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Mondayday 05.23.2016

Fast-Food Workers to Unionize

At the quadrennial meeting of the Service Employees International Union (SEIU), organizers of the “Fight for $15” campaign announced that fast-food workers plan to join the union following a vote by cooks and cashiers across the U.S. set for this summer. The SEIU represents about 2 million service workers in the U.S.

The SEIU has supported the fast-food workers efforts to raise their minimum wage to $15 an hour since the movement began in 2012 with a walkout of about 200 workers in New York City. Workers have protested outside stores owned by McDonald’s Corp. (NYSE: MCD), The Wendy’s Co. (NASDAQ: WEN), and Burger King.

According to a press release from Berlin Rosen PR, the idea to join the SEIU is the result of discussions between the union and the workers regarding the best way to continue building the efforts to win a $15 an hour wage.

SEIU President Mary Kay Henry said: SEIU members have stood arm-in-arm with fast food workers and together they have penetrated the national consciousness and changed the conversation around wages in this country. SEIU is ready to double down on our commitment to fast-food workers to help them win their demand for union rights. Our members are in this for the long haul, and we’re committed to partnering with fast-food workers so they can win a self-sustaining organization that will forge a new path for the 70 million underpaid workers across North America.

Williams Says Fed Rate Moves to Block Out Election-Year Pressure

The U.S. economy should be solid enough to merit an interest-rate increase this year, and the central bank won’t cave to political pressure to refrain from tightening during a presidential election year, said John Williams, president of the Federal Reserve Bank of San Francisco.

While global threats to growth, including in Europe and Asia, have forced a “balancing act” against largely encouraging data in the U.S., Fed officials probably will raise the benchmark interest rate sometime this year, Williams said Sunday on Fox News. He doesn’t vote on monetary policy until 2018.

“It will, in my view, be appropriate to start raising rates again later this year,” whether in June or at a later meeting, Williams said. He downplayed the risk of a U.S. recession through 2017 and said Fed policy wouldn’t be swayed by politicians.

“We’ve proven over and over again that we can act in presidential election years, taking controversial policy decisions. We’ve done that before,” he said. “We’ll do that again. We’re about as apolitical as you can imagine, just focused on our goals.”

The CEO of Goldman Sachs accidentally explained why everyone hates Wall Street

Brilliance is often accidental, and so it was at Goldman Sachs' annual meeting on Friday. In an attempt to pinpoint exactly what's wrong with the global economy — why demand is weak, why growth is anemic, why jitters on one side of the planet can turn into panic all over — CEO Lloyd Blankfein happened upon why Wall Street is so hated.

It was, as I said, an accident. Blankfein said that what the world needs now is confidence. In investment banking, when people are confident there are "more financings, more equity raises, because people invest more money in their own businesses when they're confident," he said, according to Business Insider's Portia Crowe who was on the scene.

This explanation sounds right. When people think they can make money they put their money to work. The problem is that "confidence" doesn't go far enough. More than confidence, for people to invest in the world they have to trust in it — in the systems and people that make it work.

The fact that Blankfein missed that mark, though, explains exactly why people hate Wall Street. The financial crisis, the scandals and the fraud and the dark headlines, have all helped erode that trust. And that lack of trust is what is holding the world back right now.

David Stockman predicts another economic recess

Business Debt Delinquencies Are Now Higher Than When Lehman Brothers Collapsed In 2008

You are about to see more very clear evidence that a new economic crisis has already begun. During economic recoveries, business debt delinquencies generally fall, and during times of economic recession business debt delinquencies generally rise. In fact, you will see below that business debt delinquencies shot up dramatically just prior to the last two recessions, and the exact same thing is happening again right now. In 2008, business debt delinquencies increased at a very frightening pace just before Lehman Brothers collapsed, and this was a very clear sign that big trouble was ahead. Unfortunately for us, in 2016 business debt delinquencies have already shot up above the level they were sitting at just before the collapse of Lehman Brothers, and every time debt delinquencies have ever gotten this high the U.S. economy has always fallen into recession.

In article after article, I have shown that key indicators for the U.S. economy started falling in either late 2014 or at some point during 2015. Well, business debt delinquencies are another example of this phenomenon. According to Wolf Richter, business debt delinquencies have shot up an astounding 137 percent since the fourth quarter of 2014…

Delinquencies of commercial and industrial loans at all banks, after hitting a low point in Q4 2014 of $11.7 billion, have begun to balloon (they’re delinquent when they’re 30 days or more past due). Initially, this was due to the oil & gas fiasco, but increasingly it’s due to trouble in many other sectors, including retail.

Between Q4 2014 and Q1 2016, delinquencies spiked 137% to $27.8 billion. Just like the U.S. government and just like U.S. consumers, U.S. businesses are absolutely drowning in debt.

Nearly $1 trillion in credit card debt good sign: Economist

The fact that Americans are carrying nearly $1 trillion in credit card debt is a good signal for the economy, at least for now, economist Christopher Low said Friday. "It is a sign that consumers are feeling a little bit better. They're more comfortable spending money," he said in an interview with CNBC's "Closing Bell."

Outstanding credit card balances reached almost $952 billion in the first quarter, up 6 percent from a year earlier, The Wall Street Journal reported Friday. It's the highest level since August 2009, the paper said. Balances typically rise during expansions, Low, chief economist at FTN Financial, explained. Plus, many people are locked out of borrowing off their home.

"It's really hard to get a home equity line of credit. People are using credit cards to pick up some of that slack."

Unfortunately, using plastic is a more expensive way to borrow, costing consumers about 18 percent compared to less than 5 percent for mortgage debt, he said.

Iran has no plans to freeze oil exports, official says ahead of OPEC meeting

Iran has no plans to freeze the level of its oil production and exports, Deputy Oil Minister Rokneddin Javadi was quoted on Sunday as saying, as the country tries to raise its crude exports to pre-sanctions levels.

"Under the present circumstances, the government and the Oil Ministry have not issued any policy or plan to the National Iranian Oil Company (NIOC) towards halting the increase in the production and exports of oil," Javadi, who also heads the state-run NIOC, told Iran's Mehr news agency.

"Currently, Iran's crude oil exports, excluding gas condensates, have reached 2 million barrels per day (bpd)," Javadi said. "Iran's crude oil export capacity will reach 2.2 million barrels by the middle of summer."

A meeting of the OPEC exporters' group, including Iran, is scheduled for June 2. Plans for a deal between OPEC and non-OPEC producers to shore up crude prices by freezing output fell apart in April when Saudi Arabia demanded that Iran, its main rival for influence in the region, join in.

Greece bailout: MPs approve new cuts to unblock bailout funds

The Greek parliament has passed new budget cuts and tax rises two days before a eurozone meeting expected to unblock much-needed bailout funds.

The government led by the leftist Syriza coalition passed the widely unpopular bill by 153 votes to 145. Greece agreed to a third bailout worth €86bn (£67bn; $96bn) last year.

Demonstrators gathered outside parliament on Sunday to protest against the new legislation. Eurozone finance ministers meet in Brussels on Tuesday.

The bill also creates a state privatisation fund requested by its eurozone finance ministers. One Syriza MP, Vassiliki Katrivanou, voted against the fund and a contingency mechanism that will trigger automatic spending cuts if the country fails to meet the targets of the bailout deal. Greece is trying to negotiate new aid for a debt payment of €3.5bn due in two months' time. Earlier this month, parliament approved reforms of the pension and income tax system.

Venezuela Is America's Socialist Future - Peter Schiff

George Soros Joins Druckenmiller In Gold Bet

First it was Stan Druckenmiller, now it’s George Soros. Following billionaire former hedge fund manager Druckenmiller’s announcement that gold was his family office fund’s largest currency allocation, we learned this week that his old boss, billionaire investor George Soros, purchased a $264 million stake in Barrick Gold, the world’s largest gold producer, after liquidating $3.5 billion in U.S.-listed stocks. Additionally, he disclosed owning call options on a gold ETF.

George Soross’ investment can be held up as further proof that sentiment toward gold has decidedly shifted positive, following the challenging last three years. London-based precious metals consultancy Metals Focus just released its Gold Focus 2016 report in which the group calls an end to the gold bear market that began in late 2011, after the metal hit its all-time high of $1,900 per ounce. “We are optimistic about gold over the rest of this year and our projections see it peaking at $1,350 in the fourth quarter,” the group writes. Global negative interest rate policy fears have reawakened investors’ confidence in gold as a reliable currency and store of value.

The group adds: “In the near term, there may well be some liquidations of tactical positions.” This is to be expected, especially around the start of summer, based on historical precedent. We’ve noticed that mining companies which have deleveraged their balance sheets this year have been some of the biggest gainers. Barrick, now Soros’s largest U.S.-listed allocation, started 18 months ago.

Glencore, Teck Resources and higher-risk junior producers such as Gran Colombia bounced off the canvas after being knocked down. Gold equities always have a higher beta than bullion. Usually a ±1 percent move translates into 2 to 3 percent in gold stocks. Regardless of it being a bull or bear market, there are still fairly predictable intra-year trends in the price of gold.

Pensions may be cut to 'virtually nothing' for 407,000 people

One of the biggest private pension funds in the country is almost out of money, and fresh out of options. The Central States Pension Fund has no new plan to avoid insolvency, fund director Thomas Nyhan said this week. Without government funding, the fund will run out of money in 10 years, he said.

At that time, pension benefits for about 407,000 people could be reduced to "virtually nothing," he told workers and retirees in a letter sent Friday. In a last-ditch effort, the Central States Pension Plan sought government approval to partially reduce the pensions of 115,000 retirees and the future benefits for 155,000 current workers. The proposed cuts were steep, as much as 60% for some, but it wasn't enough. Earlier this month, the Treasury Department rejected the plan because it found that it would not actually head off insolvency.

The fund could submit a new plan, but decided this week that there's no other way to successfully save the fund and comply with the law. The cuts needed would be too severe. Normally, when a multi-employer fund like Central States runs out of money, a government insurance fund called the Pension Benefit Guaranty Corporation (PBGC) kicks in so that retirees still receive some kind of benefit.

But that's not a great solution in this case. For one thing, the amount is smaller than what pensioners would have received under the Central States reduction plan, and is based on the number of years a retiree worked. A retiree would receive a maximum $35.75 a month for each year worked, according to the fund's website. (That amounts to $1,072.50 a month for retiree who worked 30 years.) But there's yet another problem. The PBGC itself is underfunded and isn't expected to be able to cover all the retirees in the Central States Pension Fund.

IBM continues layoffs that could top 14,000 job cuts

Software giant IBM is initiating another round of job cuts the company announced in April, according to multiple media reports. The number of positions cut could top 14,000, Stanford Bernstein analyst Toni Sacconaghi told The Wall Street Journal.

The cuts come as the company recorded its 16th consecutive quarterly loss. Big Blue has struggled with its core software business in the face of increasing cloud computing, analysts said.

A company executive told WRAL TechWire IBM is "aggressively transforming" to offer more cloud-based computing and could rehire just as many employees to assist in that effort as are being let go presently.

Some of the eliminated positions are being moved overseas, employees told the Journal. "IBM is aggressively transforming its business to lead in a new era of cognitive and cloud computing," an IBM executive told TechWire.

Will Millennials Just Uber Their Life?

The car industry has been holding its breath because of the growing number of Millennials, who are not purchasing vehicles. Instead of spending their money on buying a car, they have chosen public transportation and been dubbed, “The Uber and Zipcar generation.” This consumer cohort of 80 million strong has caused such frenzy, even spurring headlines that declared, “The End of Car Culture.”

As a Baby Boomer, I fondly remember the days of the “countdown” to the moment I could not only get my driver’s license, but also more importantly, afford to buy my own car. The music of the day even reflected our zeal; “Mustang Sally” by Wilson Pickett and “Little Deuce Coup” by The Beach Boys caused us to sing out our love of cars. It was a rite of passage for us to have wheels to cruise around in. It was our freedom and a social status that was flaunted; an identity point. In fact, the car industry counted on the fact that we would stick to our brand of car for a lifetime.

We Baby Boomers can probably remember when Ford initially released the Mustang, which recently celebrated its 52nd birthday, by the way. Many of us would not even date a guy who had to borrow his parents’ car. “What a nerd,” we would say. (That might have been a direct quote from me.)

Compare this with Millennials today, who in 2010 made up “around 30 percent of the population – bought just 17 percent of the new cars,” as reported by the Chicago Tribune. (And, believe it or not, the remaining 70 percent were not nerds.) Moreover, a University of Michigan study showed a steady decline in the number of young people even getting their driver’s licenses. In 1983, 87 percent of 19 year-olds had a license, compared to 69 percent in 2013. Hold on; did the pundits who are studying Millennials get it right?

Tesla Will Build a Chinese Factory When Demand Reaches “Critical Mass”

Speaking at the International Transport Forum in Leipzig on Thursday, Tesla CTO JB Straubel said that it will make sense for the carmaker to build a factory in China when local demand reaches “critical mass,” China Daily reports. It’s hard to say just where that threshold lies, but Chinese customers made up the 2nd biggest group of preorders among the broader flood of demand for the upcoming Model 3.

Straubel’s comments follow statements from Tesla’s John McNeill that suggested a Chinese factory could be part of the ramp-up in production capacity for the Model 3. Last year, Elon Musk suggested that a Chinese Tesla factory could happen around 2019. And there are reports that Tesla has already scouted factory locations there.

Tesla TSLA 2.29% has had a bumpy road in China, though, missing regional sales targets and cutting jobs in 2015. And expansion there would entail a variety of risks.

China is aggressively ramping up its own electric car sector, supported by large government subsidies aimed at solving the country’s air pollution crisis. NextEV has become the most prominent Chinese player, but Foxconn and Tencent are also part of an alliance looking for a piece of the market.

Deere Cuts Earnings Outlook as Agriculture Weakness Continues

Deere & Co. the world’s biggest agricultural equipment manufacturer, cut its fiscal full-year earnings outlook as lower commodity prices hurt farmers’ income and a glut of unsold machinery continues to pile up at dealerships.

Full-year net profit will be about $1.2 billion in the year through October, Moline, Ill.-based Deere said in a statement Friday, compared with the $1.3 billion it forecast in February.

Industrywide sales of agricultural equipment in the U.S. and Canada will drop as much as 20% this year, Deere said. It described market conditions as "challenging" and added that it sees further weakness in the construction industry, a sector that Deere also serves. The company has battled the downturn by eliminating jobs and cutting production, and said it’s still looking at ways to cut more costs.

Corn and soybean prices have fallen for the past three years, and the U.S. Department of Agriculture predicts farm net income sliding this year to the lowest level since 2002. However, a recent rebound in those commodities may give some farmers enough confidence to start buying machinery again as this year’s U.S. growing season starts up. Soybean futures traded in Chicago entered a bull market last month as heavy rains flooded fields in Argentina, among the world’s top exporters.

Keiser Report: The Return of Bubba

Univision Promotes ‘Make America Mexico Again’

Univision’s May 19, 2016 edition of its late-night national news show Edición Nocturna featured a completely favorable story about drug legalization activist Jerónimo Saldaña, the creator and vendor of baseball caps that are stamped with the slogan “Make America Mexico Again.”

Saldaña says he was inspired to start making and selling the hats after first seeing one on the Latino Rebels Facebook page and because, as he puts it, he just flat-out doesn’t like Trump. Surprising nobody, in its report Univision included no critical or opposing views against the hat.

Not only did Univision give Saldaña their platform to promote the hat, they also showed their viewers how to go about purchasing one. They touted that Saldaña has already generated $14,000 off selling the hats and, following the free promotion on Univision, more sales are likely underway.

Saldaña literally says his goal is to make Trump (and by extension, Trump’s supporters) mad. He’s clearly just being a troll and looking for attention. Which is perfectly fine with Univision, because any time they get a chance to one-sidedly bash Trump or Republicans generally during election season, they’ll gladly broadcast it on national television.

The poor are paying more and more for everyday purchases, a new study warns

The poor often spend more on all kinds of things. Households that have less money to spare in any given week, for example, are forced to buy toilet paper and similar goods in small packages, increasing the prices they pay. In addition, poor families must rely on a whole range of alternative financial services, which might charge exorbitant fees and expose customers to serious risks.

New research suggests that these disparities might only be getting worse. Xavier Jaravel, a graduate student at Harvard University, has been studying the prices people pay in the retail sector -- their everyday purchases at grocery and drug stores. He has found that prices are increasing by more than 2 percent a year on average for goods purchased by consumers with household incomes under $30,000, but by just 1.4 percent annually for those with incomes above $100,000.

While apparently small, that divergence -- if it continues -- would become hugely important in a relatively short period of time. After 20 years, for example, every dollar in the pocket of a poor consumer would be worth just 88 cents compared to what a wealthier consumer would be able to buy with it at the grocery store, given the differences in inflation and in both consumers' preferences.

Jaravel's research is preliminary, and his data includes only information on prices in one sector of the economy, excluding major household expenses outside of retail trade. All the same, the numbers are striking. "If you’re one of the consumers who is stuck at the bottom of the distribution, then you suffer more than you would think," Jaravel said.

The inventor of the 401(k) says he created a ‘monster’

Most religious men find the answers to their prayers in scripture. Ted Benna found them in the U.S. tax code. Fed up with clients only interested in getting the maximum tax break for themselves while doing as little as possible for their employees, he began to feel he could either remain a workplace benefits consultant or a Christian, but not both. In fact, just weeks before his life’s eureka moment came in September 1980, he thought about leaving the Johnson Companies, his suburban Philadelphia firm, to take a job at a local Christian college.

Instead of quitting, Benna, 74, helped turn a little-noticed new subsection of the tax code into the least likely of household names: the 401(k). American workers now take for granted they can sock away pretax earnings (with a company match), but at the time many couldn’t imagine Benna’s idea, slapped together like regulatory papier-mâché, would hold up under IRS scrutiny, let alone replace pensions as the bedrock of American retirement.

“I had only one thought at the time,” Benna told MarketWatch. “How could I make this sucker fly?” He had help. His boss, Edwin Johnson called in a chit from a friend in the Reagan administration, who arranged a meeting with “the right people at the IRS,” said John Wright, then an employee at the firm and now its president. “We sensed that if Ted’s idea was legitimate it could be something big — just not how big,” he said.

Though Benna wasn’t the only one to see potential in section 401(k), there were far more naysayers at the time. Even with preliminary approval from the IRS (full regulations weren’t written for another decade), “many of the big consulting firms still came out and said it was all a scam,” Wright said. In fact, the original purpose of section 401(k) was to limit the use of executive cash-deferred plans.

Monday 05.23.2016

NEWS to Disturb the Comfortable...

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