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Friday 05.20.2016

Gap is closing 75 stores and says layoffs coming

Gap is closing a bunch of stores and could layoff workers soon. In its earnings results Thursday, the clothing retailer said it is closing 53 Old Navy stores in Japan, as part of a shift to markets, mostly in North America, where the brand is most popular.

It also expects to close 75 Banana Republic stores. Gap expects to achieve $275 million in annual pre-tax savings through these closures.

Bloomberg reported that Gap could layoff staff, mostly at its headquarters, as part of a restructuring process. The retailer reported adjusted earnings per share of $0.32, and revenues of $3.44 billion, in line with forecasts.

Same-store sales — at locations open for at least one year — fell 5%; they were forecast at -7%. Like other department stores, Gap's sales have been getting slammed by declining foot traffic to stores. The company reported weaker-than-expected monthly sales again in April, signaling that the company's turnaround strategy is still not gaining the expected traction.

Caterpillar retail sales drop 12% in first three months of the year

World's number one heavy equipment manufacturer Caterpillar (NYSE:CAT) logged Thursday retail machines sales results for the first three month of the year, which were down 12% compared to the same period of 2015, making it the 41 straight month of sales declines.

Energy and transportation led the drop, down 34%. Resources industries sales followed close, recording a 28% fall, while sales to the construction industries were down 7% in the period.

With sales and operations at the ends of the earth, few companies are in a better position to take the pulse of the global economy and the resource sector in particular than Caterpillar.

The Peoria, Illinois-based firm has been hit hard by the decline in mining and construction — global sales are down more than $20 billion from its peak just four years ago after a drop of over $8 billion last year.

Fed economist: We talk too much to public with 'limited attention span'

When it comes to communicating with the public, the Federal Reserve may find it just talks too much. That at least is the view of Dallas Fed economist Antonella Tutino, who believes "the public's limited attention span" makes lengthy and complicated Fed statements a detriment to effective communication.

"A central bank should be concerned about overwhelming the private sector with too many details in its pronouncements," Tutino said in an analysis on the branch's website. "In so doing, it runs the risk that the less-than-fully engaged public may misinterpret the statements, leading to an unintentional and counterproductive response."

Indeed, the Fed has experienced a communication gap with the public and the markets as it has tried to normalize policy after the extraordinary measures it took during the financial crisis.

Starting essentially with the "taper tantrum" in 2013, the Fed has had a series of clumsy experiences in trying to get the market used to any tightening. Most recently, central bank officials have expressed frustration with the market's low expectations for rate hikes this year.

The End of the Tech Boom May Be Upon Us

Here's How Easy it is to Lose Money in the Stock Market Right Now...

Trading’s not supposed to be easy. But this is getting ridiculous… The major averages were sprinting to their fourth whipsaw day in row Wednesday. As if this choppy action didn’t create enough confusion, the Fed’s now whispering that it might raise rates next month. By the end of the trading day, the major averages were mostly breakeven as traders dumped utilities and jumped into bank stocks…

The market’s a hot mess once again. After a brutal start to the year and an improbable run off its lows, the S&P 500 has sagged back to breakeven on the year. It doesn’t matter if you’ve bet big on breakouts or breakdowns this year. If you didn’t take the money and run, you’re right back where you started—or worse.

Sure, the S&P is around the same spot it was in late 2014. But that fact doesn’t come close to describing what the painful, never-ending chop has done to traders and investors. Let me explain… They say a rising tide lifts all boats.

During a bull market, most stocks move higher. Sure, you’ll see market leaders that easily beat the major averages. And you’ll have your lagging stocks that might post modest gains—yet trail their benchmarks. But overall, the rising tide is forgiving. Investors’ boneheaded mistakes aren’t punished as severely as you would see in a down market. Traders aren’t blowing up their accounts. No one is scared.

A Former Banker’s Push to End ‘Too Big to Fail’

When he left Goldman Sachs to join the Treasury Department in 2006, Neel Kashkari held a worldview that played to type. “I was a free-market ideologue,” he said.

Then came a huge, sudden financial crisis, and the free-market ideologue found himself sending bailouts to Wall Street in hopes of averting a second Great Depression. Later, Mr. Kashkari ran an improbable (and unsuccessful) race for governor of California, in which he felt up close the fear, anxiety and anger of financially squeezed voters.

Now president of the Federal Reserve Bank of Minneapolis, Mr. Kashkari is no longer a free-market ideologue. “Maybe a humbled pragmatist,” he said. “Markets can make mistakes, and sometimes those mistakes can be incredibly costly.”

That’s why Mr. Kashkari these days sounds a little like Bernie Sanders, the Democratic presidential candidate. He, too, believes that the Dodd-Frank regulatory overhaul enacted under President Obama didn’t go far enough — and that the biggest banks may need to be broken up. That led him to create the “Ending Too Big to Fail” initiative. It hasn’t settled on recommendations for reducing the risk that bailouts would be needed during the next financial crisis, whenever it occurs, but the initiative has unsettled and confused some erstwhile Republican allies. “I’ve had people call me up and say, ‘What the hell are you doing?’ — friends of mine,” he said with a grin.

Most Americans Don’t Know About Ride-Sharing and the ‘Gig Economy’

If you think ride-sharing and the gig economy are taking over the world, you might be living in a bubble.

New research from the Pew Research Center shows that ride-hailing and home-sharing and grocery delivery and shared office spaces remain unfamiliar phenomena to the majority of people in the U.S. despite substantial inroads among young urbanites.

For its new research, Pew polled 4,787 American adults on their usage and awareness of services that are variously called the sharing economy, the on-demand economy or the gig economy. For most Americans, this technology has not permeated their lives yet. The only service that most Americans have used is purchasing second-hand goods online, such as the online auction site eBay. In second place, a large number of Americans — 41% — have also used programs offering same-day or expedited delivery, a service offered by the retailer Amazon.

But typically when people talk about the sharing economy or gig economy, they’re talking about platforms that allow people to rent out rooms in their homes, or use their cars to give people rides or deliver groceries. And for now, these are much less common. Only 15% of adults have used ride-hailing services, like those offered by Uber and Lyft. Only 6% have ever had their groceries delivered, and only 4% have hired someone online to perform errands and tasks.

65-Year-Old Retirees Projected To Spend $377K On Health Care

HealthView Services' new 2016 Retirement Health Care Costs Data Report explores emerging trends and provides detailed projections of health care expenses in retirement. The report, which was released today, reveals that health care costs for retirees, driven by health care inflation, age, and increased cost shifting, are continuing an upward trajectory.

HealthView's data shows the average healthy 65-year-old couple retiring this year is projected to spend $288,400 in today's dollars on lifetime Medicare Parts B, D and supplemental insurance (Plan F) premiums. When dental, hearing, vision and all other out-of-pocket expenses are included, the total retirement health care bill rises to $377,412.

"Few Americans have taken steps toward addressing medical expenses in retirement, and most do not understand Medicare costs," said Ron Mastrogiovanni, Founder and CEO of HealthView Services. "Our data shows the significant impact of rising health care costs and the importance of planning for them."

For retirees counting on Social Security income, HealthView Services' Retirement Health Care Cost Index® shows the portion of benefits required to cover projected lifetime medical expenses. A 66-year-old couple retiring this year will need 57% of their Social Security to cover total health care costs. A 55-year-old couple retiring in 10 years will require 88%, and a 45-year-old couple, 116%. These calculations are based on Social Security Trustees' projections of a 3.1% Cost of Living Adjustment (COLA) in 2017 and 2.7% thereafter. According to Mastrogiovanni, "What has not changed is that many Americans will still see a significant portion of their Social Security income consumed by health care costs; for some, medical expenses could eventually exceed their benefits."

The Biggest Bubbles: China vs. the U.S.

There is perhaps no other area where the tunnel-vision, hypocrisy, and corruption of the U.S. media is more visible than with respect to its nearly incessant China-bashing. Previous commentaries have exposed such vacuous drivel again and again and again.

While the subject matter of the Corporate media’s China-bashing varies month to month, regularly interspersed in this propaganda are numerous variations of “China’s economy is in a bubble.” Once again this week, this is a theme in the U.S. mainstream media . Once again, we see hypocrisy of epic proportions.

Chinese markets have rarely looked more like Vegas casinos. In recent weeks, investors have driven up trading volumes in China to astronomical levels, betting on everything from rebar to eggs. China traded enough steel in one day last month to build 178,082 Eiffel Towers and enough cotton to make at least one pair of jeans for every person on the planet.

Admittedly, numbers such as these should give any sober individual cause for concern. They are an obvious symptom of the global phenomenon of worthless, paper currencies being used to pump-up, manipulate, and destabilize our markets – to a degree never before seen in the history of our species. However, singling out China’s markets as being “prone to bubbles” represents hypocritical blindness on the part of the U.S. media which is too absurd to be accidental. In the United States, there is a little thing called “the derivatives market”. The “notional value” of this market is somewhere in excess of $1.5 quadrillion – more than 20 times larger than the entire, global economy.

Auto loans roar to trillion dollar level

With auto sales cruising at a near record pace, the amount of money borrowed by car, truck and SUV buyers topped $1 trillion for the first time ever. Experian, which tracks auto loans, says the total amount of auto loans in the first quarter of 2016 was $1.005 trillion, up 10 percent from the same period a year ago.

"We're still seeing strong sales projections which will help fuel this growth," said Melinda Zabritski, Experian senior director of automotive finance. After hitting an all-time high 17.46 million vehicles sold last year, the auto industry continues to enjoy strong sales. During the first third of 2016, the pace of sales was more than 17 million vehicles, with the busy summer season expected to push that pace even higher.

Driving those sales and the larger loan balances is demand for trucks and SUVs, which sell at higher prices than cars. Meanwhile, the popularity of leasing a new car or truck shows no sign of slowing.

In the first three months of 2016, open leases jumped 27 percent to an all-time high of $76.9 billion. Experian's early analysis of auto loans held in the first quarter of the year also found a slight increase in the amount of money being borrowed by those with subprime credit ratings.

Lawmakers Introduce Bill to Help Puerto Rico's Debt Crisis

Lawmakers have introduced legislation to help Puerto Rico alleviate its massive debt crisis -- including allowing employers to pay less than the minimum wage during a specific time period.

U.S. Treasury secretary Jack Lew said he was "disappointed" that the measure didn't include some of the Obama administration's proposals, but called the legislation "a positive step in the right direction." "We are pleased the bill reintroduced in the House last night includes restructuring tools for Puerto Rico that are comprehensive and workable," he said in a statement today.

The U.S. territory has been mired in a recession and weighed down by $70 billion in public debt. The island is likely to default on $2 billion in debt due on July 1. Yesterday, lawmakers reintroduced a bill in the House that would let Puerto Rico restructure all of its liabilities and provide no bailouts for any creditors, Lew notes.

The Puerto Rico Oversight, Management, and Economic Stability Act, or PROMESA, addresses various aspects of the island's struggling labor market to make it easier for businesses to supposedly hire and keep workers.

Stocks tumble on Fed talk, Dilma Rousseff sits down with RT

Hedge Funds Dump Apple Stock in Q1

When the going gets tough, the tough often leave town. In the first quarter of 2016, global hedge funds reduced their exposure to equities by 6.9%, more than four times the fourth-quarter 2015 drop. Apple Inc. (NASDAQ: AAPL) was the most heavily purchased stock in the prior quarter and the most heavily sold in the first quarter. The top 50 funds sold some $7.1 billion worth of Apple stock in the first quarter, compared with purchases of $2.2 billion in the fourth quarter of 2015.

The main contributor the dumping of Apple shares was the $4.8 billion sale by activist investor Carl Icahn, who dumped his entire stake in the company.

Overall, the 50 top hedge funds dumped $55 billion in U.S. equities in the first quarter, about half of which came from companies with market caps greater than $50 billion. Large cap stocks ($10 billion to $50 billion, according to FactSet) accounted for another $20 billion of the equity sell-off.

All 10 market sectors were sold off last quarter, led by the tech sector, where equity sales totaled $18.7 billion. Equity sales in the energy and consumer discretionary sectors rounded out the top three most-sold in the first quarter. Broadcom Ltd. (NASDAQ: AVGO) was the second most heavily sold tech sector stock, with $5.6 billion in sales in the quarter. Facebook Inc. (NASDAQ: FB) was the most purchased stock in the tech sector during the first quarter, with hedge funds adding more than $3 billion to their holdings. EMC Corp. (NYSE: EMC) was the third most acquired tech sector stock as the top 50 hedge funds added $1.8 billion to their holdings.

NFL Admits More Than $700K in Taxpayer Funds May Have Been Used for Military Tributes

Some of the tear-jerking moments honoring U.S. heroes at sporting events may have been paid for, the NFL admitted today. ABC News first reported last November on documents it exclusively obtained showing more than 70 contracts with specific mentions of patriotic moments for which major league sports received taxpayer money to stage, totaling more than $6 million in taxpayer money.

In a letter released exclusively by ABC News to the senators investigating the practice, NFL Commissioner Roger Goodell admits, following an independent audit of “contracts between NFL clubs and the military,” that more than $700,000 in payments may not have been used for recruitment activities, but instead for honoring troops.

“On this basis, the audit identified $723,734 over those four seasons that may have been mistakenly applied to appreciation activities rather than recruitment efforts,” Goodell explains in the letter. “This amount will be promptly returned in full to the taxpayers.”

Senators Jeff Flake and John McCain, both R-Ariz, the senators investigating the allegations, praised the NFL in an interview with ABC News for its response, saying it is the first time either of them can remember an organization admitting it may have been at fault and taking action to rectify. “This is the first time that I can remember where an organization has not only owned up to it but actually sought to make it right,” Flake said. “They immediately launched an investigation of their own, did an independent audit where they found they had accepted this money. They decided to give it back. That’s a great thing.”

Bill Would Overhaul Credit Reporting System, Remove Debt After Four Years

Each year, thousands of consumers file complaints against the nation’s three credit bureaus — Equifax, Experian, and TransUnion. Most of these complaints are related to inaccurate information on a consumers’ credit report and the difficult time they often have in getting this misinformation corrected. That could change with the proposed overhaul of the system.

Representative Maxine Waters (CA), a ranking member of the U.S. House Committee on Financial Services, unveiled soon-to-be introduced legislation today that would make significant reforms aimed at bringing the “broken system” into the 21st century.

The measure, entitled the “Comprehensive Consumer Credit Reporting Reform Act,” aims to augment requirements on the consumer reporting agencies (CRAs), and furnishers that provide information to these CRAs, to ensure consumers aren’t unfairly penalized for incorrect information or outdated debt that may appear on their reports.

“The growing reliance on credit information for non-credit uses means credit scoring has a significant impact on consumers’ lives,” Waters said on a press call Wednesday. “More and more landlords use these reports to decide when to rent to potential tenants, banks use this information to determine when a consumer can open an account, and employers use them to decide when to offer position or promote a worker.”

Businessman ‘Stunned’ by Obamacare: ‘I Could No Longer Help Employees with Health Care Expenses’

Obamacare forced him to stop reimbursing employees for their health insurance and made his employees cancel their plans, a Maryland business owner told a Senate committee Wednesday.

In testimony before the Senate Small Business Committee, Full House Marketing & Print President and CEO Tom Kunkel said he was, initially, a fan of Obamacare – until he got the news that he had to stop helping his employees afford health care under the Affordable Care Act (Obamacare):

“In a meeting with my accountant June 2015, I was made aware of IRS Notice 2013-54, which prohibits businesses from assisting with employees’ individual market health insurance. “I was stunned. I could no longer help my employees with health care expenses. Mid-year, I had to tell my employees I could no longer reimburse them for health care and that they were essentially on their own.”

Under Obamacare, generous employers like Kunkel face a penalty of $100 PER DAY, PER EMPLOYEE, which could drive many out of business, the National Federation of Independent Businesses (NFIB) explains: “In 2013, the Internal Revenue Service (IRS) published sub-regulatory guidance that prohibited employers from further assisting employees with these employer payment plans, stating the arrangements violate the ACA’s group health plan requirements. “One year later, in a frequently-asked-questions (FAQ) document, IRS attached a $100 per employee per day penalty for continuing the practice. Enforcement began July 1, 2015, so this tax season will be the first time both employers and employees are filing returns at the same time, inviting increased audits and fine exposure. Penalties of this magnitude would be catastrophic for small businesses, forcing many to close their doors. And these businesses are trying to help their employees.”

Raoul Pal Warns of Another Economic Recession

Raoul Pal, a former hedge-fund manager and founder of the Global Macro Investor, a macroeconomic research service, warns that the United States is at risk of another recession. The global macro analyst told Yahoo Finance he is seeing many of the same signs he saw back in year 2000 just before the tech bubble burst.

“It just feels like everyone is willing the market to go up, but something is going wrong in the overall underlying dynamics of the market,” he said of the overall stock market volatility this year.

“And in the meantime, the economy, which at first wasn’t clear that it was weakening, now appears to be weakening," he said. "And that was a similar set up in 2000 where everyone started getting chopped around. Nobody knew what was happening. The leadership was getting lost— Apple and other firms have lost their leadership. Back in 2000 it was Microsoft—same kind of thing,” he said. “I look at the business cycle and I look at the business cycle by the ISM survey,” Pal said.

“What you know is that cycle is pretty predictable. And so you know in due course, the economic cycle will weaken and we’ll get a recession. And if we look at the length, it looks like it’s coming, normally it would come either now or in the next twelve months. The probability is that a recession is coming.

TSA Total Failure - No Surprise!

This Could Easily Become The Worst Urban Crisis In History

Like our resident market P.I. John Del Vecchio, Kyle Bass is one of those hedge fund managers who profited in the last crash when he bought credit default swaps to short the housing market. He's also one of the few financiers in the market today who says there's a reasonable chance the U.S. will fall into a recession over the coming months. But he's really on the money when it comes to China. Mr. Bass estimates that China's bad debt exposure is at least five times that of the subprime crisis in the U.S. Think that's enough to trigger the next global financial crisis and depression? You bet it is!

Two things are happening now in China that most people aren't fully aware of. The country is on track to create $4 trillion in new debt this year alone, or nearly 40% of its GDP, building houses for no one, while rural migrants are declining for the first time in 30 years.

In other words, the very people it's overbuilding all these condos and infrastructure for are leaving! After decades of rapid urbanization, no one saw that coming. In the first quarter of 2016, China added $1 trillion in new debt, which puts it on track to reach that $4 trillion figure. One trillion is about the same the U.S. did in QE in 2013. It's the same the ECB did in 2014. China has done it in a single frickin' quarter with an economy 60% our size!

Even if you take the highest level of QE that the U.S., Europe and Japan added in a single year, the most that would add up to is $3.3 trillion. So at $4 trillion, China is set to rack up more debt in one year than these other major countries did at their peaks, combined. And it's mostly by creating money out of thin air. Countries can do this in a couple of ways. They can expand their bank loans against 10% reserve deposits - basically issuing $10 million when they've only got $1 million in the bank - or they can use QE. It's the difference between 90% money creation with the fractional reserve loans, or 100% for QE.

Intel Corporation Starts Sending Layoff Notices In Rio Rancho

Intel has begun sending layoff notices to some of its Rio Rancho employees, but is still not saying how many workers will be affected at the plant. KOAT-TV obtained a layoff notice sent to one employee, which stated that the worker’s employment would be terminated “due to site closures or consolidation” as of Dec. 31.

Layoffs at the Rio Rancho plant, which now employs about 1,900 people, have been anticipated after the company announced in April that it would lay off 11 percent of its global workforce. But Intel has declined to discuss workforce or plant changes with reporters at any specific company sites, such as in Rio Rancho.

Asked about the layoff notice received recently by the employee, Intel New Mexico spokeswoman Natasha Martell Jackson told the Journal on Wednesday, “Nothing has changed as far as that official announcement.”

Rio Rancho and state officials said Wednesday they have not received any notification of the plant closing. The Oregonian newspaper reported last month that Intel Corp. CEO Brian Krzanich had told employees that the company wouldn’t be closing any of its manufacturing sites and specifically that it “won’t leave its aging facility in New Mexico.”

Fed officials to Wall Street: We're right, you're wrong

The Federal Reserve has a clear message for Wall Street: Get on our page. Before this week, Wall Street all but wrote off the chance of even a single rate hike this year. That's despite the fact that the Fed had forecast two rate hikes for 2016 even though members expressed concern about the global economy in March.

The Fed doubled down on that view according to the minutes released Wednesday of its April meeting, where it reiterated that there's a strong chance of a rate hike in June if the economy stays on track. Now Wall Street is catching up to the Fed.

"I was surprised that the market wasn't taking more signals from what Fed speakers were actually saying," New York Fed President William Dudley told reporters Thursday. "The market was not putting in a sufficient probability" of a June rate hike. Dudley's comments echoed what Fed leaders discussed. Essentially, Wall Street wasn't taking the forecast seriously enough.

"Some participants were concerned that market participants may not have properly assessed the likelihood of an increase in the target range at the June meeting," according to the Fed's minutes released Wednesday. Wall Street and the Fed are in a tug of war match. In March, the Fed did lower expectations for rate hikes to two from four, which put it in line with Wall Street's view at the time. Then investors slashed their expectations even further: to zero.

Friday 05.20.2016

NEWS to Disturb the Comfortable...

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