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Thursday 08.18.2016

Department of Labor Regulating Your 401K April 16th, 2017

The financial services industry is undergoing its greatest upheaval perhaps in more than 35 years because the government came up with a brilliant new idea to pretend there is a crisis that they need to step in to save you. I have warned that there has been talk about taking over 401K funds which are about equal to the total national debt. There have been proposals that they just take control of that and stuff it by mandatory investment in government bonds. Some countries already require pension funds to be “conservative” and 85% of all money must be in government debt. The one thing we know, whenever government claims it is doing something to protect you, you can be sure the end result will only put more money in their pocket.

As of 2017, what is yours, will begin the process to become theirs. The new ruling from the Department of Labor (DOL) affecting financial advice related to retirement plans is pretended to protect consumers against high fees which necessitates the government stepping in to monitor your 401K. Next, no manager will be seen as competent and the Department of Justice will start to target small retirement managers to expose them for fraud that they can then turn into a justification for government to take over ALL 401ks.

This is how the whole thing will unfold all because the off-budget expenditure (Social Security & Medicare) are up 66% during the Obama Administration and go negative next year. One way to cope with all of this is to simple merge the failed government managed funds with the private funds. Consequently, thousands of advisers around the nation are already scrambling to change their practices to fit the new regulations, which start to go into effect next January (with the balance in 2018). This coincides with the new international G20 regulation whereby all countries will start report on everyone sharing that info among themselves to hunt for taxes.

The Office of Management and Budget’s $17 Billion Dollar number for the 401K industry is too tempting for politicians to ignore when they are in desperate need of cash. They justify this fake seizure claiming retired people are being ripped-off with exorbitant fees, which is one of the biggest lies perpetrated by The Obama Administration or any Administration in the past 100 years. This even beats the Global Warming scam to raise taxes. The Obama Administration doesn’t count in that figure any fees they regard as “reasonable” compensation. To Obama, they are all unreasonable.

Fed Minutes Show Rate Hike Could Come 'Soon'

Investors locked on one word from the Federal Reserve's minutes released Wednesday: Soon.

The Fed released the minutes from its July 26-27 meeting and investors saw a subtle shift in the central bank's stance indicating a hike in short-term interest rates is increasingly likely. "They (members of Federal Open Market Committee) judged that another increase in the federal funds rate was or would soon be warranted," according to the notes. If the Fed were to make a move in September, that would be its first hike to short-term interest rates this year.

Stocks were stable on the news as investors focused on the Fed's increased faith in the strength of the economy, but also the fact that the Fed still seems torn on taking a move. The Dow Jones industrial average was down 4.89 to 18547, which was an improvement from earlier in the day.

These are central bank's first substantive comments since last month appearing to leave the door open to a rate hike in September. Fed officials still appear to be largely divided on whether the economy is strong enough to warrant a rate hike. though. Recent economic strength, most notably the job report in July, has added fuel to the growing suspicion the Fed could move to slow things down. During July employers added 255,000 jobs, a strong showing for the second-straight month. Inflation continues to be tame, too. The Labor Department's inflation reading for July showed prices remained flat, thanks in part to lower prices at the pump. But even core inflation, which excludes food and energy costs, rose a tepid 0.1%, which was slightly less than the 0.2% many economists expected.

Macy’s Pullback Imperils $30 Billion of Debt, Morningstar Says

Store closures by Macy’s Inc. could hurt more than the mall rats, according to Morningstar Credit Ratings. Almost $30 billion of bonds backed by commercial mortgages are exposed to the retailer, which last week announced plans to shutter 100 outlets, the rating company wrote in a note on Wednesday. More than $3.6 billion in loans would be affected by the closing of 28 stores that Morningstar identifies as most at risk, several of which support multiple asset-backed securities, the company said.

Macy’s is struggling to reinvent itself for the 21st century as an increasing number of consumers opt to shop online, rather than in physical stores. To this end, the U.S.’s largest department-store company announced plans on Aug. 11 to close some of its less-profitable stores. But for bondholders, Macy’s problems signal further defaults could be ahead for notes backed by malls around the country.

“Losing a Macy’s may not be an immediate death knell for a loan, as cash flow could absorb the vacancy,” Morningstar analysts led by Steve Jellinek wrote. “However, if a mall is hit by two or more anchor closures, that’s typically the beginning of a downward spiral.”

For example, investors can expect a 66 percent loss on a $49.2 million loan for the Hudson Valley Mall, which went into foreclosure after Macy’s and another major tenant left, Jellinek wrote. Loans for malls in Albuquerque, New Mexico; Dover, Delaware; and in Lakeland, Florida, now look vulnerable, he wrote.

Tech Wreck - 100+K Jobs Gone and More Cuts Coming

Technology, which makes our lives easier, is also putting more Americans out of work at a fast clip.

At the same time it announced a fiscal fourth-quarter earnings beat on Wednesday, Cisco (CSCO), the world’s largest networking giant, said it was cutting 5,500 jobs or 7% of its global workforce. Mark Haranas, of tech news website CRN Opens a New Window. , which earlier in the day reported Cisco would eliminate potentially as many as 14,000 jobs, told FOXBusiness.com the tech industry is cutting the dead weight.

“The jobs cuts are necessary to shed some staff in order to bring on new employees with the skillset needed in today’s market. The networking skills needed in 2016 is drastically different from the skills that were needed just five years ago in 2011,” he said.

Microsoft (MSFT), Hewlett-Packard (HPQ) and Intel (INTC) have already slashed more than 100,000 jobs over the past 12 to 14 months, according to data from Challenger, Gray & Christmas, and that number is rising. “There is a certain worry with these bellwethers,” John Challenger of Challenger, Gray & Christmas told FOXBusiness.com. “[The job cuts] are a recessionary sign, the economy may be moving toward that side of the [economic] cycle” he added.

Is Free Trade Causing Job Loss?

International trade figures heavily in the presidential race. Presidential candidate Donald Trump said, "Hillary Clinton unleashed a trade war against the American worker when she supported one terrible trade deal after another - from NAFTA to China to South Korea." And adding, "A Trump Administration will end that war by getting a fair deal for the American people. The era of economic surrender will finally be over." He lamented, "Skilled craftsmen and tradespeople and factory workers have seen the jobs they love shipped thousands and thousands of miles away."

Hillary Clinton has offered her own condemnations of trade and globalization. Some see her stance on trade as little more than typical campaign rhetoric. Bill Watson's Reason magazine article "Hillary Clinton's Protectionist Promises Would Do Serious Economic Damage," looked at Clinton's trade agenda. Watson concluded that for "fans of free trade and globalization, Clinton is a much more appealing candidate simply by not being horrible."

It is true that the number of manufacturing jobs in the United States has been in steep decline for almost a half-century, but manufacturing employment disguises the true story of American manufacturing. U.S. manufacturing output has increased by almost 40 percent. Annual value added by U.S. factories has reached a record $2.4 trillion. To put that in perspective, if our manufacturing sector were a separate nation, it would be the seventh richest nation on the globe.

Daniel Griswold's Los Angeles Times article tells the story: "Globalization isn't killing factory jobs. Trade is actually why manufacturing is up 40 percent." Griswold is senior research fellow and co-director of the Program on the American Economy and Globalization at George Mason University-based Mercatus Center. He says what has changed in recent decades is that our factories produce fewer shirts, shoes, toys and tables. Instead, America's 21st-century manufacturing sector is dominated by petroleum refining, pharmaceuticals, plastics, fabricated metals, machinery, computers and other electronics, motor vehicles and other transportation equipment, and aircraft and aerospace equipment.

Why Aren’t Any Bankers in Prison for Causing the Financial Crisis?

If hotheaded online commenters ran the Justice Department, would America's prisons be full of traders responsible for the financial crisis? It is tempting to think so—that the lack of corporate prosecutions is due to a lack of will rather than a lack of way.

But convicting bankers—or any other white-collar workers whose decisions at work have ostensibly damaged the economy—is difficult because while it is easy to identify systematic wrongdoing, it's much harder to pin blame, at least in the way a court might approve of, on an individual within that system.

Sam Buell, a Duke law professor, argues in his recent book Capital Offenses: Business Crime and Punishment in America’s Corporate Age that this is no accident. The difficulties that government prosecutors face in cobbling together fraud cases against even the most nefarious executives illuminates the fact that, legally, corporations are big, fancy responsibility-diffusion mechanisms. It’s what they were designed to do: Let a bunch of people get together, take some strategic risks they might otherwise not take, and then make sure none of them is devastated individually if things go south.

In his book, Buell, who served as the lead prosecutor for the Justice Department’s Enron Task Force, sets out to soften some Americans’ lock-’em-up mentalities by providing some perspective on how the criminal-justice system works and why it works that way.

No negative rates, Deutsche Bank promises depositors

Customers at Deutsche Bank, Germany's largest, will not be charged negative interest rates on their savings, a senior executive said on Wednesday. "That won't happen with us," private banking chief Christian Sewing told Bild daily.

Banks across Europe are feeling the pinch of a -0.4 percent rate on their deposits with the European Central Bank (ECB). The ECB policy aims to push banks to lend money for investment rather than keeping it in reserve, which would provide a shot in the arm to eurozone economic growth.

Few banks have so far passed negative rates on to private customers. Regional Bavarian cooperative Raiffeisen Gmund made headlines earlier in August with plans to charge private depositors negative rates on balances over 100,000 euros (about $113,000).

Some of Germany's Sparkasse regional savings banks also said they would introduce negative rates on large deposits from business clients, sparing private customers for the moment. Deutsche rival Commerzbank provoked dismay in late 2014 when it began passing negative rates on to business customers with balances larger than 10 million euros in current accounts.

Exxon to Shut Louisiana Plant as Thousands Flee Floods

Exxon Mobil Corp. began shutting units at the fourth-largest refinery in the U.S. as record flooding in Louisiana sent tens of thousands fleeing from their homes.

The Baton Rouge refinery in Louisiana has begun shutting units as the flooding threatened an offsite liquefied petroleum gas storage facility, a person familiar with operations said Wednesday. The plant, located along the Mississippi river, can process 502,500 barrels of crude a day into gasoline, diesel and other fuels.

About 20,000 people have been forced to leave their homes and more than 10,000 are in shelters after nearly 2 feet of rain fell in parts of southern Louisiana, the Associated Press reported Tuesday. Flood warnings extend across much of the southern portions of the state with many bayous and rivers still at dangerous levels. Louisiana is home to 18 operable refineries that account for about 18% of U.S. capacity, according to Energy Information Administration data.

Through Tuesday, Baton Rouge had received 22.11 inches (56 centimeters) since the start of August, or more than 19 inches above normal, according to the National Weather Service. New Orleans got 7.46 inches or 4.35 inches above normal; Lake Charles had 11.22 inches or 8.69 above normal and Lafayette logged 23.19 or 20.81 higher than the 30-year average.

Ellen Brown-Cascade of Derivative Defaults Would Bring Everything Down

American flags removed from Arlington fire trucks after board order

American flags were removed from three Arlington Fire District trucks Tuesday, sparking heated discussion on social media and disappointment from union members.

Fire Chief Tory Gallante was directed by the Board of Fire Commissioners to remove the flags from the backs of the trucks during Monday's meeting. He declined to comment on specifics of why the decision was made but said he is “very disappointed with their direction.”

Arlington Fire Commissioner Chairman Jim Beretta said the board majority feel the flags are a "liability during normal operations for our people and other motorists," and that the board had not been consulted before the flags were mounted. The flags, which were only recently mounted on the trucks at the request of the union, were removed during a ceremony at Arlington headquarters in the Town of Poughkeepsie Tuesday.

Union President Joseph Tarquinio said he's disappointed in the board's direction, but "if we had to take them down, they had to be taken down the right way. At the time when the country needs unity, to do something like this ... it's next to flag-burning in my mind." There was an open discussion about the issue at Monday's meeting "and each board member gave their opinion," Beretta said.

On The Impossibility Of Helicopter Money And Why The Casino Will Crash

As the stock market reached its lunatic peak near 2200 in August, the certainty that the Fed is out of dry powder and that the so-called economic recovery is out of runway gave rise to one more desperate pulse of hopium.

Namely, that the central banks of the world were about to embark on outright ‘helicopter money’, thereby jolting back to life domestic economies that are sliding into deflation and recession virtually everywhere—– from Japan to South Korea, China, Italy, France, England, Brazil, Canada and most places in-between.

That latter area especially includes the United States. Despite Wall Street’s hoary tale that the domestic economy has “decoupled” from the rest of the world, the evidence that the so-called recovery is grinding to a halt is overwhelming. After all, the real GDP growth rate during the year ending in June was a miniscule 1.2%. It reflected the weakest 4-quarter rate since the Great Recession.

And even that was made possible only by an unsustainable build-up in business inventories and the shortchanging of inflation by the Washington statistical mills. Had even a semi-honest GDP deflator been used, the US economy would have posted real GDP on the zero-line, at best. So the stock market’s 19% melt-up from the February 11 interim low of 1829 on the S&P 500 was positively surreal. There was not an iota of sustainability to it. In fact, “interim” was exactly the right word for a low that is going a lot lower, and soon.

Economy Nearing Stall Speed Says Art Cashin

It’s inevitable; before every market crash there’s always an analyst on television insisting the market’s overvalued and due for a correction. The problem is that before every new high and monster “up” day there’s an analyst on television insisting the market is overvalued and due for a correction. If you watch financial television regularly you know there’s someone on television every single day saying the market’s going to crash. The ones who get lucky can endlessly replay that clip of their correct prediction on their personal highlight reel, conveniently editing out all the times they were wrong.

Even experts can’t unfailingly predict the ups and downs of the market. The best anyone in the financial media can do is point out potential trouble spots. Just because the market should go down, it doesn’t mean it will. All the same, we’ve been on a massive bull run for nearly a decade and there are ample signs the U.S. economy is indeed reaching a point of diminishing returns. That’s what Art Cashin, director of floor operations on the NYSE for UBS, calls stall speed.

First, let’s take a trip to the 20,000 foot level and talk about the irrational expectation that we can have infinite growth on a planet of finite resources. As the world becomes more developed, growth will level off until it reaches equilibrium. We may not be at full development just yet but we’re getting close, and the simple fact is that the earth can’t support two percent growth every year indefinitely.

Right now higher stock market levels are being fueled by the hope of higher oil prices. The energy sector has been getting slammed by low oil prices and there’s a faint hope thatSaudi Arabia will trim production to boost prices. But the Saudis are no friends to the United States and the two-year glut of overproduction has dealt a blow to U.S. domestic oil production. Then there are all the companies that took out billions in loans with the expectation that prices would never slide. Layoffs, closures and resulting defaults are already underway, and we only have to remember back to 2008 to realize what billions in defaulted loans does to an economy.

The Great American Retirement Crisis

I’ve got some good news and some bad news: The good news is that you can likely expect to live a much longer life than scientists thought possible just a few years ago. The bad news is that you’re going to need a bigger nest egg to pay for retirement. According to a recently published book called The 100-Year Life, odds are rising that you will live to be triple digits. And for younger people, there’s now more than a 50% chance that they will live past 100 years.

With so many productive and healthy years ahead of you, it’s important to make sure that you’re collecting the maximum amount of income to cover life expenses. That’s especially difficult for most investors today, because of extremely low (often negative) interest rates. You can’t get much from your nest egg if you’re relying on traditional investments like Treasury bonds and bank CDs.

And many retirees are in for a rude wake-up in the next few years. That’s because U.S. corporate pensions are woefully underfunded and may have to cut payments to seniors in order to stay solvent.

Forget Social Security (which we all know is a broken system living on borrowed time). Now many corporate pensions are in the same boat and may soon start reneging on the promises made to workers.

More jobs for seniors, but not quite "golden years"

For 30 years Keith Verbosky was a tool and die maker for General Motors (GM), earning $100,000 a year when he retired. These days he drives a school bus ... for a quarter of that salary. Verbosky is the classic case of someone with an “old person job.”

But the good news for Americans of a certain age -- 50 and above -- is that the job outlook is “less bleak” for people like him, according to a study by the Center for Retirement Research at Boston College. So what’s the bad news? These jobs usually pay much less. “I know I’ll never make the kind of money I once earned at GM, the amount that allowed me to raise a family of six children,” said Verbosky, who at age 66 sports a full head of graying hair.

But he also knows that he doesn’t have to. Verbosky left GM 10 years ago with his buyout tucked in his pocket -- fortunate for him because the carmaker went into bankruptcy shortly afterward. His problem was that he still had a daughter in college, and a home in Fredericksburg, Virginia, needed to be paid for. So he immediately obtained his commercial driver’s license and began driving a bus.

Verbosky is typical of the way the senior workforce is evolving. During the last century, workers 55 and older who were let go from their jobs could find only a relatively few “old person” occupations alongside other gray-haired employees. “Now, more and more workers don’t have to give up,” said Matthew Rutledge, one of the Boston College study’s three authors. “That means you should delay taking Social Security for as long as you can, because you’ll never get a better annuity than Social Security!”

US Soldiers Are Relying on Millions of Dollars in Food Stamps to Survive

Military service members on active duty spent $24 million in food stamps at military commissary shops from September 2014 to August 2015, and 45 percent of students in schools run by the military are eligible for free or reduced-price meal programs.

For years, the military has been embarrassed by reports showing that some active-duty service members struggle to feed their families and use government benefits to get by. A recent report by the Government Accountability Office (GAO) found that the Department of Defense (DoD) does not fully understand the scope of the problem.

The USDA runs the Supplemental Nutrition Assistance Program (SNAP), the benefits of which are commonly called food stamps. Neither the military nor the USDA tracks how many active-duty service members receive SNAP benefits, according the report. The base salary for low-ranking service members can start as low as $18,800 a year. A soldier making that much to support a two-person household would be eligible for food stamps.

A provision in the 2016 defense spending bill encourages data sharing between the Pentagon and the USDA to address this problem, but the DoD does not have a coordinated effort underway to access that data through the USDA. The GAO concludes that without an interagency dating-sharing effort, the military will miss a valuable opportunity to understand the needs of its service members and address hunger within its ranks.

Election recession in 2016?

Target: It's Appels Fault

Target (TGT) reported disappointing Q2 earnings on Wednesday, and management placed part of the blame squarely on Apple (AAPL). Comparable store sales at Target overall fell by 1.1%, but Target executives noted that electronic sales decreased by double digits and “accounted for 70 basis points [0.7%] of overall comp decline.”

Even more notably, Target specifically pointed out that Apple product sales were down by “more than 20%” year-over-year and were to blame for a third of the overall plunge of electronic sales at Target.

Apple’s growth has been running into a bit of trouble recently, as the astounding success of the iPhone 6 has made for tough comparisons. Earnings growth for the tech giant was bad enough in the second quarter to shift overall tech sector year-over-year earnings growth from positive to negative.

It’s important to note that with the upcoming release of the iPhone 7, many Apple customers are just sitting on the sidelines waiting for the newest product. This would explain much of why sales have slowed down.

Ex-Goldman Sachs trader fined $400K for ripping off clients

An ex-Goldman Sachs trader was banned from the securities industry and agreed to pay a $400,000 fine on Tuesday for ripping off clients and reaping an extra $1.5 million in profit for the Wall Street bank.

Edwin Chin, who was Goldman’s head of residential mortgage bond trading until he was fired in 2012, inflated the prices of residential mortgage backed securities, according to an agreement he entered into that ended a probe into the matter by the Securities and Exchange Commission.

Chin can ask the SEC for permission to rejoin a Wall Street firm in two years, according to the settlement.

“Chin repeatedly abused his fundamental duty to serve as an honest transmitter of market information so he could increase Goldman’s trading profits and, indirectly, his own compensation,” Michael J. Osnato, chief of the SEC enforcement division’s complex financial instruments unit, said in a statement. Chin, who was the bank’s most prolific trader, was able to get away with ripping off his hedge fund clients because mortgage bonds — which are of a kind similar to those in the movie “The Big Short” — don’t have a listed price, like stocks on an exchange.

9-In-10 Big Banks Strip Customers Of Their Right To Jury Trial

If you ask someone on the street if they should have the right to sue their bank over something like an illegal overdraft fee, nearly everyone you speak to will invariably say yes. But a new report confirms that nearly all big banks are forcing customers to give up their right to a jury trial.

This is according to researchers at the Pew Charitable Trusts, who looked at the customer contracts for checking accounts at 44 of the nation’s largest banks and found that 91% of them include jury trial waivers.

At the very least, that means that any legal dispute would be heard solely by a judge and not by a jury of the customer’s peers. However a further look at these contracts shows that customers are — often unwittingly — signing away their ability to even enter a courtroom in the first place.

According to the Pew data, 70% of these same banks have forced arbitration clauses, meaning you can’t have your case heard in a courtroom but must instead enter into binding arbitration before a third-party private arbitrator.

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