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Tuesday 09.20.2016

Wells Fargo CEO John Stumpf has to go, shareholder says

Wells Fargo was recently fined for creating accounts for customers across multiple product lines without telling them, in order to meet sales goals. All told, the bank agreed to pay $185 million in penalties and $5 million to customers. Over the course of five years, 5,300 employees were also fired. Armstrong also believes the auditors failed in not detecting the problem soon enough.

"Where were they? They should have been raising some red flags on these issues and they should have seen it and warned the board of directors and management much sooner," he said. When asked for a comment on Armstrong's views, a spokesperson for Wells Fargo referred to Stump's interview with CNBC's "Mad Money" last week.

"Of course it stops with all of us, and especially me. I'm the leader, I get it. I said right off the bat when we don't meet our goals with 100 percent right, I'm accountable," he told Jim Cramer last Tuesday.

"And I'm leading this company and leading it forward through this. I want to make sure that every customer knows when they come into one of our branches, deal with one of us on the internet, whatever the case is, we are 100 percent on their side." Stumpf also said he does not plan to resign.

Kmart is closing 64 more stores and laying off thousands of employees

Kmart is closing 64 stores across 28 states. Sears Holdings, which owns Sears and Kmart, informed Kmart employees of the closures on Friday, according to local news reports and employees who spoke to Business Insider.

The stores that are closing will begin liquidation sales on September 22, and close by mid December, employees said. Sears did not respond to Business Insider's request for comment.

Separately on Friday, Seritage Growth Properties, a real-estate-investment trust that owns 235 Sears and Kmart stores, revealed in a filing that Sears had decided to terminate leases on 17 stores, meaning it would close those stores. According to RBC Capital Markets analysts, all 17 closures are Kmart stores and they will close by January.Km

The new wave of closures follows Sears' decision to shut down nearly 80 stores — most of which were Kmart stores — in July. Moody's analysts warned last week that Kmart doesn't have enough cash or access to cash to stay in business. Kmart has about 870 stores today, down from about 1,300 in 2012.

How a Basic Income Could Replace All Welfare

A panel of welfare experts discussed the current welfare state Monday and the merits of replacing it with a universal basic income. A universal basic income would mean every citizen would get an unconditional payment on a regular basis. The American Enterprise Institute hosted the panel to discuss whether the idea would be a better alternative to our current welfare system.

AEI Scholar Charles Murray argues a $10,000 basic annual income would be more cost effective and could better serve workers displaced by automation. He released a book in June in support of the idea. “We can implement the plan, that I present in the book in our hands, for less money in transfers,” Murray said during the panel discussion. He adds welfare costs are “going to get worse because we have rising entitlement costs.”

The basic income is unique from our current welfare system in that it would be available to everyone. Economist Jared Bernstein, however, opposes the idea of replacing the welfare system outright. He agrees the current system has issues but argues many of the programs are yielding positive results by investing back into people.

“These are investment payments,” countered Bernstein who previously worked as chief economic adviser to Vice President Joe Biden. “These investments are in areas we can agree we don’t want market failures leading to the elderly living on the streets.” AEI’s Murray noted the basic income would better serve workers displaced by the rise of automation.

Potekin Gives Gold Call, Says Not Too Late To Buy

World Money and Hyperinflation

This world money has existed for some time, but it’s about to become a lot more important. In 1944, John Maynard Keynes proposed a form of world money, which he called the “bancor,” at the Bretton Woods international monetary conference.

In 1961, Nobel Prize winner Robert Mundell said, “the optimum currency area is the world,” laying the theoretical foundation for world money in his classic article “A Theory of Optimum Currency Areas.” In March of 2009, U.S. Treasury Secretary Timothy Geithner supported greater issuance of Special Drawing Rights (SDR’s) at the depths of the financial crisis.

And as recently as October 2015, the former undersecretary general for economic and social affairs (ECOSOC) of the United Nations, José Antonio Ocampo, wrote an Op-Ed calling for new issues of SDRs with a disproportionate share going to emerging markets.

The list of prominent international monetary elites calling for greater use of SDRs as world money keeps growing. It’s critical you to understand this new trend. The SDR has the power to reduce the dollar to the status of a local currency no different than the Mexican peso. Understanding SDRs will also help you avoid losses from inflation and benefit from new opportunities that will be created by their use.

McDonalds Hires Foreign H-1Bs, Fires 70 American Accounting Staff

The H-1Bs outsourcing in the nation’s heartland showcases the growing corporate effort to use foreign H-1B workers to cut workforces of American white-collar professionals, and it comes after companies have used waves of legal and illegal migrants to slash blue-collar jobs and wages in Ohio and around the country.

Also, the 70 Ohio jobs that McDonalds outsourced to lower wage foreign graduates are not Silicon Valley technology and software jobs — they’re white-collar accounting jobs performed by graduates from mainstream business schools. That outsourcing of mainstream business jobs spotlights the growing movement of foreign workers into all corners of the nation’s white-collar professional economy.

White-collar outsourcing “is not just a Silicon Valley thing anymore, it is happening all over” the country, said Steve Camarota, head of research at the Center for Immigration Studies.

The outsourcing in Columbus, Ohio, was explained as a cost saving effort by a McDonald’s spokeswoman. “To deliver $500 million in savings, the vast majority by the end of 2017, we are restructuring many aspects of our business, including an accounting function,” said spokeswoman Terri Hickey.

The Bullish Case for $30 Silver

It's been a volatile year for the stock market, with some notable market leaders still struggling to get back to their baselines. In particular, biotech stocks and money center banks have largely underperformed in 2016.

That hasn't been the case for physical precious metals or precious-metal mining stocks, which are among the year's top performers. With physical gold up more than $250 an ounce year-to-date (24%), 14 of 22 gold mining stocks with market valuations of at least $300 million have more than doubled in 2016. Upward momentum has been even more pronounced with physical silver and silver mining stocks. Spot silver prices are up better than $5 an ounce (37%) year-to-date, with all six silver miners with valuations above $300 million at least doubling in price. These stocks are the true standouts this year.

When we take a step back and analyze the catalysts behind the move higher in precious metal spot prices, it's silver that could have considerably more upside than gold. Today, we'll lay out the case why physical silver could be on its way to $30 an ounce, which would represent a gain of nearly 60% from where physical silver is today.

Silver is often thought of in the same context as gold, in that it's a hedge investment people flock to during times of uncertainty. However, what's often overlooked is that supply and demand can have just as much impact on spot metal pricing as investor sentiment.

Suspect captured in New York City, New Jersey blasts

Almost 100,000 Somali Refugees Admitted to US Since 9/11; 99.6% Muslim

Almost 100,000 Somali refugees have been resettled in the United States since 9/11, including 8,619 so far during the current fiscal year. The largest number – some 16 percent of the total over the past 15 years – have been resettled in Minnesota, home to the nation’s biggest Somali-American community.

Of the 97,046 Somali refugees admitted to the U.S. since the fall of 2001, 99.6 percent were Muslim, and 28,836 (29.7 percent) were males between the ages of 14 and 50.

In FY 2015 Somalis were the third largest contingent of refugees admitted to the U.S. – 8,858, or 12.6 percent of the total from around the world. Only Burma, with 26.3 percent, and Iraq, with 18.1 percent, accounted for larger groups of refugees arriving in the country.

The biggest influx of Somali refugees over the past 15 years occurred during the FY 2004-2006 period, after which the numbers dwindled before picking up again from FY 2014-2016, State Department Refugee Processing Center data show. The man who carried out a terror attack at a mall in central Minnesota on Saturday night was identified by family as Dahir Adan, a 22-year-old Somali-American college student whose father said was born in Africa and came to the U.S. 15 years ago, according to the Minneapolis Star Tribune.

Deutsche Bank to securitize billions worth corporate loans

Deutsche Bank, which faces a hefty fine from the U.S. Department of Justice over mortgage-backed securities, is planning to convert billions of dollars of corporate loans into marketable securities, according to a person close to the matter.

This year's deal volume is to be lower than last year's $5.5 billion and is unrelated to the mortgage probe. The process will be handled by the bank, the person said. A study by German economic research institute ZEW found in August that the European lender had the highest potential capital shortfall of 19 billion euros.

Bloomberg earlier reported the bank's deal to securitize the loans. The bank has warned it may need deeper cost cuts to turn itself around, after revenue fell sharply in the second quarter because of challenging markets and low interest rates..

Last week, the U.S. Department of Justice levied a fine of $14 billion to settle claims the bank missold mortgage-backed securities.. The bank responded in a statement that it had no intention of settling those potential civil claims anywhere near the number cited and Germany's Finance Ministry said it expected a fair result in the mortgage case.

Venezuela Confident on Oil Output Deal, Kilduff Says the Entire Issue is "a Joke"

Following a discussion about market stabilization among delegates at the Non-Aligned Movement in Venezuela, Venezuelan President Nicolas Maduro said Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members are closing in on an agreement and that he is aiming for a deal to be announced this month.

Hassan Rouhani, president of Iran, who also attended the summit, reiterated an earlier comment that Tehran will support any stabilization effort.

Maduro remarked, "We had a long bilateral meeting with Rouhani; we're close to a deal between OPEC producer countries and non-OPEC."

An increase in oil prices is crucial to Venezuela's collapsing economy, and to that end Eulogio Del Pino, the country's oil minister, told media that "Global production is at 94 million barrels per day, of which we need to go down 9 million barrels per day to sustain the level of consumption."

Keep your eyes on the housing market

Two of Fed’s Own Primary Dealers Warn Shock Hike Awaits Markets

There’s uncommon dissent in the ranks of the Federal Reserve’s primary dealers over the central bank’s interest-rate decision this week.

Two of the Fed’s 23 preferred bond-trading partners -- Barclays Plc and BNP Paribas SA -- are betting against their peers and the bond market by forecasting officials will raise rates Wednesday. It’s the first time more than one dealer has gone against the consensus during the week of a policy meeting since last September, data compiled by Bloomberg show. Economists at both banks say traders have too steeply discounted officials’ intent to hike after the Fed has remained on hold for longer than expected.

“There is no perfect time -- there will always be some uncertainties in the data,” said Laura Rosner, senior U.S. economist in New York at BNP. “Despite a multitude of shocks through the last nine months, which have delayed the Fed, hiring has continued to be robust. There is a window of opportunity for the Fed to continue normalizing, and we think it’ll take it.”

The bond market and Fed are locked in a battle of wills over the direction of interest rates more than seven years after the end of the recession. The central bank’s credibility is at stake after policy makers began the year projecting four rate increases, after liftoff from near zero in December, yet remained on hold time and again because of economic circumstances in the U.S. and abroad. Even last month, Fed Chair Janet Yellen and Vice Chairman Stanley Fischer hinted that the bank could still raise rates twice this year.

Will the war on cash morph into a war on gold

Readers will no doubt be aware of a number of economists, central bankers and politicians trying to push the world towards a cashless society, and the first victims of this are high denomination banknotes. The theory behind this, as central banks run out of stimulatory options as they head increasingly towards zero interest rate policies (ZIRP) and even negative interest rate policies (NIRP), is to try and re-stimulate spending and thus economic growth – so far unsuccessfully. If savings are to be penalised through ZIRP and NIRP, coupled with attempts towards increasing inflation, the theory is that people will spend rather than save and thus help stimulate consumer demand and the economy.

Withdrawing high denomination banknotes like the €500 note and the CHF1,000 note, as is being proposed, would just make it more difficult for the save to compensate by storing large amounts of cash rather than see their money held in the banking system eroded by NIRP. Indeed the €500 note is already being withdrawn with no new ones being printed, although, for the moment, existing notes will remain legal tender.

Of course controlling citizens’ ease in hoarding large sums of cash is not the official reasoning behind such a policy. Government will tell you it’s a weapon to clamp down on money laundering and cross-border money smuggling by terrorists, drug dealers, tax evaders, illegal arms dealers and all sorts of other criminals wishing to stash their ill-gotten gains in less invasive and less-unfriendly governmental and banking environments. Even the US$100 bill might be in danger if this idea is to gain traction globally. Ultimately the central banker theorists would like to turn us into a cashless society where all money is stored electronically and thus open to government theft - 'for the overall good of the economy'. of course.

If we carry this logic to its conclusion though, there are other small high value options for moving and storing wealth. Two which have been mentioned are gold bullion (coins, bars etc.) and diamonds. There is a logic for high wealth individuals, if they feel that their cash holdings are under threat, for transferring this wealth into gold and diamonds – the former being more easily negotiable, but could this be equally vulnerable? There is obviously precedent here with the U.S.’s gold confiscation by Presidential decree back in April 1933 and subsequent gold revaluation. Could this happen again?

Total Number of U.S. Restaurants in Decline in 2016

There have recently been reports out about consumers spending slightly less on their lunch tickets out at restaurants. Now it appears that the actual number of restaurants in America is in decline as well.

NPD Group is now showing that, as of the Spring of 2016, the total U.S. restaurant count was at 624,301 units — down 1% from the 632,572 count seen a year earlier. Restaurant chains, which would include franchises, ticked up ever so slightly. Sadly for the little guy on the street, the number of independent restaurants declined about 3% to 331,469 from 340.778.

NPD noted that the drop in independent restaurants was concentrated in the full service segment. This segment includes casual dining and the so-called midscale/family dining restaurants, and it also includes the fine dining segment. Full service independent units were down 3%, and the quick service independent units declined by 2% this spring.

There was an effort to explain the drop here. It was noted that the overall decline in the restaurant count reflects the stalled traffic growth experienced by the foodservice industry over the past several years.

Post-Crisis, Central Banks Have Built Up Their Gold Reserves

Central banks have been steadily buying gold since 2008 in line with trends dating back to 1871, according to a new report. According to a new study by the Official Monetary and Financial Institutions Forum, central banks have preferred "accretions to disposals" of gold since 2008, "following four decades after 1970 when central banks generally ran down their gold stocks." In the past eight years, OMFIF's David Marsh and Ben Robinson write in "The Seven Ages of Gold: Central Bank Buying Back to Historical Norm," central banks have purchased 350 net tonnes (about 386 tons) per year, increasing their reserves by 9.4%.

These renewed purchases are "in line with the 100-year average up to 1970," they write, which reflects "the metal's renewed attractiveness as a safe haven asset in an environment of uncertainty and low or negative interest rates." The last time central banks consistently purchased rather than unloaded gold was during the 1950-65 postwar recovery period, when they acquired over 7,000 tonnes on net.

Marsh and Robinson call the current period, which follows the 2008 financial crisis, the "Rebuilding" period, the seventh in their schematic since 1871. This followed the 1998-2008 "Sales" period, when many central banks sold their bullion. From the "Demonetisation" period of 1973-1998, in contrast, "gold's role was in limbo after it was officially phased out of the monetary system," beginning with Richard Nixon's 1971 decision to cancel the U.S. dollar's direct convertibility to gold under the postwar Bretton Woods monetary system.

Gold purchases and disposals are not necessarily correlated with price, Marsh and Robinson note. For example, central banks were net sellers of gold from roughly 1973-2008, when the price of gold was "fluctuating but generally rising" and gold stocks rose steadily. Since 2008, the price of gold has swung sharply from around $1000 to $1600 per ounce.

Liberals Want New American Flag with Rainbow Stripes for "Diversity" - Current Design "Offensive"

Credit card agreements too tough for half of us to understand

Your credit card agreement says, "The Regular Monthly Periodic Rate and corresponding Annual Percentage Rate applicable to your Average Daily Balance of Purchase and your Average Daily Balance of Balance Transfers and your ..." But you've already zoned out.

Not only are they incredibly boring, these agreements are too hard for about half of American consumers to understand, according to a study by CreditCards.com. After analyzing more than 2,000 current agreements, CreditCards.com found the average one is written at an 11th-grade reading level, taking about 20 minutes to read in full. About half of consumers read at a ninth-grade level or below, says Matt Schulz, senior analyst for CreditCards.com.

Nearly half of card holders ignore the agreements completely, instead of slogging through the verbose swamp of legalese. CreditCards.com found 46% “never” or “hardly ever” read their card agreements.

Consumers might assume they’re in the clear as long as they make their monthly payments. “No one ever gets into a credit card agreement thinking things are going to go south,” Schulz says. But if things do go south, what consumers don’t know might hurt them. One example, Schulz says, is the concept of security interest. The idea is if a consumer has a delinquent credit card account in addition to other accounts at the same bank, the bank can take money from the other accounts to pay off the delinquent bill.

Bankers Question Legality of Fed’s Stress Tests

The U.S. Federal Reserve’s stress tests for the largest U.S. bank holding companies may violate the law that requires transparency and accountability in government rulemaking, according to a group of financial industry leaders.

In a paper released Thursday, the Committee on Capital Markets Regulation said the public notice and comment requirements of the Administrative Procedure Act should apply to the tests that the Fed uses to measure whether banks would maintain sufficient capital in a future crisis.

The tests were mandated under the post-financial crisis Dodd-Frank law and the Fed has so far conducted six rounds of testing.

“The Federal Reserve has likely not complied with the APA’s procedural requirements in adopting key aspects of its Comprehensive Capital Analysis and Review stress tests,” the committee said, noting that if a bank fails a test, the Fed “can prevent the bank from returning cash to shareholders through dividends or stock buybacks.” “Therefore, the Fed’s stress tests act as a de facto binding capital constraint on banks,” the paper said.

Zimbabwe will print its own version of the U.S. dollar

Zimbabwe is about to start using its own version of the U.S. dollar. The country's central bank said Thursday it will start circulating "bond notes" by the end of October. It said it expects $75 million worth of these notes to be in use by the end of the year.

The southern African country has been using a mix of different foreign currencies -- and most importantly U.S. dollars -- since its own currency collapsed in 2009 during a period of hyperinflation.

To ease its cash shortage problem and stop cash from flowing out of the country, the bank announced it would start printing "bond notes" in denominations of $2, $5, $10 and $20.

The country already has "bond" coins that represent U.S. dollar values. For each coin in circulation, there's an equivalent U.S. dollar held in the country's reserves. "The bond notes will be at par with the U.S. dollar and will be used and treated in the same manner as bond coins," said John Mangudya, the governor of the Reserve Bank of Zimbabwe.

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