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Monday 06.20.2016

Boeing negotiating deal to sell 100 airplanes to Iran

Boeing Co. is negotiating a deal to sell 100 airplanes to Iran, state-run media reported Sunday, a sale potentially worth billions that would mark the first major entry of an American company into the Islamic Republic after last year's nuclear deal.

Chicago-based Boeing declined to discuss details of the talks or the figure of 100 planes, attributed to Ali Abedzadeh, the head of Iran's Civil Aviation Organization.

Boeing said in a statement to CBS News transportation correspondent Kris Van Cleave: "We have been engaged in discussions with Iranian airlines approved by the USG about potential purchases of Boeing commercial passenger airplanes and services. We do not discuss details of ongoing conversations we are having with customers, and our standard practice is to let customers announce any agreements that are reached. Any agreements reached will be contingent on U.S. government approval."

Regulatory hurdles and U.S. sanctions that remain in place after the nuclear agreement could complicate the deal. Despite efforts by the U.S. State Department to encourage trade to Iran, many American firms remain worried about the legal and political ramifications of any agreements with the country.

Here’s what the Brexit vote could mean for the US stock market

Uncertainty about the Brexit vote may be the greatest danger to markets right now. People simply have no precedent for how US markets could be affected by Britain leaving the European Union.

Two recent reports, one led by Citigroup’s Tobias Levkovich and another by FactSet’s John Butters, attempt to quantify how much exposure US-based companies actually have to the turmoil across the Atlantic. Levkovich looked at the S&P 500’s (^GSPC) exposure to all of Europe, instead of just the UK. Even considering that, he found that the exposure was not that high.

“With Europe directly accounting for 9% of S&P 500’s constituent sales, of which a good chunk comes from stable businesses in areas like food, drugs and beverages, a Brexit vote is unlikely to be disruptive,” Levkovich noted.

Given that people are likely to keep buying these necessities, regardless of a Brexit, the main direct damage to sales will likely come from the swing in foreign exchange rates instead. The pound and euro may weaken as a result of voters voting to leave the EU. The volatility over the vote may also cause investors to start converting all sorts of currencies into dollars, (as it is seen as a “safe haven”) causing the dollar to strengthen, while the pound and euro are already weakening. A strong dollar hurts exporters, making goods more expensive and less competitive in overseas markets. Furthermore, overseas sales become worth less when they’ve been converted back into dollars.

China: Heading for a Great Depression?

“Capitalism was driven by investment, savings, capital accumulation, reinvestment and capital accumulation… But history got in the way…” In yesterday’s reckoning, economist and author Richard Duncan explained “creditism.” And how it came to replace good old-fashioned capitalism, now dead beyond recall.

World War I forced warring nations off the classical gold standard. The Great Depression and World War II put the final stakes through capitalism. Government spending, based on the expansion of credit-backed money, was the new order of the day. Thus, creditism was born.

Creditism scotched the Nazis. It buried the Soviet Union. It also sparked one of the great economic booms in history as it ushered in a new era of globalization. Thus, an economic backwater like China could develop into the world’s second-largest economy. But the laws of economics will not be forever conned. Trees don’t grow to the sky. Imbalances must be righted. Debts must be paid….

Creditism has produced booms and busts and the devil and all the other disorders to which a credit-based monetary system is prone.

David Stockman: Sell The Bonds, The Stocks, Get Out Of The Casino!

Thanks to the Fed, $1300 Gold Is Just the Start

Markets continued to worry about the upcoming Brexit vote while witnessing another version of the Federal Reserve‘s ongoing revival of Hamlet.

Something is indeed rotten in “Denmark,” aka the Fed’s headquarters in D.C.’ Marriner Eccles Building – namely that the central bank has no clue what it is doing and appears hell-bent on driving the U.S. economy (and the rest of the world) over a cliff. Janet Yellen said it herself…

In fact, she admitted as much last week (at least the first part, that she has no idea what she is doing) in her press conference when she was asked by CNBC reported Steve Liesman if the Fed has lost credibility since it never does what it says it will do.

Her answer was largely incomprehensible – a paean perhaps to her predecessor Alan Greenspan who never met a sentence he couldn’t mangle – but the gist of it was that she and her colleagues have no idea what is going on in the U.S. economy.

US economy just 'doesn't want to grow up:'

The United States, along with the European Central Bank and Bank of Japan, are stuck overseeing 'Peter Pan' economies that refuse to wean themselves off cheap money policies.

That assessment comes from Bank of America-Merrill Lynch Global Research's head of high yield and relative value strategy, who saidFederal Reservechair Janet Yellen and her global central banking counterparts have been reduced to little more than high ranking babysitters.

"A Peter Pan economy is an economy that just doesn't want to grow up," Michael Contopoulos recently told "Fast Money."The central bankers of the U.S., Japan and Europe "are like three nannies managing the economies. And, that's what they're supposed to be doing.

Speaking about the central banks' mandate for price stability, Contopoulos added: "If you think about it, their job is to spur inflation and growth. It's to baby the economies forward. It's just not happening though." The analysis coming as the ten-year Treasury note yield fell to multi-year lows this week, breaking the 1.60 percent mark. Meanwhile, the Fed decided leave interest rates unchanged.

The Next President Will Likely Face A Recession

The U.S. is overdue for a recession. The economy has been growing for seven years now. The average Post World War II expansion cycle lasts less than five years, according to the National Bureau of Economic Research.

No one knows exactly when the next recession will hit. Predicting that is similar to forecasting what will happen to the stock market: It's easier said than done. But more and more experts believe the U.S. economy will falter in 2017 or 2018 -- just as Hillary Clinton, Donald Trump or Gary Johnson is trying to push his or her big agenda forward.

"I think the end of 2017 or the start of 2018 is quite possible for a recession," says Brad McMillan, chief investment officer at Commonwealth Financial. "All the indicators seem to be lining up for that time frame."

The business community is also worried. "Our expectation is the economy will be relatively weak. The next president is going to need a plan right out of the gate," says John Engler, president of the Business Roundtable. The group has spoken with both Clinton's and Trump's campaigns about ideas to spur growth.

Britain debates membership in EU before Brexit vote

Uber Reportedly Shopping Hyundai For Self-Driving Fleet

Up until now, most companies have been going it alone on autonomous car technology and initiatives. But recently self-driving has made for strange bedfellows.

In April, automakers Ford and Volvo, ride-sharing rivals Lyft and Uber and tech giant Google joined forces to form the Self-Driving Coalition for Safer Streets. And last month Google announced a partnership with Fiat Chrysler Automobiles to turn the automaker’s new Pacifica minivan into a self-driving test mule.

Now, according to Maeil Business News Korea, Uber wants to partner with Hyundai on the development of self-driving technology in the automaker’s home country, and is also poised to place an order for a huge number of Hyundai vehicles. The outlet also reported that Uber recently visited Hyundai’s Namyang research and development facility in Hwaseong on a reconnaissance mission.

With Uber operating in 71 countries and 438 cities, such a partnership could mean a need for millions of vehicles from the Korean company to fuel the ride-sharing company’s global growth.

DOJ Will Censor All References To Islamic Terrorism From Orlando 911 Call Transcripts

In the ongoing war of words between president Obama on one hand, who has repeatedly said that Orlando shooter Omar Mateen was "self-radicalized" and was not influenced by Islamic elements, and Donald Trump prominently on the other, where the Republican presidential candidate has repeatedly alleged that Mateen's actions were provoked by "radicalized Islam" which has prompted Trump to renew his calls for a temporary ban on Muslim immigrants as well as profiling Muslims already in the US, it appears that the president is about to get some much needed help from none other than the Department of Justice, which will step into the debate, by releasing Mateen's 911 transcripts however only after heavy edits which censor and remove all references to Islamic terrorism.

As RealClearPolitics writes, in an interview conducted earlier today with NBC's Chuck Todd, Attorney General Loretta Lynch said that on Monday the FBI will release edited transcripts of the 911 calls made by the Orlando nightclub shooter to the police during his rampage. One minor matter: the transcripts will be heavily edited.

"What we're not going to do is further proclaim this man's pledges of allegiance to terrorist groups, and further his propaganda," Lynch said. "We are not going to hear him make his assertions of allegiance [to the Islamic State]." Why: so Obama's statement that he was "self-radicalized"

The Washington Post reported last week that the gunman made multiple phone calls while holding hostages: "The gunman who opened fire inside a nightclub here said he carried out the attack because he wanted 'Americans to stop bombing his country,' according to a witness who survived the rampage." Salon reported that: “Everybody who was in the bathroom who survived could hear him talking to 911, saying the reason why he’s doing this is because he wanted America to stop bombing his country."

Paul Ryan: It's up to Republican delegates if they want to change their minds about Trump

Decade after housing peaked: Owners richer, renters hurting

It's a troublesome story playing out across America in the 10 years since the housing bubble peaked and then burst in a ruinous crash: As real estate has climbed back, homeowners are thriving while renters are struggling. For many longtime owners, times are good. They're enjoying the benefits of growing equity and reduced mortgage payments from ultra-low rates.

But for America's growing class of renters, surging costs, stagnant pay and rising home values have made it next to impossible to save enough to buy.

The possible consequences are bleak for a nation already grappling with economic inequality: Whatever wealth most Americans possess mainly comes from home equity. An enlarged renter class means fewer Americans can build that same wealth and financial security. Nearly two-thirds of adults still own homes. And some who rent do so by choice. Yet ownership has become a more distant dream for the many Americans who still regard it as a route to prosperity and pride. The problem has become especially severe in areas that offer the best job prospects as well as those that have been battered by foreclosures.

"It doesn't paint a pretty picture," said Svenja Gudell, chief economist at Zillow, the online real estate database company. "You're really blocking out a group of buyers from owning a home. They're truly living paycheck to paycheck, and that does not put them into a good position to buy."

Is The End In Sight For Alaska’s Oil Based Economy?

Alaska has long been one of the few U.S. states without an income tax. Thanks to its incredible bounty of natural resources, the state had more than enough cash coming in through oil company taxes and especially Prudhoe Bay production. All of that is starting to change. After a 40 year oil boom that transformed Alaska from a frozen tundra into one of the richest states in the country, the oil price crash is bringing reality back to bear.

Alaska’s problems go deeper than the current oil price collapse though. Simply put, the state is getting long in the tooth – at least as far as its productive assets go. The Prudhoe Bay Oil field, once the largest such field in North America, is starting to reach the end of its life. In 1985, the Prudhoe Bay field was pumping 2 million barrels per day – roughly a quarter of the total U.S. output. Today it is pumping 500,000 barrels a day. That’s leaving the 800 mile Trans-Alaska pipeline seriously under-utilized.

Roughly 90 percent of Alaska’s general fund revenues are tied to oil. Between the oil price collapse and the inexorable decline of oil production over time, Alaska now faces a $4B budget deficit, all while the state has slid into an oil related recession over the last year. With the State’s rainy day fund burning through $11 million per day, that energy fund will be exhausted in less than two years.

All of this is a new challenge for Alaska and its roughly three-quarters of a million residents. Alaska has traditionally lightly yoked its residents with the lowest tax burden of any state across the country. In contrast, it has also had the highest per capita spending in the country thanks to its vast swath of territory. Both facets of this social compact may have to change. The State and its new governor, Bill Walker are already looking closely at implementing a state income tax for the first time in 35 years. Walker is also looking to double the gas tax and cut corporate incentives for energy firms.

US Wants to Keep the $100 Bill

The U.S. government has no intention of scrapping the $100 bill in an attempt to thwart criminal activity, The Wall Street Journal reported.

Peter Sands, a Harvard University fellow and former bank executive, wants to get rid of the $100 bill, the 1,000 Swiss franc note, the 500 euro note and the 50 British pound note because those high denominations make it easier for criminals to conceal large sums of cash and eliminating them would make it tougher for the bad guys to do business.

“My argument is if you have something that society doesn’t really need but illegal activity really likes, why are you producing it?” Sands, a former chief executive of Standard Chartered PLC and a senior fellow at Harvard’s John F. Kennedy School of Government, told the WSJ.com.

A spokeswoman for the Treasury Department said the agency has no plans to drop the $100 bill. "Even if the U.S. did drop the $100 bill, several government agencies predicted criminals would simply gravitate to whatever denominations were available," the WSJ reported.

Republican Operatives Launch All-Out Effort To Unbind The Delegates And Deny Trump The Nomination

If you think that Donald Trump already has the Republican nomination locked up, then you don’t understand what is going on behind the scenes. It has long been my contention that the elite will move heaven and earth in order to keep Trump from ever setting foot in the Oval Office. One way that they could try to do this is by attempting to deny him the nomination at the Republican convention next month. Over the past couple of days, the Washington Post, CNN and a whole host of other mainstream news outlets have been reporting on a new “last-ditch effort” that has been launched by Republican operatives to get the Republican convention Rules Committee to unbind all of the delegates and allow them to vote however they want. As you will see below, they can do this, and if they get enough votes they will do it.

This current effort is different from what we have seen so far during this campaign season, because it is actually being organized by the delegates themselves. The following comes from the Washington Post…

Dozens of Republican convention delegates are hatching a new plan to block Donald Trump at this summer’s party meetings, in what has become the most organized effort so far to stop the businessman from becoming the GOP presidential nominee.

The moves come amid declining poll numbers for Trump and growing concern among Republicans that he is squandering his chance to defeat Democrat Hillary Clinton. Several controversies — including his racial attacks on a federal judge, his renewed call to temporarily ban Muslims from entering the United States and his support for changing the nation’s gun laws — have raised fears among Republicans that Trump is not really a conservative and is too reckless to run a successful race.

The Dumbest Monetary Experimental End Game In History

We have seen several explanations for the financial crisis and its lingering effects depressing our global economy in its aftermath. Some are plain stupid, such as greed for some reason suddenly overwhelmed people working within finance, as if people in finance were not greedy before 2007. Others try to explain it through “liberalisation” which is almost just as nonsensical as government regulators never liberalised anything, but rather allowed fraud, in polite company called fractional reserve banking, to grow unrestrained. Some point to excess savings in exporting countries as the culprit behind our misery. Excess saving forces less frugal countries reluctantly to run deficits, or so the argument goes.

While some theories are pure folly, others are partial right, but none seem to grasp the fundamental factor that pulled and keep pulling the world into such unsustainable constellations witnessed in global finance, trade and capital allocation.

Whenever we try to explain the reasons behind the crisis, such as the build-up in non-productive and counterproductive debt people ask us why did this happened now, and not earlier? It is a fair question that we have thought about and believe have one simple answer. Bottom line, the world economy is running on a system with no natural correcting mechanisms.

As we are never tired of pointing out, the Soviet Union only had one recession, the one in 1989. The system was stable, until it was not. A system that does not correct internal imbalances grows just like a parasitic cancer, eventually killing its host. If unsustainable capital allocations are allowed to continue unchecked, the pool of real savings will at some point be depleted. At that point recession hits because the structure of production is too capital intensive relative to the level of real saving available. A quick look at US saving and investment rates since the 1950s confirms what we all know to be true; saving and investments are not keeping up with GDP growth.

The World Economy Looks a Bit Like It's the 1930s

To understand today’s global economy, look back 80 years. Just like in the 1930s, growth is being constrained by companies unwilling to spend, falling inflation expectations and governments backing away from fiscal stimulus.

The trigger for the current malaise was the financial crisis that left a hangover of debt and deleveraging amid tighter banking regulations that are exacerbating deflationary pressures. It’s similar to the kind of shock that preceded the 1930s slump, according to an analysis by Morgan Stanley economists led by Hong Kong-based Chetan Ahya.

"We think that the current macroeconomic environment has a number of significant similarities with the 1930s, and the experiences then are particularly relevant for today," they wrote. "The critical similarity between the 1930s and the 2008 cycle is that the financial shock and the relatively high levels of indebtedness changed the risk attitudes of the private sector and triggered them to repair their balance sheets."

Like then, the end result could be a prolonged weak period and subdued inflation expectations, with a risk that those price expectations are un-anchored. The danger is that central banks move too quickly to raise interest rates or governments cut back on spending, triggering an even deeper slowdown.

Unum planning to outsource 300-400 jobs

There is growing speculation over possible layoffs at one of Portland's largest employers.

A Florida attorney, who runs a website aimed at protecting U.S. workers, says Unum is planning to outsource 300-400 jobs.

Next to the Unum employees, no one is more concerned about possible layoffs at Unum than Portland Mayor Ethan Strimling. He says he plans on meeting with Unum leaders to make sure those jobs stay right in Portland.

"We certainly don't want to lose any jobs," Strimling said. "Unum is a great partner to the city." Unum is the second largest employer in Portland with more than 3,000 workers. The website "protectusworkers.org" reports Unum is about to outsource hundreds of technology jobs.

NEWS to Disturb the Comfortable...

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