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Wednesday 10.19.2016

Layoffs hit struggling Harley-Davidson

Harley-Davidson, facing falling motorcycle sales around the world, said on Tuesday it plans to streamline its operations, reorganize and reduce its workforce during the fourth quarter in a move that will cost the company $20 million to $25 million.

The motorcycle manufacturer cited continued slowed US motorcycle industry growth as the main factor for weaker retail sales. Harley-Davidson did not give details on its reorganization plans nor initially say how many jobs may be impacted.

The motorcycle maker’s shares surged 6.7 percent, to $53.01, in early afternoon trading on Tuesday. Harley-Davidson’s retail motorcycle sales fell 7.1 percent in the US during the third quarter. Weak US industry trends dragged on the company’s total global retail sales, which fell 4.5 percent.

“We continue to effectively navigate a fiercely competitive environment and an ongoing weak US industry,” said Matt Levatich, president and chief executive officer of the Milwaukee, Wisc., company. For the nine months ended Sept. 30, motorcycles registered in the US fell about 5.6 percent to 279,013, according to Motorcycle Industry Council data.

Ford cutting production as US demand slows

Ford Motor Co. is cutting production as U.S. demand for new vehicles slows, but so far, its rivals aren't doing the same. Ford said Tuesday it will temporarily idle four of its North American assembly plants this month to better align production with demand.

After six straight years of growth, U.S. sales of new vehicles are slowing. In the first nine months of this year, U.S. sales totaled 13.1 million new vehicles, up less than 1 percent from 2015.

"This is a roller coaster that's gone to the top," said Mike Harley, an analyst with Kelley Blue Book. "I wouldn't be surprised if other automakers follow suit."

But sales are still near last year's record-high levels, and so far, Ford's chief rivals are sticking to their production plans. General Motors Co. and Fiat Chrysler Automobiles both said Tuesday that all of their plants are operating normally. Toyota Motor Corp. said last month that it plans to increase production of Tacoma pickup trucks at its plant in Baja California, Mexico. Toyota is adding 400 workers and investing $150 million in the plant by 2018.

What’s driving the ‘restaurant recession’?

Wells Fargo ex-CEO John Stumpf resigns from Chevron, Target boards

John Stumpf resigned from the boards of Chevron Corp and Target Corp a week after he quit Wells Fargo & Co as chief executive bowing to pressure over its sales tactics.

Stumpf resigned for personal reasons and not as a result of a disagreement with Chevron, the second largest U.S.-based oil producer said in a regulatory filing on Tuesday. Chevron said on Oct. 3 that it supported Stumpf despite concerns about his leadership at Wells Fargo.

Stumpf joined the boards of Chevron and Target in 2010. Stumpf, who notified the companies' boards on Monday that he intends to resign, still serves on the board of Financial Services Roundtable, an advocacy group for the U.S. financial industry.

Wells Fargo said on Oct. 12 that Stumpf, 63, was retiring and would be replaced by President and Chief Operating Officer Tim Sloan. Stumpf's fall from grace started with a $185 million regulatory settlement among the bank, regulatory authorities and a Los Angeles prosecutor over its staff opening as many as 2 million accounts without customers' knowledge.

Once Jobless and Uncounted, Eager Workers Could Slow Fed Rate Hike

The crammed-to-capacity parking lot at a job training center in this St. Louis suburb is exhibit A for why the U.S. Federal Reserve remains at odds over the health of the U.S. labor market and how quickly interest rates should rise.

Among those in the building on a recent fall day, 23-year-old Joshua Goodson described his recent work history as a "dead end." Motivated by the prospect of a firm career foothold, he is now in a program at the Family and Workforce Centers of America that includes both a curriculum in heating and air conditioning installation, and the "soft" social skills needed to keep steady employment.

It will take a few months, but "I will get a job, and nail it," he said. As the nation's six year run of job creation reaches deeper into neighborhoods like Wellston and nearby Ferguson -- site of a police shooting two years ago that highlighted the depressed economic conditions in some U.S. neighborhoods -- Goodson is among a pool of sidelined workers returning to the labor force in unexpected numbers and more readily landing jobs.

That subtle but surprising shift has stoked fresh debate within the Fed over whether to risk slowing a process that is finally drawing in marginalized residents like Goodson, and showing up in middle and lower end incomes.

Rickards: Volatility Could Explode in a Matter of Weeks

Volatility is waiting to explode due to unstable currency exchange rates, bank liquidity crises, geopolitical uncertainty, and a wild U.S. election cycle. One or more of these potential sources of instability are ready to pop-up on the markets like a tightly jammed jack-in-the-box when someone unlocks the lid. The key to profits is to understand how to use volatility as a trading strategy. If you act now, you could reap huge rewards in a matter of weeks.

Most investors have some familiarity with trading specific instruments such as stocks, bonds, and gold. Investors also understand how options can be used to limit losses, and increase gains on trades involving those underlying instruments. But, volatility is an unfamiliar trading strategy to many. How can you trade volatility? And, how is volatility poised to offer huge gains?

In principle, trading volatility is no different than trading other more familiar instruments. The Chicago Board Options Exchange (CBOE) maintains a proprietary volatility index (VIX). It trades roughly in the range of 0 to 100 although as a practical matter it never reaches either extreme.

A volatility index level of 80 would be associated with something like the Panic of 2008. An index level of 10 would be associated with an unusually calm period of smooth sailing in financial markets. Most of the time the index trades between those levels. When you trade volatility, you are not betting on the direction of markets — you are betting on whether or not extreme moves are in store. Those extreme moves could be up or down for a variety of market measures. When you have a long position in volatility, you don’t care if a certain market goes up or down, you just care that markets are jumpy and moving in some unexpected or extreme way.

Why a Lame Duck Congress Is Bad News for Taxpayers | The Daily Signal

Hundreds Of Layoffs, Apple Car Not Happening

Apple's Project Titan is all tumbling down and the electric Apple Car some were expecting is apparently not going to see the light of day in this lifetime.

For a good while now, all signs seemed to point in this direction. We've already heard on several occasions that Apple's Project Titan plans were not going too well and the company was shifting its focus to car software rather than hardware. A new report now reiterates that the Apple Car is not happening.

Citing sources familiar with Apple's Project Titan, Alex Webb and Mark Gurman from Bloomberg report that Apple has "drastically scaled back its automotive ambitions, leading to hundreds of job cuts and a new direction that, for now, no longer includes building its own car."

The duo also report that Apple has broken down and reorganized the Project Titan team, with hundreds of people either departing or facing layoffs. Titan has reportedly been repurposed, now focusing on creating an autonomous driving system that would allow Apple to team up with other automakers or rekindle plans of making its own vehicle sometime in the future.

1 in 3 rehabilitated student loans may wind up back in default

The Consumer Financial Protection Bureau (CFPB) has some dire warnings for consumers trying to clean up their student loans. It says one in three borrowers who have rehabilitated their status could be driven back into default because of gaps between student loan programs.

“The consumer protections promised under federal law should make it nearly impossible for the most vulnerable consumers to be trapped in default,” said CFPB Director Richard Cordray. “Today’s report shows that far too many of these borrowers continue to fall through the cracks of a flawed student loan system."

The report, prepared by the CFPB's student loan ombudsman, examines debt collection and servicing problems plaguing the federal programs designed to help millions of defaulted student loan borrowers get on track and into affordable repayment plans.

The Bureau estimates that the breakdowns along the path out of default will cost borrowers hundreds of millions of dollars, including over $125 million in unnecessary interest charges over the next two years. The bureau is calling for an overhaul of these programs in order to help improve the recovery process for distressed consumers.

Nearly 400000 Michigan Residents Brace for Obamacare Spike

Michigan residents are bracing themselves for double-digit increases in prices for individual plans on the state’s Obamacare exchange.

The sticker price for individual plans on Michigan’s Obamacare exchange is set to go up to 16.7 percent next year and will go into effect starting November 1, 2016, when open enrollment on Healthcare.gov begins again, the Detroit Free Press reported.

Most people in Michigan do not pay the full sticker price for Obamacare because of the tax credit subsidies available to those who qualify, which increase as the premiums increase. This means that the cost of insuring people who get subsidies is ultimately shifted to the taxpayer.

Insurers are calling for higher rates because of rising health care and prescription drug costs, larger-than-expected insurance claims, and the end of a federal reinsurance program that gives money to plans with members who have very high claims. Insurance companies originally sought rate increases of 17.2 percent before the rates were approved by regulators.

Trump's Not The Only One Who Thinks the System Is Rigged

Why Americans Are Limiting Their Spending

Since 2014, a relatively stable 65% of Americans say they are limiting their spending. But with incomes once more on the rise (up 5.2% in 2015), the reason that the percentage isn’t changing is not stagnant incomes. Rather, Americans simply want to save more money.

According to the latest Financial Security Index from Bankrate, 30% of survey respondents say the reason they aren’t spending more is because they need to save more. Another 25% say they have limited spending because their incomes have not risen.

It doesn’t take a Nobel-prize winning economist to figure out that if American consumers spend less, then companies that make products Americans buy will make less. And if U.S.-based companies make less, then they need to spend less on employees and capital equipment.

As wages rise, especially at the lower end of the scale, spending should pick up because these are the consumers who most often need to buy more. When consumers buy more, American companies can hire more employees and invest more, and a virtuous cycle begins. At least that’s one theory.

Venezuela's oil giant warns of default next week

Venezuela's government-run oil giant -- the country's largest source of cash -- is warning that it could default on its bonds as early as next week. Petroleos de Venezuela S.A., or PDVSA, failed to get investors to agree on a deal to push back debt payments by three years. The company said it is extending its deadline for a third time so investors can accept a deal by Friday night. This time, it warned that things could get messy.

"If the exchange offers are not successful, it could be difficult for the company to make scheduled payments on its existing debt," PDVSA said in a statement Monday night. PDVSA owes $1.6 billion in principal and interest on October 28 and another payment of $2.9 billion is due on November 2 for a separate bond.

It's unclear if PDVSA may actually default or if it's trying to strong arm investors to take the deal. "I don't think they've prepared themselves for a default, I think it's mostly just a threat. The concern is that they're starting to talk about it," says Siobhan Morden, head of Latin America fixed income strategy at Nomura Holdings.

In total, Venezuela is asking investors to "swap" $5.3 billion of bonds due in 2017 with bonds due in 2020, essentially allowing the government to push back payments. But PDVSA hasn't been able to lure enough investors to accept the offering. It's led Standard & Poor's to cut its rating on PDVSA in mid-September to two notches above default.

What's a "good job"?

The Marketplace-Edison Research Economic poll asked respondents what attributes were important for a job to be considered a “good job.” The top selection among the choices offered was that the job provide health benefits — picked as “essential” by 73 percent of respondents. Next in line was “provide a good working environment,” followed by “provide opportunities for advancement,” and “make you feel valued.”

At the bottom of the list: “offer a salary rather than an hourly wage” (31 percent) and “provide flexible work hours” (40 percent).

Sarah Heidler is 48, and has worked at Hawthorne Auto Clinic in Portland, Ore., as a mechanic and service advisor since mid-2015.

“This is a fantastic job,” Heidler said, “because of the benefits, and the owners actually care about people and invest in people.” Heidler has raised two children — the youngest is still in high school — and has had her share of bad jobs, including “assistant manager at a convenience store — working 45 to 50 hours per week and still eligible for food stamps.”

Students are graduating with $30,000 in loans

College grads left school with more debt in 2015 than they ever have before. The average undergraduate student borrower is facing $30,100 in loans, up 4% compared to the year before, according to a report from The Institute of College Access and Success released Tuesday.

That means they'll be paying about $300 a month over 10 years. The report might underestimate the average debt. It excludes students who went to for-profit colleges, because so few of those institutions report relevant data. But a majority of for-profit students do borrow money.

"Overall, there's been a tremendous increase in the number of graduates with student debt compared to the previous generation," said Lauren Asher, the president of TICAS. In 1993, less than half of new, four-year graduates had loans. As of last year, it was 68%.

For years, the cost of college has been going up and rising faster than family incomes. Private colleges cost families an average of $26,400 last year, which would account for nearly half of the median family's income. Public colleges cost $14,120 for in-state students, or 25% of family income. One reason the cost is rising is because states have been cutting funding to public colleges and universities, where a majority of Americans go to school. Average state funding per student remains 18% lower than before the recession.

Central Bank Bubble: How Its Size Is Expanding

Are global central banks creating a financial bubble? Central banks' intervention to stave off deflation and help the global economy recover from the 2008 financial crisis is showing signs of strain. They have allowed their balance sheets to balloon, with the ten largest central banks owning a whopping $21.4 trillion in assets. According to detailed story in Bloomberg, this is a 10% increase year over year from 2015, and now represents nearly one-third of the wealth of the global economy.

To blame for this staggering amount of central bank assets is the tactic of quantitative easing (QE), or the purchase of non-governmental securities in exchange for newly "minted" money. The goal of QE is not only to inject money into the economy but also to stabilize asset prices to keep them from falling in to deflation.

Europe's various banking crises (Italy, Greece, Spain) have encouraged central banks' use of QE, along with similar efforts in Japan and elsewhere. With QE, it is difficult to stop the asset purchases, since doing so would potentially pull the bottom out of the support central banks are giving, and at the same time signal to investors who get spooked.

Low interest rates are also partly to blame, since they are encouraging a speculative buying spree in bonds, sovereign and corporate alike - including purchases made by central banks themselves. According to Bloomberg, the growth of central-bank holdings has coincided with the mostly upward trend of stock and bond prices. As the top 10 central banks expanded their balance sheets by 265% over the past decade, the MSCI All Country World Index of equities gained 19% and the Bloomberg Barclays Global Aggregate Index of bonds advanced 50%.

Here's what the typical American retiree spends on health care

It's no secret that health care costs aren't getting any lower. In fact, over the past 50 years, health care costs have grown at an annualized rate of 6%. This means that health care costs today are more than 18 times higher than they were in 1966. Even so, you might be shocked to hear just how much American retirees should plan to spend on health care expenses.

A recent report by Fidelity concluded that the average 65-year-old couple retiring in 2016 will need $260,000 to cover their medical expenses throughout retirement. This is a 6% increase over Fidelity's findings a year ago, and can be attributed to longer life expectancies, rapidly rising prescription drug costs, and higher medical-service utilization levels.

Furthermore, this estimate doesn't include the cost of long-term care insurance, which, according to Fidelity's report, can add another $130,000 to the lifetime tab. This assumes that a retired couple in good health purchases a policy with a maximum $8,000 monthly benefit for three years, with an inflation adjuster of 3% per year.

Another recent report, from HealthView Services, concluded that the lifetime tab for a 65-year-old couple would be $266,589 — consistent with Fidelity's findings. However, this amount includes only premium expenses and assumes the couple is covered by Medicare parts B and D, as well as a supplemental insurance policy. For total health care expenses, including items like dental and vision care, co-pays, and all other out-of-pocket costs, the estimate rises to $394,954. Notably, this doesn't take inflation into account — these figures are in today's dollars.

Getting rid of cash could have some pretty weird effects on our bodies

Harvard economist Ken Rogoff has a long list of reasons he's anti-cash. He says many countries should get rid of most paper money in favor of electronic payments. But one possible benefit he does not spend a lot of time discussing is our health.

Rogoff argues in his new book, "The Curse of Cash," that large notes like fifties and hundreds are used primarily for tax evasion and crime. They don't help most people buy groceries or clothes, purchases increasingly made with plastic or by electronic means. "What's going to happen is someday cash gets used less and less in the legal economy," Rogoff told Business Insider. "It's already the case, and that's just going to continue."

But if we did ditch cold, hard cash in favor of electronic money, there is some evidence that it could have significant effects on our physical and emotional well-being.

It's a misnomer to call cash "paper currency," at least in the US. Bills are 75% cotton and 25% linen, according to the Bureau of Engraving and Printing. This makes American cash extremely absorbent to the many kinds of bacteria we encounter every day, says Chris Mason, a microbiologist at Cornell University. "The paper is like a little sponge wandering around and can serve as a bit of an echo of the bacteria and the people which it has encountered over time," Mason told Business Insider. According to the Dirty Money Project, a 2014 research project led by NYU biologist Jane Carlton, each bill contains about 3,000 types of bacteria. Some of the bacteria are harmless, but others can spread DNA from drug-resistant microbes and spread pathogens that cause skin infections and stomach ulcers. If we got rid of cash, many of those microbes could relocate to other surfaces or disappear entirely, for better or worse.

Keiser Report: Mom joins in

Gap To Close Banana Republic Stores In The UK

Mall stalwart Gap’s rough year — including a distribution center fire, store closures, and a “too normal” clothing line — is getting a bit rockier, as the company announced it will soon close most of its Banana Republic-branded stores across the pond.

Bloomberg reports that the Gap will close the eight Banana Republic stores in the UK by the end of the year.

A spokesperson for the company says customers in the U.K. can continue to purchase apparel and other items on the chain’s website. Additionally, one Banana Republic store will remain in each Italy and France.

The closures aren’t exactly surprising: Gap announced it would review Banana Republic’s overseas presence and would close what it deemed were poor-performing stores earlier this year, Bloomberg reports. Sales at Banana Republic’s European division have dwindled in recent years, falling 15% in the most recent quarter.

Will tiny increase in Social Security benefits for 2017 make a difference?

Social Security recipients including retirees, disabled workers, veterans, and their families can expect a 0.3 percent increase in their payments next year, said the federal government Tuesday.

For retired workers, the increase amounts to a $5 per month bump in pay for an average monthly stipend of $1,360 starting in January 2017, according to the Social Security Administration. Disabled workers will see $4 more in their benefits checks, or a total of $1,171 on average.

While the small increase for next year is welcome news for the upwards of 60 million of Americans who receive Social Security benefits, it will be the smallest bump (aside from years in which there was no increase) since the Social Security Administration (SSA) began tying annual increases to the rate of inflation in the mid 1970s, according to the American Institute for Economic Research (AIER).

Last year's rate didn't increase because of the flat inflation rate of that time, which resulted largely from low energy prices. On average, the SSA has increased payments by 2.3 percent each year since 2000, calculates the institute. If that rate had applied in 2017, it would have added $28 a month to people's benefits checks at current average benefit levels.

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