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Wednesday 06.22.2016

66 Million Americans Have No Emergency Savings

Many Americans are woefully ill-prepared for an unplanned expense, so much so that a whopping 66 million U.S. adults have zero dollars saved for an emergency, according to a new study.

When broken down by age, those in Generation X fared the worst: One-third of people ages 36 to 51 said they had saved nothing in an emergency fund. That compares with 27 percent of all others ages 18 or older, according to a Bankrate.com survey of 1,000 adults conducted earlier this month.

Generally, the likelihood of having saved at least six months of expenses increases steadily after age 25, Bankrate said. Yet for Gen Xers, "those are the years when it catches up with you," said Bankrate's chief financial analyst Greg McBride.

"This underscores the fact that it takes time, especially because expenses grow faster than many Americans can save during the homebuying, family-raising years," McBride said. "If you are not in the habit of saving regularly, whatever you have is going to get wiped out sooner rather than later."

Upper Middle Class Thriving, Report Says

The American upper middle class – those who have an annual household income of $100,000 to $350,000 for a family of three – has joined the rich in dominating the economy, a new report argues.

A lot has been made in recent years about the divide between the 1 percent, the richest earners and the capital class, and everyone else, who are said to be falling behind. But a new report out Tuesday from the Urban Institute and economist Stephen Rose said that the true national divide is between the rich – and – the upper middle class as one bloc, and everyone else.

The upper middle class grew to 29.4 percent of the population in 2014, up from 12.9 percent in 1979. The rich – those making $350,000 or more – also grew, from 0.1 percent of the population in 1.8 percent of the population.

The middle class, however – once considered the backbone of the American economic order – shrunk from 38.8 percent to 32 percent of the population during the same time. The Urban Institute, a liberal-leaning think tank, defines the middle class as those making $50,000 to $100,000 per year. The lower middle makes $30,000 to $50,000 per year, those defined as "poor" make less than $30,000 per year. The decline of the middle class in the U.S. has shaken American politics. But the populist rise of Donald Trump and Bernie Sanders isn't anger so much at the rich alone. It is also anger at the upper middle class, who may be interpreted as rich, The Washington Post reported.

NY Fed Warns about Booming Subprime Mortgages, now Insured by the Government

The New York Fed just warned about the ticking mortgage subprime time bombs once again being amassed, and what happens to them when home prices decline. But unlike during the last housing bust, a large portion of these time bombs are now guaranteed by the government.

Subprime mortgages are what everyone still remembers about the Financial Crisis. They blew up has home prices fell. Folks who thought they were “owners with equity” found out that they were just “renters with debt.”

And they dealt with it the best they could: forget the debt and the rent and stay until kicked out. Cumulative default rates on subprime mortgages spiked to 25% in 2007, according to the report. Banks ended up with the properties and collapsed. Mortgage backed securities based on these subprime mortgages imploded. Bond funds that held them imploded. All kinds of fireworks began. While subprime mortgages didn’t cause the Financial Crisis by themselves, they were an essential cog in a crazy machinery.

Now, the machinery is even crazier, subprime mortgages are even bigger, and mortgage-backed securities, chock-full with subprime, are hotter than ever. Only this time, the taxpayer is on the hook. During the prior housing boom, from 2000 through 2005, government mortgage insurance programs covered less than 3% of all subprime mortgage originations, while private mortgage insurers covered over 20%.

Venezuelans face collapsing economy, starvation and crime

Greenspan to Yellen; Incoherence The Common Theme But Vastly Different Receptions

It is human nature to extrapolate in straight lines, to take what is as what should forever be. In economic statistics, tail risks continue to live outside the tails because the math can never get past that limitation. No matter how sophisticated the “jump diffusion” tendencies, no one can predict inflections. This is not to say there aren’t warnings, usually there are. But institutional inertia particularly with regard to apparent prosperity is a powerful force of destructive capacity.

In 1927, John Maynard Keynes confidently declared, “there will be no more crashes in our time” such was his faith in centralized man. Despite the error revealed in disastrously in just three years’ time, in August 1971 President Richard Nixon famously appropriated Milton Friedman’s earlier declaration that “we are all Keynesians now.” Friedman’s quote was, he later claimed, taken out of context by a December 1965 Time Magazine article with John Maynard Keynes’ face glaring on the cover. In 1968, Friedman said of his attributed affability towards the economist, “We all use the Keynesian language and apparatus; none of us any longer accepts the initial Keynesian conclusions.”

Nixon’s use of the quote was still far too similar even to where Freidman was protesting; interventionist policies would be the only way forward. Friedman agreed, only split into the monetary realm where so many others at that time were working it through fiscal policies.

Just nine years after Nixon declared everybody one, the Joint Economic Committee of the United States Congress confirmed nobody was left to be – on the fiscal side. The disaster of the Great Inflation was palpable enough that even partisanship was no longer an impediment to the necessary judgement.

Sears workers reveal mistakes that are killing the company

Sears is on the brink of death, according to several store-level employees. The company's sales have been falling for years. It has been shutting down stores, selling real estate, and spinning off brands to stem the bleeding. Since 2007, Sears has closed half its stores - which include both Sears and Kmart stores - and eliminated more than 137,000 jobs.

Some employees are now predicting that the rest of the company's physical stores will close within the next two years. The stores are severely understaffed, with some operating on less than half of the employees they need, according to workers who spoke to Business Insider.

Not only are the stores firing people, but they are also cutting labor hours for the workers that remain, according to the employees. In some cases, stores are operating with just one or two cashiers - and sometimes no cashiers at all - they said.

That's making it increasingly difficult to hire and retain experienced workers, according to a former Kmart employee of 41 years who said she was laid off in February. She told Business Insider that her store's employees hadn't seen raises in eight years. She blames the company's CEO, Eddie Lampert, for the company's downfall. "Lampert has taken this company and with pompous arrogance, has destroyed it," she said. "Customer care is vital to a retail business. Lampert just couldn't understand that."

Hedge fund manager dies of apparent suicide following arrest

Sanjay Valvani, a hedge fund manager at Visium Asset Management who was arrested last week on insider trading charges, has been found dead in an apparent suicide, the police said on Tuesday.

Valvani, 44, was discovered by his wife on Monday evening at his Brooklyn home with a wound to his neck, a New York police department spokeswoman said. A note and a knife were recovered, she added.

Valvani was arrested last Wednesday and accused of having fraudulently made $25m by getting advanced information about US Food and Drug Administration approvals of generic drug applications.

Valvani pleaded not guilty to five counts including securities fraud, wire fraud and conspiracy and was freed on $5m bond secured by his home. The death marked a stunning turn in one of the US government’s biggest insider trading cases in years.

FedEx Posts $70 Million Loss, Gives Cautious Outlook

FedEx Corp. lost $70 million in the latest quarter because of large pension and acquisition items, and the delivery giant gave a cautious outlook for the next 12 months. The company's fiscal fourth quarter results Tuesday still beat Wall Street expectations, as FedEx and other delivery companies continue to benefit from the growth in online shopping.

At times, however, the boom in e-commerce has strained the networks of FedEx and United Parcel Service Inc. To keep up, FedEx plans capital spending of $5.1 billion in the fiscal year that just started. FedEx will use the money to expand its ground network and buy more aircraft.

FedEx said it expects earnings excluding one-time items in the new fiscal year to be between $11.75 and $12.25 per share. The midpoint of that range is less than the $12.17 per share that analysts were expecting, according to a FactSet survey.

Still, the midpoint of the company's forecast suggests an 11 percent increase in full-year adjusted profit. CEO Fred Smith said on a call with investors that FedEx will increase profit margins and earnings per share over the next several years assuming that economic growth is moderate. FedEx's fiscal fourth quarter loss amounted to 26 cents per share and compared with a year-earlier loss of $895 million, or $3.16 per share. Results were dragged down by accounting for the changing value of pension assets and liabilities and by costs related to the acquisition of Dutch delivery company TNT Express.

Tesla offers to buy SolarCity for almost $3 billion in a bid to merge 2 parts of Elon Musk's empire

Tesla has offered to buy SolarCity, the struggling solar-power company cofounded by Elon Musk, in a bid to bring together two planks of his plan to transform the way humans consume energy.

Musk, CEO of Tesla and chairman of SolarCity, has said that he wants to remake transportation using the electric car while freeing Earth from a dependence of fossil fuels using solar power.

"Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently, but they still need access to the most sustainable energy source that's available: the sun," Tesla said in its statement announcing the offer.

The offer comes as Tesla struggles to keep pace with its own ambitious growth targets and faces challenges from automakers that are catching up to its electric-vehicle and self-driving technology. The company said earlier this year that it plans to produce 500,000 vehicles by 2018, which is about as much as 10 times the number it produced last year.

Janet Yellen Hints That Fed May Hold Back on Raising Interest Rates

Weak economic growth in the United States could force the Federal Reserve to hold off on any imminent interest rate increases, the Federal Reserve chairwoman, Janet L. Yellen, told Congress on Tuesday. While Ms. Yellen said that the American economy’s long-term prospects remain favorable, she signaled that headwinds, including slower employment gains in recent months, weak productivity growth and the persistence of a sluggish pace of inflation have prompted the Fed to adopt a more cautious stance.

“The latest readings on the labor market and the weak pace of investment illustrate one downside — that domestic demand might falter,” Ms. Yellen said in testimony before the Senate Banking Committee.

Ms. Yellen’s overall message on Capitol Hill echoed her comments at a news conference last week after the Fed’s decision to hold rates steady. But her tenor suggested that there was little chance of an increase in the benchmark federal funds rate at the central bank’s next meeting, in July, and that a move when policy makers meet again in September is hardly guaranteed.

“Proceeding cautiously in raising the federal funds rate will allow us to keep the monetary support to economic growth in place while we assess whether growth is returning to a moderate pace,” she said. Mirroring the habit of Fed leaders going back decades, Ms. Yellen hedged her bets, emphasizing her positive outlook for the years ahead, if not the coming quarter or two.

Goodbye, Password. Banks Opt to Scan Fingers and Faces Instead

Some of the nation’s largest banks, acknowledging that traditional passwords are either too cumbersome or no longer secure, are increasingly using fingerprints, facial scans and other types of biometrics to safeguard accounts.

Millions of customers at Bank of America, JPMorgan Chase and Wells Fargo routinely use fingerprints to log into their bank accounts through their mobile phones. This feature, which some of the largest banks have introduced in the last few months, is enabling a huge swath of the American banking public to verify their identity with biometrics. And millions of additional customers are expected to opt in as more phones incorporate fingerprint scans.

Other uses of biometrics are also coming online. Wells Fargo lets some customers scan their eyes with their mobile phones to log into corporate accounts and wire millions of dollars. Citigroup can help verify 800,000 of its credit card customers by their voices. USAA, which serves members of the military and their families, identifies some of its customers through their face contours.

Some of the moves reflect concern that so many hundreds of millions of email addresses, phone numbers, Social Security numbers and other personal identifiers have fallen into the hands of criminals, rendering those identifiers increasingly ineffective at protecting accounts.

Economic Anxiety in Divided America

Report: 4,948,000 illegals eligible for amnesty, 716,000 in battleground states

With the Supreme Court readying its decision on President Obama's illegal immigrant amnesty programs, a new report shows that nearly 5 million aliens would be eligible for just two of the president's initiatives, or nearly half of the total population of undocumented immigrants.

What's more, the interactive map of those eligible for amnesty finds that the 2016 presidential battleground states would be heavily impacted, since 716,000 live in those nine states.

Overall, some 4,948,000 illegals would be eligible for Obama's deportation deferral programs, Deferred Action for Childhood Arrivals, or DACA, and Deferred Action for Parents of Americans and Lawful Permanent Residents, or DAPA, according to a report from the Center for American Progress, which supports Obama.

The report focuses on the economic benefits granting illegal immigrants legal working documents would have. Other groups that oppose the president's program have focused on the costs to taxpayers and impact on jobs.

Wendy's, McDonald's say kiosk tests not tied to minimum wage battle

Amid nationwide calls for significantly higher wages for fast food workers, Wendy’s and McDonald’s are testing self-service ordering kiosks. And they both have a beef with the notion there’s necessarily a connection or that some employees might soon be in a pickle.

“It’s not specifically tied to raising the minimum wage,” said Wendy’s spokesman Bob Bertini. “This is primarily driven by consumer demand. Customers, particularly young customers like to be in control. They’re used to doing iPhones and tablets so they like the convenience of using kiosks. And it does help to mitigate some costs.”

But won’t those lowered costs come in the form of fewer employees or at least fewer hours for workers? “It’s not safe to assume that at this point,” Bertini said. “We’re reviewing that now as part of the pilot test.”

For its part, McDonald’s won’t even say mitigating costs is the goal. A spokeswoman for the world’s largest fast food chain says it’s all about consumer experience. “An assumption that their use is related to wage or staffing levels is not the case at McDonald’s,” said Lisa McComb. “Staff perform many functions in our restaurants beyond taking the orders, and in those restaurants testing kiosks, there is the ability for some staff to spend more time on hospitality, customer service and other functions. For example, in some restaurants we’re also testing table service, so that might be a function of an employee’s role.

George Soros warns of financial chaos if Brits exit EU

George Soros, the billionaire who once gained international fame by betting against the pound, and profiting handsomely from that hedge, warned British voters they ought to stay in the European Union or else suffer a massive financial hit that would rock world markets.

In an opinion in the Guardian, Soros said Britain’s exit from the European Union would devalue the pound by 15 percent or more, from it’s current $1.46 level to less than $1.15.

“The value of the pound would decline precipitously,” he said. “It would also have an immediate and dramatic impact on financial markets, investment, prices and jobs.” Brits are set to vote on their EU participation this Thursday. And Soros warned: A vote to leave would mean a worse financial crisis than in 1992, when he hedged against the sterling and bet it was overvalued against the German mark, forcing Britain’s then-prime minister, John Major, to pull the pound from the European Exchange Rate Mechanism.

“I would expect this devaluation to be bigger and also more disruptive than the 15 percent devaluation that occurred in September 1992, when I was fortunate enough to make a substantial profit for my hedge fund investors,” Soros said.

Bank of America ATMs now processing Apple Pay withdrawals

According to an unconfirmed report posted to Reddit on Sunday, Bank of America customers living in Redondo Beach, Calif., can now withdraw cash from certain NFC-enabled ATMs. The system does not appear to be fully operational, however, as deposits still require a physical debit or checking account card.

AppleInsider received reports of Apple Pay integration at select Bank of America ATM locations in May. At the time, pilot program coverage was limited to two machines in San Francisco. Bank of America has not yet made an official announcement regarding ATM compatibility with Apple Pay, though it appears the service is slowly rolling out beyond the Bay Area.

Like some point-of-sale solutions, compatible Bank of America ATMs bear a generic NFC logo and might not necessarily sport Apple Pay branding. On machines with activated NFC internals, customers simply open Apple Pay on their iPhone, tap the device to the reader, enter a PIN and make a withdrawal. No cards are needed as part of the process.

Currently, Bank of America ATMs are restricted to in-house accounts, suggesting the backend service is not yet connected to out-of-network credit card processors.

California Will Close Its Last Nuclear Plant by 2025

Electric Cars To Take a Bite Out Of Gasoline Demand In The Next 20 Years

Electric cars, which at this point are still few in number, and remain a bit of an anomaly on American roads, will increase in the ensuing decades. Spencer Dale, who serves as the chief economist at BP, notes that the upswing in the number of electric cars probably will not happen for another twenty years, but it will happen. Dale maintains that while conventional vehicles still retain many advantages over electric vehicles, it is a matter of “when, not if.”

While the U.S. still has relatively few of them, due to a combination of lower fuel prices and batteries that need to be recharged approximately every 100 miles, better electric cars are coming on the market now that overseas automakers are answering the demands of air quality restrictions.

In the United States, Tesla is creating cars with larger batteries that can hold a charge for 200 miles, spurring other auto makers such as Hyundai, Nissan and Volkswagen to join the race.

Ford has announced its plans to develop 12 new vehicles over the next four years. Volvo wants to get one million vehicles out by 2025. Chevrolet is expected to introduce the Bolt sometime this year. A new Bolt will cost consumers $30,000 after tax credits.

Don’t Let Them Take Your Liberty After Orlando

Last week America was rocked by the cold-blooded murder of 49 people at the Pulse nightclub in Orlando, Florida. Unlike the terrorist attacks of September 11, 2001, the Orlando shooter appears to be a lone gunman who, while claiming allegiance to ISIS, was not actually working with a terrorist group. About the only thing Orlando has in common with 9/11 is the way power-hungry politicians and federal officials wasted no time using it to justify expanding government and restricting liberty.

Immediately following the shooting, we began to hear renewed calls for increased government surveillance of Muslims, including spying on Muslim religious services. Although the Orlando shooter was born in the US, some are using the shooting to renew the debate over Muslim immigration. While the government certainly should prevent terrorists from entering the country, singling out individuals for government surveillance and other violations of their rights because of religious faith violates the First Amendment and establishes a dangerous precedent that will be used against other groups. In addition, scapegoating all Muslims because of the act of one deranged individual strengthens groups like ISIS by making it appear that the US government is at war with Islam.

The Orlando shooting is being used to justify mass surveillance and warrantless wiretapping. For the past three years, the House of Representatives passed an amendment to the Defense Department appropriations bill limiting mass surveillance. But, last week, the same amendment was voted down. The only difference between this year’s debate and previous debates was that this year defenders of the surveillance state were able to claim that the Orlando shooting justifies shredding the Fourth Amendment.

The fact that the Orlando shooter had twice been investigated by the FBI shows that increased surveillance and wiretapping would not have prevented the shooting. Mass surveillance also creates a “needle in a haystack” problem that can make it difficult, or impossible, for law enforcement to identify real threats. Unfortunately, evidence that giving up liberty does not increase security has never deterred those who spread fear to gain support for increased government power.

Computers eyeing the jobs of sports camera operators

For mammals, including humans, much of learning is mimicry. The same goes for computers and robots. Computer engineers with Disney Research and the California Institute of Technology are improving the performance automated cameras by having them watch and mimic the moves of human sports camera operators.

By watching humans film basketball and soccer games, researchers are teaching automated cameras to follow the action more smoothly and recover from mistakes with grace. "Having smooth camera work is critical for creating an enjoyable sports broadcast," Peter Carr, senior research engineer at Disney Research, said in a news release. "The framing doesn't have to be perfect, but the motion has to be smooth and purposeful."

"This research demonstrates a significant advance in the use of imitation learning to improve camera planning and control during game conditions," added Jessica Hodgins, vice president at Disney Research. "This is the sort of progress we need to realize the huge potential for automated broadcasts of sports and other live events."

Currently, automated cameras don't follow the ball. They do their best to follow the action of a match by analyzing the movement of players and anticipating where the ball will travel and how the competition will unfold. When the game's flow doesn't match the anticipatory movement of the camera, the broadcast can appear jerky.

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