May 2016.

"In a new development, the most routinely targeted tools this year were instant messaging and calling platforms, with restrictions often imposed during times of protests or due to national security concerns," the report says, presenting two particular features that attract crackdowns: 1. Encryption on some of the apps, for instance Telegram, helps protect users' chats from surveillance; 2. The apps, which are free or cheap, challenge profits of traditional phone and other telecom companies that may be friendly with governments.

Indian prime minister defends currency swap as 'fight to end corruption'

Indian Prime Minister Narendra Modi spent Sunday defending his surprise decision to ban the most-used currency in the country in an effort to eliminate counterfeit cash and corruption.

Modi defended the decision as part of what he called his election mandate to end corruption, asking his constituents to be patient and that the cash swap will be completed by the end of the year. The decision has caused chaos across the country as people stand in long lines at banks waiting to exchange old 500-rupee and 1,000-rupee notes so they can complete basic tasks like grocery shopping. The notes can also be changed at ATMs, however the machines have run out of cash quickly and have had to be converted to handle the new money.

Modi said the change will be completed by Dec. 30 and encouraged Indians to trust that it will stop the circulation of counterfeit and black market currency.

"This is a fight to end corruption and dishonesty," Modi said at a gathering for his birthday in Uttar Pradesh. "It might take time and cause some hardships. It is a big task to introduce new notes. I have sought 50 days and all these processes will be completed by Dec. 30. Bank staffers are working day and night to help us realize this. I have asked you to bear the little discomfort for 50 days for the interest of the poor."

Zillow: Mortgage interest rates skyrocket after Trump victory

Financial markets are still processing the effects that President-elect Donald Trump will have when he officially takes office in January. In the aftermath of Trump’s victory last Tuesday, the stock market rose sharply, reaching record highs late last week.

But the stock market isn’t the only thing that’s on the rise since Trump won; mortgage interest rates are skyrocketing as well. According to data provided by Zillow, the 30-year fixed mortgage interest rate spiked in the aftermath of Trump’s election, rising from 3.38% on Tuesday to 3.8% on Monday morning.

Zillow said that Monday morning’s interest rates are the highest rates have been in 2016. The jump from 3.38% on Tuesday to 3.8% on Monday represents the largest one-week jump in interest rates seen on Zillow Mortgages since July 2013, when mortgage rates jumped 68 basis points in the wake of the “Taper Tantrum.”

According to Zillow’s data, the average interest rate for the 15-year fixed-rate mortgage and the 5/1 adjustable-rate mortgage also rose sharply in the past week, with each trending towards 3% in recent days.

Ron Paul: More inflation on the way

Greece out of recession

The Greek economy emerged from recession for the first time since 2014, managing two straight quarters of GDP growth, figures released Monday showed. Greece’s gross domestic product (GDP) increased by 0.5 percent in the three months to September from the previous quarter, and by 1.5 percent from the third quarter of 2015, statistics bureau Elstat said.

It had already nudged 0.2 percent higher in the second quarter from the first. Two consecutive quarters of growth officially mark the end of a recession. The Greek government expects the Greek economy to contract by 0.3 percent in the full-year 2016, before returning to growth next year when it predicts GDP to surge by 2.7 percent.

On Thursday it said the growth dynamic was now in better shape than at any point since the financial crisis. “The Greek economy has not known a comparable growth rhythm since the first quarter of 2008,” government spokesman Dimitris Tzanakopoulos said.

He said Greece was counting on debt relief to support growth, as well as on Athens gaining access to the European Central Bank’s quantitative easing programme which involves purchases of sovereign bonds.

Markets Saying 'Loudly and Clearly Trump's Deals Are All Quite Possible'

CNBC’s Ron Insana, who had spoken out again Donald Trump all during the campaign, now says the financial markets are backing the president elect’s blueprint to make America greay again.

“I think the financial markets are telling us, loudly and clearly, that President-elect Trump's deals are all quite possible,” Insana wrote for CNBC.com. “For those who think compromise is in the air, the markets have already told us that a rather large portion of the trump agenda is being priced in to individual stocks and the broader market.

The message of the markets is clear. Passing the Trump agenda, much like his candidacy, is not only possible, but also very likely a new reality,” Insana wrote.

“The jump in stock indexes, including two consecutive record highs for the Dow; the run-up in banks, financials, pharma and bio-tech; the explosion in the price of copper; the shocking jump in interest rates and a meaningful slump in emerging markets, all tell us that investors are making large-scale bets that a Republican president, and Republican Congress, will move swiftly to enact as much of candidate Trump's agenda as swiftly as possible,” Insana said.

LinkedIn Data Shows More Cash-Strapped Millennials Turning To Part-Time Freelancing

The number of U.S. workers with full-time jobs who freelance on the side is sharply on the rise. According to our data here at LinkedIn, the share of those users in our top professional fields has doubled in the past five years. What's more, the number of people freelancing on the side of their day jobs is growing more than three times faster than the number of full-time freelancers on LinkedIn. Here's why.

Who are all these folks? To find out, we started by examining roughly 9,600 of LinkedIn's ProFinder professionals. To be sure, that may be a self-selecting sample, and the way those users choose to respond to survey questions can vary based on professional, social, and regional culture, not to mention personal preference. (Not everyone thinks about freelance work the same way, for instance—some don't even call it "freelancing.") But because they're vetted, qualified freelancers who have purposefully chosen to join the platform, they're among the most committed independent workers in a gig economy that's still very much in flux—which may make them the trendsetters to watch.

In any event, we discovered some interesting patterns. For one thing, it's clear that some people are more inclined than others to add part-time freelancing to their repertoires than others. We've noticed, too, that men are doing more part-time freelancing than women, and millennials are doing so more than any other age group.

Of all the users who list freelance work on their LinkedIn profiles, 20% have a full-time job in addition to their freelance business. That means full-time freelancing still dominates, but the side-gig model is quickly catching up.

NEWS to Disturb the Comfortable...

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