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Tuesday 05.17.2016

Fast food workers are becoming obsolete

The age of the restaurant self-service kiosks has dawned, and it's the end of fast food as we know it.

McDonald's is striding into the 21st century with the rollout of the "Create Your Taste" touchscreen kiosks, on which custom burgers can be built as well as full-menu ordering.

The kiosks are incredibly convenient and improve order accuracy, to which I can personally attest. Panera Bread has fully committed to the kiosk craze as well. The company's "Panera 2.0" initiative is in full swing. About 50% of company-owned stores already have the technology installed, and the remaining locations expect to have kiosks in place by the end of the year.

Combining the kiosks with Panera's "MyPanera" rewards membership is an added bonus. "Beyond shorter lines and improved accuracy, customers love the fact that they can save those modifications as favorites or order from their history," says Blaine Hurst, Panera Chief Transformation & Growth Officer. And now, Wendy's has announced that it will make kiosks available in the later half of 2016.

Treasury discloses Saudi Arabia’s US debt holdings: $117 billion

Saudi Arabia has emerged as one of the biggest holders of US government debt, according to data released on Monday by the Treasury Department.

The world’s biggest oil exporter holds $116.8bn as of March 2016, the Treasury said, following a freedom of information request by Bloomberg. The figure would make the kingdom among the world’s top 14 holders of US government debt, reports Joe Rennison in New York.

Until now, the US does not break out how much of its bonds are held by Saudi Arabia. Instead the country was lumped into a broad category of “oil exporters” – which also includes Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria.

Fears emerged earlier this year that as oil prices plummeted Saudi Arabia might begin to shed its holdings, which were widely believed to be sizeable. It would have come at the same time as selling pressure from China and other emerging economies who had been attempting to prop up their currencies by selling US debt since the summer of 2015.

China to buy $90 billion gold vault in London

China is buying one of London’s biggest gold vaults. The Chinese state-owned ICBC Standard Bank, the world’s biggest bank by assets, has agreed to buy Barclays precious metals storage business, including its state-of-the-art storage facility in London.

The deal will boost China’s access to London’s gold market, and expand the country’s role in the gold business. The vault is in a secret location in London, and can store 2,000 tonnes of gold and other precious metals. At current prices, up to $90 billion worth of gold could be stored inside.

Barclays has previously announced a move away from the precious metal business. The bank opened the facility in 2012. The financial details of the sale were not released.

London is the world’s largest wholesale over-the-counter gold market by trading volume, with estimated $5 trillion worth of gold trades cleared there every year. The precious metal has been traded in London for over 300 years. But China dominates in terms of actual physical gold trading. Gold imports to China have surged over 700% since 2010, and the country overtook India to become the world’s biggest gold consumer in 2013.

Oil bankruptcies mount despite crude rebound

Here's a crude reality: Oil prices are recovering too late to save many drillers drowning in tons of debt. SandRidge Energy (SD)became the latest victim of the oil crash, with the Oklahoma City-based shale driller filing for Chapter 11 bankruptcy on Monday.

Based on roughly $4 billion of debt, SandRidge is the second-biggest oil-focused U.S. company to file for bankruptcy during the current oil bust, according to a CNNMoney analysis of stats compiled by law firm Haynes and Boone.

The biggest bankruptcy took place just last week when Linn Energy (LINE)filed for Chapter 11 with more than $10 billion in debt. Other bankruptcy filings in recent days include energy exploration and production company Breitburn Energy Partners (BBEP) on Sunday and shale driller Penn Virginia (PVA) last week.

It's a sign of the continued struggles despite the 80% spike in oil prices since mid-February to around $47.50 a barrel today. Oil companies continue to grapple with diminished cash flows as they've cut back on production and contend with low prices. All of this makes it very difficult to pay back the debt they piled up just a few years ago when oil prices were comfortably sitting above $100 a barrel. Hence, the boom-to-bust nature of the oil business.

Fmr. IMF chief economist: Interest rate hike unlikely in June

SandRidge Energy Files for Bankruptcy With $4.1B in Debt

SandRidge Energy filed for bankruptcy protection Monday, saying it hopes to convert $3.7 billion of long-term debt into equity while allowing the company to keep its operations going.

The Oklahoma City-based company filed the Chapter 11 paperwork in the U.S. Bankruptcy Court for the Southern District of Texas. The petroleum and natural gas exploration company said it had the support of creditors who hold more than two-thirds of its $4.1 billion in total debt.

The company said it asked the court for permission to continue day-to-day operations while. It said it wants to continue paying wages, royalties and interest without interruption, and that suppliers and vendors would be paid under their normal terms.

"We are pleased that our creditors recognize the long-term value SandRidge and its employees can create with an improved balance sheet," SandRidge President and CEO James Bennett said in a written statement. "The new capital structure will allow the Company to concentrate on oil and gas exploration and development in our active Oklahoma and Colorado project areas."

The Elite’s New Case for Gold

As you may know, the “Shanghai Accord” is a secret plan created by the G-4 (China, the U.S., the eurozone and Japan) on the sidelines of the G-20 meeting in Shanghai, China, on Feb. 26. The plan is to strengthen the euro and the yen and ease the dollar. With the Chinese yuan pegged to the dollar, this combination gives China financial ease and a competitive advantage over its trading partners.

The Shanghai Accord will be an operative reality in global currency markets for the next several years. The message is that Japan should not even think about market intervention to weaken the yen. But the G-20 is a high-level club with no secretariat or staff of its own. Who does the dirty work when the G-20 wants to send a message? The answer is the IMF.

The International Monetary Fund acts as the eyes and ears of the G-20 and makes sure all of the members stay in line and live up to their commitments. The IMF has already threatened Japan publicly (in polite language, of course). The IMF essentially said, “Let the exchange rate move however it wants to.” That means the strong yen trade will continue. Japan has been warned.

Where is the world going under the Shanghai Accord? To answer that question, I recently attended the IMF Spring Meeting in Washington, D.C. This was a larger version of the G-20 meeting in Shanghai. It was the first time that all the “five families” of the global monetary system had gotten together since a smaller meeting in Paris on March 22. One of the most remarkable events I saw in Washington was Christine Lagarde’s press conference on April 14. This is where Lagarde put on her Godfather hat and threatened Japan.

U.S. debt dump deepens in 2016

Central banks are dumping America's debt at a record pace. China, Russia and Brazil sold off U.S. Treasury bonds as they tried to soften the blow of the global economic slowdown. They each sold off at least $1 billion in U.S. Treasury bonds in March. In all, central banks sold a net $17 billion. Sales had hit a record $57 billion in January.

So far this year, the global bank debt dump has reached $123 billion. It's the fastest pace for a U.S. debt selloff by global central banks since at least 1978, according to Treasury Department data published Monday afternoon.

Treasuries are considered one of the safest assets in the world, but some experts say a sense of panic about the global economy drove the selloff. "It's more of global fear than anything," says Ihab Salib, head of international fixed income at Federated Investors. "There's still this fear of 'everything is going to fall apart.'"

Judging by the selloff, policymakers across the globe were hitting the panic button often and early in the year as oil prices fell, concerns about China's economy rose and stock markets were very volatile. In response, countries may be selling Treasuries to prop up their currencies, some of which lost lots of value against the dollar last year. By selling U.S. debt, central banks can get hard cash to buy up their local currency and prevent it from losing too much value.

Chinese pour billions into US real estate, surpassing Canadians as biggest foreign buyers

Chinese nationals became the largest foreign buyers of US homes last year as they pour billions into American real estate, seeking safe offshore assets, according to a new study Sunday.

A huge surge in Chinese buying of both residential and commercial real estate last year took their five-year investment total to more than US$110 billion, according to the study from the Asia Society and Rosen Consulting Group. The sheer size of that total has helped the real estate market recover from the crash that began in 2006 and precipitated the 2008 economic crisis, they said.

And despite a slowdown due to Beijing’s clampdown on capital outflows, the figure for the second half of this decade is likely to double to US$218 billion, the study said. “What makes China different and noteworthy is the combination of the high volume of investment (and) the breadth of its participation across all real estate categories,” including a “somewhat unique entry into residential purchases,” the study said.

The authors of the study said their numbers, based on public and real estate industry data, understate the total. They necessarily miss purchases made by front companies and trusts that don’t identify the sources of the funds. While big deals, like the Anbang insurance group’s US$2 billion purchase of the Waldorf Astoria hotel in New York last year, and its failed US$14 billion offer for the Starwood group in March, make headlines, the study said Chinese buying of US homes far outpaces its investment in commercial land and buildings.

Don't Fret, May Always Brings Buying Opportunity For Gold

The 'audit the Fed' movement is taking a big step forward in Congress this week

An effort to conduct an unconventional audit of the Federal Reserve is gaining traction in Washington and on its way to a potentially important milestone this week.

The Federal Reserve Transparency Act will undergo the markup process this week in the House Oversight and Government Reform Committee. A product of the "Audit the Fed" movement, the bill seeks not a financial exam of the U.S. central bank but rather a peek behind the curtain of how monetary decision-making happens. The markup comes after several failed efforts to move the legislation ahead, and supporters believe there now is enough backing in Congress to go forward.

The Fed's policymaking arm, the Federal Open Market Committee, does not meet in public and only communicates its decisions through carefully worded statements at the end of its meetings and through officials' remarks at speaking engagements and through the press.

Former U.S. Rep. Ron Paul of Texas has been the leading voice behind the Fed auditing effort; his son, Kentucky Republican Sen. Rand Paul, has been spearheading the bill in Congress. The Campaign for Liberty, which Ron Paul chairs, believes this week's legislative effort marks a significant step. "Given the tenor of what people seem to be signaling from the campaign trail in both parties, it's not necessarily seen as a good year to be siding with the Federal Reserve, the big banks and international financial institutions against the majority of Americans," Norman Singleton, president of the Campaign for Liberty, said in an interview. "The best possible outcome is for a more fully informed public about Fed monetary policy."

Data Breaches Up 24% to Date in 2016

The latest count from the Identity Theft Resource Center (ITRC) reports that there have been 378 data breaches recorded this year through May 10, 2016, and that more than 11.5 million records have been exposed since the beginning of the year. The total number of reported breaches increased by 30 compared to the prior week.

The Washington Post last week reported that the Federal Deposit Insurance Corp. (FDIC) retroactively reported five “major incident” data breaches that have occurred since October 30. 2016. In all cases the data breaches involved employees with legitimate access to personally identifiable information downloaded the data along with their own personal data when they were leaving the agency. All five signed affidavits declaring that they had not shared the data.

The number of breaches in 2015 totaled 781, just two shy of the record 783 breaches that ITRC tracked in 2014. The 378 data breaches reported so far for 2016 are 24% more than the number reported for the same period last year. A total of more than 169 million records were exposed in 2015.

The government/military sector retained the lead in the number of records exposed in 2016. The sector has suffered 18 data breaches so far this year, representing about 45.2% of the total number of records exposed and 4.8% of the incidents. More than 5.2 million records have been compromised in the government/military sector to date in 2016.

Illegal Immigrants Increasingly ‘Finding Loopholes’ to Stay

Central and South American immigrants are finding loopholes in order to manipulate the United States immigration system so they can stay. Law enforcement officials from the various agencies that make up the Department of Homeland Security have reached out to Breitbart Texas pointing out the new practices being taught to illegal immigrants by smugglers.

Under the claim of demanding humanitarian parole, individuals who at times have been previously deported are working the system in order to receive a temporary permission to stay, the officials said.

Various law enforcement officials who work in the immigration processing of these individuals claim that more and more groups are arriving at ports of entry, also known as international bridges and demanding the protected status.

The little known phrase is called “Humanitarian Parole” which is different than refugee status. According to the U.S. Department of Homeland Security, a refugee is identified as a person who “unable to or unwilling to return to his or her country of nationality because of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion.”

The last shoe company in America's shoelace capital

Obama at War Longer than any President in History

President Obama came into office seven years ago pledging to end the wars of his predecessor, George W. Bush. On May 6, with eight months left before he vacates the White House, Mr. Obama passed a somber, little-noticed milestone: He has now been at war longer than Mr. Bush, or any other American president.

If the United States remains in combat in Afghanistan, Iraq and Syria until the end of Mr. Obama’s term — a near-certainty given the president’s recent announcement that he will send 250 additional Special Operations forces to Syria — he will leave behind an improbable legacy as the only president in American history to serve two complete terms with the nation at war.

Mr. Obama, who won the Nobel Peace Prize in 2009 and spent his years in the White House trying to fulfill the promises he made as an antiwar candidate, would have a longer tour of duty as a wartime president than Franklin D. Roosevelt, Lyndon B. Johnson, Richard M. Nixon or his hero Abraham Lincoln.

Granted, Mr. Obama is leaving far fewer soldiers in harm’s way — at least 4,087 in Iraq and 9,800 in Afghanistan — than the 200,000 troops he inherited from Mr. Bush in the two countries. But Mr. Obama has also approved strikes against terrorist groups in Libya, Pakistan, Somalia and Yemen, for a total of seven countries where his administration has taken military action. “No president wants to be a war president,” said Eliot A. Cohen, a military historian at Johns Hopkins University who backed the war in Iraq and whose son served there twice. “Obama thinks of war as an instrument he has to use very reluctantly. But we’re waging these long, rather strange wars. We’re killing lots of people. We’re taking casualties.”

Offshore driller to cut 350 more jobs

Offshore drilling giant Ensco PLC (NYSE: ESV), which cut hundreds of jobs last year, will stack three drillships and a semisubmersible rig, affecting 350 offshore jobs.

Ensco is still finalizing plans, but the cuts are expected to begin May 11, the company told the Texas Workforce Commission in a Worker Adjustment and Retraining Notification Act letter. All of the employees report to the Ensco Offshore Co. office at San Felipe Plaza at 5847 San Felipe, suite 3500.

The company expects to maintain some employees at the stacking locations, and it may recall some previously assigned employees if it secures new contracts. Ensco will stack its Ensco DS-3, Ensco DS-4 and Ensco DS-5 drillships, along with the Ensco 8500 semisubmersible rig. However, at least the DS-4 and the DS-5 will not be fully cold-stacked, President and CEO Carl Trowell said in a recent conference call.

“We're relocating them from the Gulf of Mexico where they have basically been at anchor … to a new cluster-stack approach, which we're going to do in Tenerife (in the Canary Islands off West Africa),” Trowell said of the DS-4 and the DS-5 in the April 28 conference call. “And we're going to do that because it's a lower-cost environment to do it. We can put the rigs dockside there, and they are better-positioned for any future work that might come because of that location, be it East Africa, be it Latin America, be it the GOM.”

China’s debt bubble is getting only more dangerous

It would be like finding out Warren Buffett's financial empire may have been, quite possibly, a sham. That's what happened last year when China's richest man — at least on paper — lost half of his wealth in less than half an hour. It turned out that his company Hanergy may well just be Enron with Chinese characteristics: Its stock could only go up as long as it was borrowing money, and it could only borrow money as long as its stock was going up. Those kind of things work until they don't.

The question now, though, is how much the rest of China's economy has come down with Hanergy syndrome, papering over problems with debt until they can't be anymore. And the answer might be a lot more than anyone wants to admit. Although we should be careful not to get too carried away here. Hanergy is now a nothing that used debt to look like a very big something, while China's economy actually is a very big something that is using debt to look even bigger. In other words, one looks like a boondoggle and the other a bubble. But in both cases, excessive borrowing — especially from unregulated "shadow banks," such as trading firms — has made things look better today at the expense of a worse tomorrow.

In Hanergy's case, there will, of course, be no tomorrow. To step back, the first thing to know about Hanergy is that it's really two companies. There's the privately owned parent corporation Hanergy Group, and the publicly traded subsidiary Hanergy Thin Film Power (HTF). The latter, believe it or not, started out as a toymaker, somehow switched over to manufacturing solar panel parts, and was then bought by Hanergy Chairman Li Hejun. And that's when things really got strange.

The majority of HTF's sales, you see, were to its now-parent company Hanergy — and supposedly at a 50 percent net profit margin! — but it wasn't actually getting paid, you know, money for them. It was just racking up receivables. Why? Well, the question answers itself. Hanergy must not have had the cash to pay HTF. Its factories were supposed to be putting solar panels together out of the parts it was getting from HTF, but they were barely running — if at all. Hedge-fund manager John Hempton didn't see anything going on at the one he paid a surprise visit to last year. It's hard to make money if you're not making things to sell.

The Rise and Fall of American Growth

Every Farmers Market in L.A. Will Now Accept Food Stamps

On Friday, L.A. City Council unanimously approved legislation that would require farmers markets across the city to accept CalFresh EBT cards, the modern equivalent of food stamps. Previously it has been estimated by the Los Angeles Food Policy Council that almost half of L.A. farmers markets didn’t accept EBT, although many farmers and vendors supported the program as a boon to business.

It's estimated that over a million people in the L.A. area rely on CalFresh to buy groceries each month, according to L.A. County data, and while the EBT program is accepted at places like KFC, Taco Bell and 7-Eleven, using it to buy local, fresh fruits and vegetables has been a somewhat byzantine process.

“In order to create a fair farmers market system that ensures all Angelenos, regardless of income level, have access to healthy foods, we need a policy that requires those farmers markets to accept EBT,” said Councilmember Jose Huizar in a press release. Huizar proposed the motion to the council after being approached by the Los Angeles Food Policy Council and Los Angeles Community Action Network.

Under the new process, market managers will operate a digital EBT card reader booth that dispenses vouchers that can be used to purchase food from certified vendors. The vendors will then be reimbursed dollar-for-dollar, ensuring that the transaction is as beneficial for farmers as it is for the public.

The Economic Consequences of Brexit

Those campaigning for Britain to exit the European Union claim that doing so would make their country both freer and richer. They assert that after “Brexit”, the UK could quickly negotiate a bespoke agreement with the EU that offers all the benefits of free trade without the costs of EU membership; strike better trade deals with other countries; and reap huge benefits from scrapping burdensome EU regulations. But this is a delusion.

In fact, Brexit would entail huge economic costs for Britain. The uncertainty and disruption of drawn-out and doubtless acrimonious divorce proceedings would depress investment and growth. Permanent separation would reduce trade, foreign investment, and migration, hurting competition, productivity growth, and living standards. And “independence” would deprive Britain of influence over future EU reforms – notably, the completion of the single market in services – from which it would benefit.

The London School of Economics’ Centre for Economic Performance calculates that the long-term costs to Britain of lower trade with the EU could be as high as 9.5% of GDP, while the fall in foreign investment could cost 3.4% of GDP or more. Those costs alone dwarf the potential gains from Brexit. Britain’s net contribution to the EU budget amounted to only 0.35% of GDP last year, and scrapping EU regulation would bring limited benefits, because the UK’s labor and product markets are already among the freest in the world.

The exit process would generate prolonged uncertainty. Officially, it is meant to take two years. But it would probably take much longer. In the 1980s, it took three years to negotiate the exit of Greenland (population: 50,000), and the only controversial issue was fish. Extricating Britain (the EU’s second-largest economy, with a population of 64 million) would be far more complex. Moreover, any agreement on a new economic relationship with the UK would require unanimity among the EU’s 27 remaining members. And Britain would also have to renegotiate – from scratch – the 50-plus trade deals that the EU has with other countries. All of this would take a long time.

TSA blames you for longer lines at airport security checkpoints

Facing a growing backlash over extremely long airport security lines, Homeland Security Secretary Jeh Johnson on Friday asked fliers “to be patient” as the government takes steps to get them onto planes more quickly.

Travelers across the country have endured lengthy lines, some snaking up and down escalators, or through food courts, and into terminal lobbies. At some airports, lines during peak hours have topped 90 minutes. Airlines have reported holding planes at gates to wait for passengers to clear security.

Johnson said the government has a plan to deal with the lines but won’t neglect its duty to stop terrorists. “Our job is to keep the American people safe,” Johnson told reporters at a news conference. “We’re not going to compromise aviation security in the face of this.” The comments reflect a statement released earlier this week after long lines were reported at Newark, JFK and LaGuardia airport security checkpoints. When asked about those long lines, the TSA essentially blamed you in a press release, specifically passengers who bring too many carry-on items:

"There are several factors that have caused checkpoint lines to take longer to screen passengers… including more people traveling with carry-on bags, in many cases bringing more than the airline industry standard of one carry-on bag and one personal item per traveler; Passenger preparedness can have a significant impact on wait times at security checkpoints nationwide…Individuals who come to the TSA checkpoint unprepared for a trip can have a negative impact on the time it takes to complete the screening process.”

Tuesday 05.17.2016

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