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Thursday 09.15.2016

Wells Fargo is 'too big to regulate, manage,' says trade group CEO

Wells Fargo's scandal over unauthorized accounts shows that the bank is "too big," according to one expert. Officials announced last week that Wells Fargo will pay $185 million in penalties and $5 million to customers for opening fee-generating accounts without authorization. Over a five-year period, 5,300 Wells Fargo employees were fired over the practice cited by the Consumer Financial Protection Bureau, CNBC confirmed with Wells Fargo. The activity occurred in the company's community banking division.

"This is the dictionary definition of too big to manage and too big to regulate, isn't it? That's what too big to manage and too big to regulate looks like," Camden Fine, president and CEO of Independent Community Bankers of America said Wednesday on CNBC's "Power Lunch." The ICBA is a trade group that represents thousands of community banks.

The number of employees involved indicates this was a systemic issue and not just overambitious staffers, Fine said. He explained that it is a company's senior leadership that sets the culture and expectations.

"So either Mr. Stumpf and his senior executives set an inappropriate culture and expectations or they can't get their arms around their own organization. It's as simple as that," Fine said. Leaders of the bank should be held accountable in whatever way regulatory authorities determine is appropriate, he said.

Ford Moving All Small-Car Production to Mexico From U.S.: CEO

Ford Motor Co Chief Executive Officer Mark Fields said on Wednesday that all of the company's small-car production will be leaving U.S. plants and heading to lower-cost Mexico.

"We will have migrated all of our small-car production to Mexico and out of the United States," over the next two to three years, Fields told Wall Street analysts at an investor conference hosted by the automaker.

Earlier this year, Ford said it would invest $1.6 billion in Mexico for small-car production to start in 2018. Republican presidential candidate Donald Trump has criticized Ford for moving U.S. jobs to Mexico. Fields has responded that as a global company, Ford must compete by making solid business decisions.

The Trump campaign did not immediately respond to requests for comment on Ford's plans. Ford is expected to post pretax profits of $10.2 billion in 2016, and in the past 18 months has made record pretax profit. The company said earlier Wednesday it expects profits to decline in 2017 as it invests in vehicle development, and hopes to improve its financial performance in 2018.

U.S. public pensions turn to currency as returns sour

U.S. public pension funds are embracing currency hedging to bolster returns that have soured in the past year and to prevent further buffeting from extreme market movements. With equities and bonds as the main stars of the pension investing world, currency funds, which hedge their assets, have been viewed as an afterthought for years. But their track records of stabilizing portfolios while adding modestly to returns have caused them to gain traction.

Total inflows to currency managers soared nearly 160 percent to $13.0 billion in the first seven months of the year from $5.1 billion a year earlier, according to investment data analytics firm eVestment. That was up from $10.4 billion for all of 2015.

By contrast, global macro hedge funds, which invest in currencies, interest rates and stocks, had outflows of $3.6 billion in the seven-month period amid poor returns, eVestment data showed. They had drawn inflows of more than $9 billion a year earlier.

"In a world of low returns, with movements in currencies generating gains, investing in currency funds has become more attractive," said Richard Benson, co-head of portfolio investments at Millennium Global Investments in London, which oversees $16 billion in assets. Public pension systems across the United States are posting their poorest returns since the waning days of the financial crisis due to rock-bottom interest rates and choppy global equity markets. Funds ranging from the $302 billion California Public Employees' Retirement System, or Calpers, to the $17 billion Kansas Public Employees Retirement System have posted returns below 1 percent in the last year, far less than targeted levels averaging 7 percent to 8 percent.

Michael Pento-Gold Goes To All-time Highs If Fed Admits It Cannot Raise Rates

Americans' out-of-pocket healthcare costs are skyrocketing

For the majority of Americans who receive health insurance through their employer, there is some good news and some bad news.

The Kaiser Family Foundation, a nonpartisan think tank addressing health policy issues, released its annual Employer Heath Benefits Survey on Wednesday and looked at the cost of insurance for Americans.

Based on the data Kaiser gathered it appears that the hit directly to American's wallets is increasing dramatically, but the growth in their monthly payments is slowing down.

The good news is that premium costs, the basic monthly payment to be covered, are growing at an incredibly slow rate compared to recent history. According to the Kaiser survey, average family premium costs increased just 3% between 2015 and 2016 to $18,412. "This year’s low family premium increase is similar to last year’s (4%) and reflects a significant slowdown over the past 15 years," said the release from Kaiser. "Since 2011, average family premiums have increased 20 percent, more slowly than the previous five years (31% increase from 2006 and 2011) and more slowly than the five years before that (63% from 2001 to 2006)."

Is it Time For Billionaires Like Warren Buffett To Protect Themselves With Gold

It has not been a good week for equity markets, nor billionaire investors. After Tuesday’s selloff, the S&P 500 is down 3% from its all-time highs, which were seen just one month ago.

According to Bloomberg, leading the losses among the billionaires is the Oracle of Omaha Warren Buffett who, thanks to his stake in Wells Fargo, lost $1.4 billion Tuesday. The U.S. bank saw significant selling pressure, falling more than 3% Tuesday after it was revealed that bank employees opened up accounts without clients’ permission.

Of course, Buffet isn’t alone. Bloomberg noted that according to its index, billionaires lost a total of $37.3 billion yesterday. Faced with such big losses, is gold looking more attractive?

Commodity analysts have noted that although gold has seen modest selling pressure lately, the market has held up reasonably well as investors are looking for a safe-haven asset amidst collapsing equity markets and falling bond yields.

U.S. Household Finances – It Only Looks Like The Good Life

Of all the recognized generational cohorts dating from the American Revolution, it is the 13th or the Generation X cohort which demographers find hardest to define. Did the stork deliver the first Gen X-ers as early as 1960 or as late as 1965? Was the end date for their births 1976 or 1984? And what of their collective character? At one time they were considered to be disdainful apathetic slackers, but since have become known as confident, hardworking and extremely entrepreneurial.

What is not in question is their unforgettable movie characters whose reasons for being were to make us laugh, not cry. Think Sixteen Candles’ hysterical foreign exchange student, Long Duck Dong and the impossible, too cute to rebuke truant, Ferris Bueller. And who didn’t harbor a soft spot for Pretty in Pink’s Ducky or Chet in Weird Science? It was the 80s, and even outcasts could be transformed into loveable friends on the big screen. You just can’t deny the affection we all felt for every last recipient of Saturday detention as The Breakfast Club credits rolled along to our anthem, “Don’t You Forget About Me?”

But then there was Less than Zero, which more than made up for the rest of the light-hearted lot. The 1987 hit stands as the Eighties’ testament to Film Noir replete with shoulder-pad wardrobed femme fatales, darkly doomed heroes and even nastier anti-heroes. Can anyone argue James Spader as a debt-collecting drug dealer was his least likeable character? Of course, the movie made an icon out of Robert Downey, Jr., whose stoned character gave new meaning to, ‘Don’t Leave Home Without It,’ when he tried to swipe his American Express card to gain entry to the family mansion’s (open) sliding glass door.

The film’s byline, “It Only Looks Like the Good Life,” summed up the Yuppie era to a tee, a time when U.S. households woke to the idea of aspiration, as in aspirational lifestyles. Longing to break free from their parents’ frugal ways, many Baby Boomers embraced the relatively novel world of easily accessible debt with relentless relish.

Boeing CEO says 777 output may be cut further if sales lag endures

Boeing Co’s production of 777 jets may be cut further than projected if sales lag this year, the company’s chief executive said on Wednesday.

Cutting production of 777s would “add pressure” to Boeing’s goal of hitting its profit-margin target, but would not change the target, Boeing Chief Executive Officer Dennis Muilenburg said at an investor conference hosted by Morgan Stanley.

Boeing makes 8.3 of its 777s per month, and had already announced plans to cut output to seven per month next year as it shifts to a new model, the 777X, which enters production in 2018. The shift will mean deliveries of the 777 fall to about 5.5 a month in 2018, Muilenburg said.

But the company has sold just eight 777s this year, far short of its target of 40 to 50 sales needed to sustain production at those levels. “So, obviously, pressure there,” Muilenburg said, noting numerous 777 sales campaigns are underway.

Self-Driving Vehicle Revolution to Wipe Out 4 Million Jobs

Tesla made headlines the other day with the first traffic fatality caused by its “Autopilot” system, which had failed to “see” a big tractor-trailer rig that had pulled right in front of the car. But humans fail to see things too, and gruesome accidents are happening with humans behind the wheel. Last year, 38,300 people were killed in traffic accidents in the US, up 8% from 2014, and 4.4 million were injured enough to require medical attention.

Other manufacturers all have similar or better systems than Tesla’s beta version, but they’re more conservative in their hype and what they allow drivers to do.

On Tuesday, Ford, touting its plans for self-driving taxis and other autonomous-vehicle services, took reporters on a spin through the neighborhood in its self-driving cars. It will roll out its services in big cities first, such as New York and Detroit, and will initially limit the service to cities.

Uber is now starting to test about two dozen partially self-driving Ford Fusions in Pittsburgh, and surely there will be some accidents too. There are always accidents once you put enough vehicles into motion.

The Feds Will Soon Be Able to Legally Hack Almost Anyone

Digital devices and software programs are complicated. Behind the pointing and clicking on screen are thousands of processes and routines that make everything work. So when malicious software—malware—invades a system, even seemingly small changes to the system can have unpredictable impacts.

That’s why it’s so concerning that the Justice Department is planning a vast expansion of government hacking. Under a new set of rules, the FBI would have the authority to secretly use malware to hack into thousands or hundreds of thousands of computers that belong to innocent third parties and even crime victims. The unintended consequences could be staggering.

The new plan to drastically expand the government’s hacking and surveillance authorities is known formally as amendments to Rule 41 of the Federal Rules of Criminal Procedure, and the proposal would allow the government to hack a million computers or more with a single warrant. If Congress doesn’t pass legislation blocking this proposal, the new rules go into effect on December 1. With just six work weeks remaining on the Senate schedule and a long Congressional to-do list, time is running out.

The government says it needs this power to investigate a network of devices infected with malware and controlled by a criminal—what’s known as a “botnet.” But the Justice Department has given the public far too little information about its hacking tools and how it plans to use them. And the amendments to Rule 41 are woefully short on protections for the security of hospitals, life-saving computer systems, or the phones and electronic devices of innocent Americans.

Gannett announces 200-plus layoffs coming at North Jersey Media Group

North Jersey Media Group announced Wednesday that a restructuring of operations across its newsroom and sales department could cost upwards of 200 people their jobs.

In a report on NorthJersey.com, the publisher of the website, The Record newspaper and a number of community weekly publications said it is focusing on its readers’ “growing digital demands” and consolidating its content operations.

North Jersey Media Group was acquired from the Borg family by Gannett Co. Inc., the publisher of USA Today and other newspapers, in July.

“For decades, North Jersey Media Group has delivered award-winning journalism in Bergen and Passaic counties and throughout the state,” Tom Donovan, Northeast regional president of Gannett East Group, said in the report. “Since Gannett’s July acquisition, we have recognized that NJMG must transform even faster to meet the ever-changing demands of readers, advertisers and the communities we serve. In response, we are reinventing our newsroom, sales team and other business divisions. We are making a long-term investment in our staff, tools and technology.”

Bayer, Monsanto agree to $66 billion merger

Feds to Spend $4.6 Million to Give ‘Emotional Wellness’ to Refugees

The Obama administration plans to spend $4.6 million next year on health promotion and “emotional wellness” for refugees as President Obama plans a 30 percent increase in the number of refugees admitted into the country.

The Department of Health and Human Services issued a grant forecast last month detailing its plans to issue health care grants for refugees on top of government programs that are already available, such as Medicaid.

“The Office of Refugee Resettlement (ORR) within the Administration for Children and Families (ACF) invites States to submit applications for Refugee Health Promotion (RHP) discretionary grant funds,” the grant forecast says. “The purpose of the RHP grant is to support health and emotional wellness among refugees. The program is designed to coordinate and promote local health and mental health services and education.”

The agency said the funding would be in addition to Medicaid and programs that provide cash and medical assistance for refugees. “The RHP grant is intended to encourage partnerships with community-based organizations and complement existing care coordination and medical assistance programs such as Medicaid and Refugee Medical Assistance (RMA), which includes refugee medical screenings (RMS), and other ORR-funded social service programs, including Preferred Communities,” according to the grant forecast. Preferred Communities is a job placement program for refugees.

Gold: The Best Performing Asset of the 21st Century

Had you acquired a 100 ounce bar of physical gold on December 31, 1999, your total out lay would have been $29,025.00. The value of that same gold bar today would be approximately $132,800.00 or could easily pay off a mortgage, provide for a child’s college education or a great many other items that would change the lives of most people reading these words. More than 4 fold rise in the value of any asset, over the course of seventeen years would be considered a winner. You will never hear anything like this on mainstream media, as they are too busy reminding you of how great those blips-on-a-screen are performing and making your retirement all cushy and fat.

Well, had you invested the same $29,025.00 in the stock market on the last trading day of 1999 you would have made a handsome profit in the 21st century. Unfortunately, your profits would pale in comparison to gold. Your investment, not only would have been on the verge of being wiped out on two different occasions, but for all that risk, your investment would have grown by less than double, approximately 57% – no where near the four-fold increase in the value of gold.

When you watch mainstream media or listen to central bankers, gold is constantly deemed to be the redheaded stepchild of the investment industry. Just that alone, is unbelievable, considering that gold has been one of the best performing investments of the 21st century. On December 31st, 1999, gold closed at $290.25. As of today it is trading at $1327.80.

That is a percentage gain in the last 16 years of 357%! Compare that to the Dow Jones, which closed the 20th century at 11497 and currently is at 18085 for a gain of only 57.3%. If there is a business sector or financial asset class that has outperformed gold in the last 16 years, I can’t think of one. Yet, aside from your crazy neighbor with a bomb shelter or those who read The Dollar Vigilante, how many people do you know who understand the necessity for owning gold and have actually acted on that knowledge?

School superintendent says Betsy Ross flag is a symbol of ‘hostility’ and ‘hate’

Daniel Behm, the superintendent of the Forest Hills Public Schools in Michigan, apparently thinks the flag representing the original 13 American colonies is an image of “hate.”

At a football game on September 9 where Forest Hills Central visited Ottawa Hills, several students from the former carried the Betsy Ross flag, in addition to a “TRUMP — Make America Great Again” banner.

Behm received a parent complaint about the students, which in turn led him to penning a “letter to the community” denouncing the students’ actions. “And to wave a historical version of our flag, that to some symbolizes exclusion and hate, injects hostility and confusion to an event where no one intended to do so,” he wrote.

Behm continued with an apology: “To our gracious hosts — the students, families, staff, and community of Grand Rapids Ottawa Hills High School and Grand Rapids Public Schools — and to the student-athletes, coaches, officials, and supporters of both teams, we are truly sorry. These actions are not characteristic of our schools, our staff, our students, or our community, and they represent a lack of knowledge.” Forest Hills Public Schools released a statement that said the students wouldn’t be disciplined for the Betsy Ross flag and “it will be used as a teachable moment.”

Ben Bernanke thinks Fed shouldn’t rule out ‘extremely helpful’ negative interest rates

Should the Federal Reserve rule out negative interest rates so soon? No, says former Fed Chair Ben Bernanke. Writing in a blog post on the Brookings Institution website, Bernanke argued that policymakers should consider implementing subzero rates. He stated that installing negative rates, something that has been done by the Bank of Japan (BOJ), the European Central Bank (ECB) and several other central banks, wouldn’t be as drastic as it may seem.

As a matter of fact, according to Bernanke, negative rates could “be extremely helpful.”

“It would be extremely helpful if central banks could count on other policymakers, particularly fiscal policymakers, to take on some of the burden of stabilizing the economy during the next recession,” Bernanke wrote on Tuesday. “Since that can’t be assured, and since the current low-interest-rate environment may persist, there are good reasons for the Fed and other central bankers to consider changes in their policy frameworks. The option of raising the inflation target should be part of that discussion. But … it is premature to rule out alternative or potentially complementary approaches, including the possibility of using negative interest rates.”

But who says the Fed has ruled out subzero interest rates at all? Late last year, Fed Chair Janet Yellen, Bernanke’s successor, told a congressional committee that the United States central bank would consider installing negative rates should the national economy collapse.

Trump Gives Medical Report To Dr. Oz

Rough times for golf: Golfsmith files for bankruptcy

Golfsmith International Holdings Inc., the retailer of golf clothing and equipment, filed for Chapter 11 bankruptcy amid a slide in the sport’s popularity in North America.

The Austin, Texas-based company listed debt and assets of as much as $500 million each in Delaware court, and said it would try to sell part of the chain as a going concern while shutting some stores. If that fails, the company would liquidate, according to a resolution passed by Golfsmith directors and included in the bankruptcy court documents.

Managers were “directed to finalize and implement a going-concern sale and partial chain liquidation plan and, in the alternative, a full chain liquidation plan,” the resolution reads.

Golfsmith, which merged with Canada’s Golf Town in 2012 to become what it called the largest specialty golf retailer in the world, is owned by OMERS Private Equity Inc., part of the Ontario municipal employees’ pension fund. Golfsmith, which operates e-commerce sites Golsmith.com and GolfTown.com, is No. 218 in the Internet Retailer 2016 Top 500 Guide with 2015 estimated web sales of $125.9 million, according to Top500Guide.com.

Berlin approves billions to help states with migrants

The German government has approved a financial package aimed at helping states and local authorities shoulder costs associated with refugees. The move comes after clashes between state officials and the Berlin cabinet.

The federal government on Wednesday passed a draft law that includes a pledge to pay for accommodation of people with official refugee status. "We are starting measures that will amount to some 20 billion euros ($22.5 billion) by 2019," German Economy Minister Wolfgang Schäuble said. This package will see Berlin provide Germany's 16 states with a total of 2 billion euros per year for the next three years. The states are given free reign on how to spend the funds, as long as the money goes to helping refugees integrate into society.

In addition, the federal government will pay another billion to help build new housing. Between 2016 and 2018, Berlin will also take over all living expenses for newcomers with confirmed refugee status. These expenses, such as rent and heating, have previously been delegated to municipal levels.

Many local and state officials have slammed Berlin for calling on the lower levels of government deal with the financial burden. The federal government currently contributes 670 euros per asylum-seeker per month while states process a person's application for asylum.

Federal Debt Pushing U.S. Toward Disaster

When the next president settles into the Oval Office, the federal debt will be just shy of $20 trillion. No government in history has ever owed so much, yet neither major party candidate is addressing the fact that our government is unsustainable. The debt is already making it impossible for the government to conduct either fiscal and monetary policy.

To conduct monetary policy, the Federal Reserve must control interest rates. Lower interest rates encourage borrowing and spending. But the Federal Reserve has driven interest rates about as low as they can possibly go. From 1955 through 2008, the Fed’s target interest rate averaged 5.7 percent. Since 2009, it has averaged just 0.1 percent.

By pushing rates to near zero, the Fed has lost the ability to stimulate the economy. As important, it has also lost the ability to cool the economy. The federal debt is now so large that the Fed can’t raise rates for fear of threatening the government’s financial health. Just a 1 percentage point increase in interest rates will cost the government, on an annual basis, twice as much as the Iraq and Afghanistan wars combined.

To conduct fiscal policy, the government must increase spending during recessions. But without a budget surplus, the only way to spend is to borrow, and the government is running out of places to borrow. Its single largest creditor, the Social Security Trust Fund, has lent the government almost $3 trillion. Within three years, the trust fund will have no additional money to lend, and within 18 years it will need the full $3 trillion back. Not only is the government losing its largest financial backer, but that backer will soon become its largest cash drain.

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