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Thursday 06.16.2016

Janet Whiffs Again——Take Cover Now!

If Donald Trump has even a partial clue about the nation’s monumental economic mess one of his first acts will be to demand Janet Yellen’s resignation. And for sheer incompetence among countless other failings. She was out there again today talking in completely incoherent circles. On the one hand, Yellen robotically insisted that the U.S. economy is moving steadily toward the Keynesian nirvana of full employment.

At the same time, she struck a profile in cowardice that was downright pathetic. Yep, after 90 months of ZIRP the Fed has decided to wait for further confirmation from the “incoming data” before concluding that another baby step toward interest rate normalization is warranted.

Needless to say, our paint-by-the numbers school marm has no clue that money market rates at 0.38 bps have nothing to do with the Fed’s so-called dual mandate. It’s sole impact has been to flood the canyons of Wall Street with zero cost carry trades and endless cheap debt for corporate financial engineering and other leveraged speculations.

By contrast, its massive spree of money pumping never got anywhere near to main street. It couldn’t deliver honest full employment through cheap money inducements to borrow and spend because households are still stranded at Peak Debt.

Wal-Mart to Cut Back-Office Jobs at About 500 U.S. Stores

About 500 stores, mostly on the West Coast, are dropping positions that cover accounting and invoicing for individual stores, said Mark Ibbotson, executive vice president for central operations at Wal-Mart U.S.

A Wal-Mart store typically has about three employees in those roles, usually higher-paid hourly workers who count cash or manage invoices for companies that bring products directly to stores, not through Wal-Mart’s warehouses.

Instead, invoicing will be handled by a central office at Wal-Mart’s Bentonville, Ark., headquarters and money will be counted at each store by a “cash recycler” machine, Mr. Ibbotson said. The current system is dated and error-prone, he said, and “we really want to pull our workforce onto the floor.”

The affected workers have been offered other consumer-facing store positions, though they aren’t guaranteed the same hourly wage, Mr. Ibbotson said. Wal-Mart says these employees will make $17.55 an hour or their current per-hour rate, depending on which is lower. Wal-Mart expects less than 1% of the employees affected to leave the company, Mr. Ibbotson said.

Has $800 Billion in Oil Simply Disappeared?

By one count, some 3 billion barrels of crude oil valued at about $840 billion have gone missing since the end of 2014. Adding in oil-equivalent barrels of natural gas, the number of barrels that have disappeared is about 11 billion from 125 oil and gas companies around the world.

The barrels have not really evaporated, they remain tucked away underground but are no longer counted as “proved” reserves in the oil companies’ calculations. In order to be counted as a proved reserve, a barrel of oil must be both technically recoverable with current technology and economically recoverable at current prices.

Beginning in 2009, the U.S. Securities and Exchange Commission requires U.S. producers to use a formula that values a barrel at the average price a company receives on the first day of each of the 12 preceding months. At the end of 2014, that figure was right around $95 a barrel. At the end of 2015 the figure had fallen to less than $50.

Because the barrels could not be economically recovered at a price below $50 a barrel, they moved from the proved reserves category to either “probable” or “possible” reserves. It doesn’t matter which because the value of a company’s assets is based on its proved reserves only.

China’s Hidden Plan to Accumulate Gold

China wants to do what the U.S. has done, which is to remain on a paper currency standard but make that currency important enough in world finance and trade to give China leverage over the behavior of other countries.

The best way to do that is to increase its voting power at the IMF and have the yuan included in the IMF basket for determining the value of the special drawing right. Getting those two things requires the approval of the United States because the U.S. has veto power over important changes at the IMF. The U.S. can stand in the way of Chinese ambitions.

China accomplished that last November when the IMF agreed to include the yuan in its basket of currencies. The rules of the game also say you need a lot of gold to play, but you don’t recognize the gold or discuss it publicly. Above all, you do not treat gold as money, even though gold has always been money.

The members of the club keep their gold handy just in case, but otherwise, they publicly disparage it and pretend it has no role in the international monetary system. China will be expected to do the same. It’s important to note that China will not act in the best interests of gold investors; it will act in the best interests of China. Right now, China officially does not have enough gold to have a “seat at the table” with other world leaders. Think of global politics as a game of Texas Hold’em.

Bank rules not hindering U.S. economy: FDIC chief

Banking rules meant to protect the U.S. financial system from collapse are not harming the economy or damaging financial markets, the chairman of the Federal Deposit Insurance Corp said on Wednesday, contrary to the views of industry groups.

U.S. regulations requiring banks to toughen underwriting standards and pull back from some risky lending in the wake of the 2008 financial crisis have not harmed the economy, said FDIC Chairman Martin Gruenberg.

Bank loans are growing faster than gross domestic product while lending to the commercial and industrial sector is outpacing an important measure of corporate borrowing, he said. "I believe the evidence suggests that the reforms put in place since the crisis have been consistent with, and supportive of, the ability of banks to serve the U.S. economy," Gruenberg said during a luncheon in Washington.

Gruenberg lauded community banks as an engine of economic growth and lamented that so few small lenders are in the market. "We could use more community banks in this country," he said. "We're going to try and work on that."

Gary Johnson: Make it easier for anyone to get a work visa

Air traffic controller shortage could mean more flight delays

Your next flight delay could very well be due to a critical shortage of air traffic controllers, according to congressional testimony Wednesday. The number of controllers, which was already at a 27-year low, continued to decline in the first three months of this year. Most of the officials who testified said they don't believe safety is at risk. But there was widespread agreement that flight delays are bad and getting worse because of the staffing shortage.

"Unfortunately budgetary missteps and the FAA's bureaucratic red tape have led to a shortage of air traffic controllers," said Paul Rinaldi, president of the union that represents the controllers. He said that shortage will cause "further system inefficiencies, delays, and a reduction in air traffic services for the flying public."

Part of the problem is still a hangover from a 2013 hiring freeze due to the congressional budget fight that led to a funding cut in known as the sequester. That's because it takes two to four years to fully train new hires.

But Rinaldi and others were critical of the FAA for not hiring all the controllers it was authorized to add since then. About one quarter of the current controllers are eligible for retirement, and there aren't enough replacements in training to fill all those slots, let alone make up for the current shortfall.

The Rush to Gold: A New Respect Is Growing

You didn't come here today for bad news. There's plenty of that everywhere you look, and even where you don't look. So here's the good news. A new rush to gold has begun. To see where we're headed, let's first see where we've been.

Gold and silver owners in the first ten years of this new century were in for quite a ride, watching gold soar to $1,895 and silver to $49 by 2011. Even those who jumped in midway saw their paper money values zoom. Gold had bottomed at $255.95, Apr 2, 2001. Note the gold bull began months before the attacks of 9/11. Silver bottomed nine weeks after the attacks at $4.06, alongside crashing stock markets.

The national debt in 2001 was $5.8 trillion, on its way to today's $20 trillion. Savers and retirees could depend on CD and bond returns well north of 5%. U.S. bonds were still triple-A rated. You could take your cash from your bank without federal snooping.

“War on cash” was an unknown socio-economic term. No one predicted massive, taxpayer funded bail-outs, threats of bail-ins, or the terrible twins, ZIRP and NIRP – zero and negative interest rates. While the DOW and S&P languished in the agony of three crashes from March of 2000 through 2009, gold and silver got no respect from Wall Street or financial media. That's despite gold doubling in paper money terms 2.8 times from 2001 to 2011. Silver had 3.5 doubles. Both metals had short-lived drops along the way.

Obama has ordered flags at half-staff more than any president in history

With his tenure in office marked by terror attacks and mass shootings, President Obama has reached a sad but remarkable milestone in his presidency: He has ordered the lowering of the nation's flags to half-staff more often than any president in history.

On Sunday, Obama extended that unenviable streak even further, ordering all flags at federal buildings and ships at sea to be flown at half-staff to honor the 49 victims of the Orlando nightclub shooting.

Those flags will remain at half-staff until sunset Thursday, meaning that the nation will spend most of National Flag Week — proclaimed by Obama in a separate order last Friday— with the stars and stripes in a mournful pose. Since 2009, Obama has issued 66 proclamations to fly the flag at half-staff, exceeding President George W. Bush's 58 and Bill Clinton's 50, according to a USA TODAY analysis of presidential proclamations.

Annual observances such as Memorial Day and Pearl Harbor day have contributed to that total, as have the deaths of notable public figures like Sen. Robert Byrd, Sen. Ted Kennedy, former first lady Nancy Reagan and Supreme Court Justice Antonin Scalia. But it's a spate of national tragedies — from the Fort Hood shooting that claimed 13 lives in 2009 to the most recent carnage in Orlando — that have distinguished the Obama presidency. Fourteen proclamations honoring the victims of those tragedies have accounted for 79 days with the flag over the White House at half-staff, more than half of the 158-day total under Obama.

Bill Holter-Dire Warnings from Top Wall Street Pros Signal Trouble Coming Soon

Slumping autos weigh on US manufacturing output; inflation tame

U.S. manufacturing output unexpectedly fell in May as motor vehicles and parts production recorded its biggest drop in nearly 2-1/2 years, suggesting sustained weakness in the sector even as the overall economy appears to be gaining momentum.

Other data on Wednesday showed underlying producer prices were subdued last month amid weakness in costs for health services, indicating inflation could remain tame for a while.

Against the back drop of weak manufacturing, benign inflation and a recent sharp slowdown in employment gains, the Federal Reserve on Wednesday left interest rates unchanged. The U.S. central bank, however, signaled it still planned two rate hikes this year.

"The disappointing manufacturing output points to continued sluggishness in this segment of the economy and will likely remain a source of concern at the Fed," said Millan Mulraine, deputy chief economist at TD Securities in New York. Manufacturing output fell 0.4 percent last month after increasing by a downwardly revised 0.2 percent in April, the Fed said. Economists polled by Reuters had forecast manufacturing production unchanged in May after a previously reported 0.3 percent increase in April.

HSBC: Gold Could Jump 10% In The Event Of Brexit

According to the report, if the UK votes to leave the European Union on June 23, the price of gold could rally by 10% to around $1400 an ounce as investors look to the yellow metal to provide a safe haven in times of uncertainty. What’s more, gold could also benefit from the reluctance of investors to move into sterling or even the euro following a ‘leave’ vote.

HSBC’s view is based on the thesis that gold will benefit from the flow of funds after a ‘leave’ vote as the uncertainty spurred by an exit vote would likely elicit sufficient gold purchases to buoy prices. In times of uncertainty, gold is the go-to haven asset for most investors and this time around is unlikely to be any different.

There are very serious concerns that in the event of a ‘leave’ vote from the UK the very existence of the EU as a whole could be called into question, which could make the move in gold following the vote more pronounced. Movements in the forex market are also likely to drive investors towards gold according to HSBC’s forex team. The team estimates that a vote to leave would probably drag GBP lower, and EUR lower with it; especially if especially if a UK exit stoked concerns of a possible fragmentation of the EU.

Traditionally, a weaker EUR would be negative for gold as gold is inversely correlated to the USD. However, the team at HSBC predicts that if capital outflows weaken GBP and EUR, much of these flows would move to CHF and JPY as well as gold – the three traditional safe haven plays.

Why Gundlach thinks central banks are ‘losing control’

DoubleLine’s Jeff Gundlach is losing faith in central bankers. That’s not to say that the bond guru had much faith to start with. Gundlach raised fresh questions about the ability of major central banks to manage economic risks, late Tuesday. During a web presentation, the market pundit and investor pegged risk aversion, which has swept over global markets over the past several trading sessions, to ineffective moves by the Federal Reserve and other central banks.

Disquiet in world financial markets has been highlighted by slumping equity markets, which were rebounding somewhat Wednesday, and yields on benchmark government debt descending into negative territory. Indeed, yields on 10-year German benchmark bonds slipped into negative territory for the first time ever on Tuesday, as yields on the paper of other major economies spiraled to record lows.

Concerns that the U.K. might vote in favor of exiting the European Union at a referendum set for June 23 has provided some impetus for investors’ recent flight to safety.

But Gundlach attributes the lion’s share of the market’s jitters to indecisive policy efforts by central banks, including the Fed, which he said has frequently changed its tune from implying that rate increases were imminent to espousing a cautious and prudent approach to normalizing interest-rate policy. The uncertainty is fostering volatility, he said.

Why this Economy Feels Even Crummier than the Data

$271 billion in total business sales officially disappear: Census. Total business sales in the US did in April what they’ve been doing since July 2014: they dropped: -2.9% from a year ago, to $1.28 trillion (not adjusted for seasonal differences and price changes), the Censuses Bureau reported on Tuesday. That’s where sales had been in April 2013!

This is a barometer of just how tough business has become in the US. These sales are not just corporate sales, but total sales, including those by small operations and sole proprietorships. The data is survey based, and covers only sales in the US, unlike sales reported by S&P 500 companies, which include sales by their ventures overseas.

These total business sales are composed of three categories: sales by merchant wholesalers (34% of total), manufacturers (35% of total), and retailers (31% of total).

And they were crummy in April: Sales by manufacturers dropped 4.7% year-over-year to $453.7 billion, not seasonally adjusted; sales by retailers rose 2.1% to $394.3 billion; and sales by merchant wholesalers dropped 5.3% to $430.6 billion. Among wholesalers, sales in the biggest durable-goods categories all dropped year-over-year: automotive -4.1%, professional equipment -0.7% (including computer equipment -6.6%), electrical equipment -7.4%, and machinery -2.2%.

Strike looming at Macy's iconic New York store

Workers at Macy's flagship store in New York City are threatening to strike if there is no new contract by a midnight deadline.

The store, a Manhattan tourist hot spot on 34th Street, hasn't had a strike since 1972. Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union, which represents the 5,000 workers including the 3,500 from the store, said contested issues include health care, unpredictable schedules, and pension plans for senior employees.

Three other area stores may strike as well. "Fireworks are nice, but if Macy's wants to be a responsible member of the New York community, they have to make sure that the people they employ are able to afford to live in the city,"Appelbaum told The Associated Press, referring to the annual July 4th show. "Macy's is an iconic New York institution. What happens in these negotiations will set the trend for the city and for the country."

Macy's sees the threat of the strike as real and has placed ads in local newspapers including The New York Times seeking temporary workers. Macy's spokeswoman Elina Kazan says negotiations are ongoing.

Full Employment Math: 2 + 2 = 5

Inventory is an exceedingly simple concept spaced between the most basic economic fundamentals. Because the modern economy operates upon mass production, the flow of goods is not direct. Thus, there are structural differences between demand and supply, with inventory as the pivot in between. If end demand rises it still gets filled even though production cannot respond instantaneously (no matter how much emphasis on just-in-time in economics textbooks). Instead, inventory falls signaling more production is necessary with certain structural lags.

If inventory levels are rising, then that either means demand has fallen off relative to the level of production or production is far greater than the end level of demand. This relationship is constant no matter the absolute point in either supply or demand. In other words, if inventory is rising precipitously and demand is already “strong” and getting “stronger” still, then supply must be really, really strong.

It is, again, an exceedingly simple equation where the one variable is inarguable. In this case, inventory is and has been rising beyond any reasonable boundaries since late 2014. As noted earlier today, despite that economists and the media (redundant) tell us constantly that “demand”, especially consumers driven by the so-called robust jobs market, is especially robust. It has to be given the narrative of “full employment.” Therefore, by simple equation of known inventory and the mainstream qualification of demand, we can only expect production is unbelievably strong. Which it isn’t.

Instead, we know that production both in the US and overseas is the opposite of that, leaving demand as I often describe it – atrocious. There is in this context no way with which to turn contraction in production combined with rising inventory into “strong” consumer spending – or “strong” anything economy related. It is the incontrovertible contradiction to the “full employment” narrative. There cannot be a huge inventory imbalance combined with contracting production that works out as anything other than atrocious “demand” and consumer spending. And, as is clear below, it is everywhere and not just petroleum.

Facebook’s offline tracking, Denninger on net neutrality, Microsoft

What Happens When Big Money Moves Into Silver?

The event that will transform the Silver Market is when BIG MONEY finally moves into the sector in a BIG WAY. Even though the precious metals prices experienced new highs in 2011, this was due to only a small fraction of investor demand. The overwhelming majority of investors were still in playing in the Stock, Bond and Real Estate Markets.

However, the time when BIG MONEY finally moves into the precious metals sector grows closer each day. Michael Belkin discussed this in his recent interview on Kingworld News. Michael provides a very expensive newsletter to large clients (institutions & Hedge Funds) on what they should be buying.

During the end of 2015, Michael put a new gold stock newsletter in which he stated gold stocks were going to really take off in the beginning of the year. A month later he came out with a group of silver mining stocks that he forecasted would experience tremendous gains.

Both the gold and silver mining stocks have performed incredibly over the past 4-5 months. Mr. Belkin believes this is just the first inning of the precious metals bull market. Moreover, Mr. Belkin believes when BIG MONEY finally moves into the precious metals market, it will really drive the prices to extremely high levels.

Bank Of America Cutting Thousands Of Jobs

Bank of America Corp.is planning to cut up to 8,000 more jobs at its consumer banking division, the Financial Times reported Wednesday, citing people with knowledge of the bank's plans.

The planned job cuts come as Bank of America, the largest U.S. retail bank by deposits, transforms its retail financial centers for digital banking and thus reduces the need for back-office employees and bank tellers.

According to the FT report, the bank also plans to add sales staff - including mortgage loan officers, small business bankers and personal investment advisers - as part of its efforts to improve revenues.

The consumer banking unit had more than 107,900 employees in 2009, which declined to about 68,400 employees at the end of the first quarter of 2016.

Why are some Obamacare plans about to become more expensive?

One of the most popular plans under the Affordable Care Act is about to see a huge price hike, according to a new study.

An analysis released Wednesday by the Kaiser Family Foundation projects that in 2017, premiums could rise an average of 10 percent across 14 major US cities for the "silver plan," which has the second-lowest cost of the plans in the Healthcare marketplace. The silver plan is one of the most popular healthcare plans available under Obamacare, according to a report by the US Department of Health and Human Services, because of its low cost. Premiums for the plan had increased by only 7.2 percent when open enrollment for 2016 began.

Last year, premiums increased by an average of five percent across the United States after approval from state insurance, according to the report.

The projected increase for 2017 isn’t uniform across the country. Premiums for the cheapest health insurance plans available under Obamacare could jump by as much as 26 percent in Portland. But in Providence, R.I., consumers could see their premium rate drop by as much as 14 percent. Several factors are driving the increase in premiums. One is the rising cost of medical treatments and prescription drugs, which grew by 12.2 percent in 2014, to $297.7 billion. Much of that higher spending came from the prescribing of expensive, brand-name specialty drugs, rather than off-brand or generic alternatives, according to figures from the U.S. Centers for Medicare and Medicaid Services.

NEWS to Disturb the Comfortable...

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