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Monday 07.25.2016

World Bank mulls different approach as prospects for global growth darken

At a time when weaker global growth prospects are a cause for concern, and even impacting the World Bank's goals to alleviate poverty, President Jim Yong Kim is taking a different tact to confront the challenge.

"(What) we're really focusing on, is there's a whole other set of investments that can be made that will prepare countries for five, 10, 15 years into the future, especially investments into human capital," Kim told CNBC at the G-20 finance ministers and central bank governors meeting in Chengdu, China on Saturday.

Speaking on the sidelines of the event, he cited a World Bank study that showed people in the 80th to 90th percentile of income had benefited the least from globalization, and this being largely the middle class in high-income countries.

Whether its artificial intelligence or a more automated workforce, Kim believes that preparing for the economy of the future will go a long way in eliminating poverty.

How Do We Make America Strong Again? Start Telling the Truth

“Making America Strong Again” is a potent political narrative. But what does “being strong” mean? For some, it’s a code-phrase for bullying–forcing other nations to do our bidding. For others, it describes a re-emergence of widespread domestic economic vitality. Another audience sees the rebuilding of a social contract and social cohesion as the essence of strength.

As laudable as some of these interpretations of strength might be, to me “being strong” boils down to one principle, and only one principle: tell the truth, however painful and unwelcome as it might be. The essence of weakness is the cowardice of avoiding the truth. We as a nation have grown accustomed to the cowardice of half-truths, half-confessions, half-apologies and a financial system that rewards fraud in all its variations of artifice, deception and lies.

What’s presented as “fact” is actually a spectrum of manipulation and lies.Does anyone with a basic grasp of the economy really believe unemployment is 5% or less? Does anyone seeking the truth believe that a person working one hour a week is equivalent to someone working 40 hours a week? Isn’t counting both of these positions as equally statistically important jobs a form of not telling the truth?

If you hold great wealth and power, and the source of your wealth and power is illegitimate, you must dissemble, fabricate, propagandize and lie to hide the illegitimacy of your power. That is the status quo of the U.S. in a nutshell. Those who earned wealth and gained power legitimately have no fear of the truth. Those whose wealth and power is illegitimate fear the truth more than anything else.

A Move Of Epic Proportions In China Is Far Closer Than Anyone Thinks

Lately there have been quite a few warning signs pertaining to China. Yet, concern seems anathema to not only the “markets,” but the media in general. However, I’m of the opinion that is all about to change. And that “change” is not years away, but rather, sooner (and much sooner at that) than later.

To use an analogy, I don’t think there’s a better one than the old “Bull in a china shop.” Sure there’s no broken dishes currently, but that’s because the bull has yet chosen an aisle to venture down. That is – if he chooses to use an aisle at all. And the “markets” are behaving as if the bull can somehow read or cares about the “you break it – you own it!” sign. This pretty much sums up the absurdity of complacency now taking place in the “markets.”

Last week China’s GDP figure was reported to be 6.7, beating consensus by just a tick. However, there was some concern that the print might come in (heaven forbid) below consensus. Why the need for any concern one might ask? After all, when your GDP figure is basically announced well in advance (e.g., 6.5 – 7.0) then hit with statistical precision, report, after report, after report as announced by the politburo of a communist controlled economy. Again, why sweat it? The so-called “smart crowd” weren’t.

Easy: Today, in a market so utterly adulterated and carry trade sensitive via central bank meddling, just a tick lower of the expected 6.6, as opposed to their tick higher beat, has ominous implications. For any movement lower is now suspect or viewed by the outside world as “just how bad is it if they reported lower?” An inline, or even just a tick higher beat is seen as “they must still have some control of their economy.” e.g., Phew…Buy, buy, buy!

Debbie Wasserman Schultz Resigns As Chair Of The DNC

The outrageous rip-off of taxpayer-funded stadiums

My husband and I spent a recent evening walking along the Mississippi — he chasing Pokémon, I not. Towering above us across the river, taking up about half the Minneapolis skyline, was the new U.S. Bank Stadium, a glass and metal behemoth that looks, above all, expensive.

It looks expensive because it is expensive. And it's expensive on the taxpayer's dime. Scheduled to open today, the Vikings' new digs came with a bill of $1.1 billion, with Minnesotans on the hook for $678 million once all construction costs plus 30 years of interest payments are factored in. It's a deal Vikings owner Zygi Wilf and his pals at the NFL accomplished via naked political extortion, warning Minnesota Gov. Mark Dayton there would be "serious consequences" in the form of a Vikings exit to sunny Los Angeles if the state didn't cough up the cash.

And speaking of Los Angeles: When the Rams announced their decision to move to L.A. in January, they left St. Louis with more than $100 million in lingering debt from the public bonds the city used to finance the Edward Jones Dome in the 1990s. The stadium won't be paid off until 2021, a feat that must now be accomplished with no NFL team (and no $500,000 of annual NFL rent). Mayor Francis Slay attempted to cast the situation in optimistic terms, but an NFL dine-and-dash is seriously resistant to positive spin.

Yet St. Louisans are, incredibly, not stuck with the worst of all stadium public financing deals. That dishonor goes to either Seattle or East Rutherford, New Jersey, formerly the locations of the Seattle Kingdome and Giants Stadium, respectively. I say "formerly" because both facilities are now demolished, the Kingdome since 2000, and Giants Stadium since 2010. As each city has learned, a stadium need not exist to continue costing taxpayers money: When the wrecking balls hit the Kingdome, Seattle still owed $83 million for its construction costs. Government debt for Giants Stadium was $266 million at the time of demolition and will not be paid back until 2025.

The Subprime U.S. Economy: Disintegrating Due To Subprime Auto, Housing, Bond & Energy Debt

The U.S. financial system continues to disintegrate even though most Americans hardly notice. The system is being gutted from the inside out… much the same way a chronic disease weakens a patient even before any symptoms are felt. However, we are already experiencing painful symptoms as U.S. economic indicators continue to weaken.

Here are just a few of the recent headlines: Energy Giant Schlumberger Fires Another 8,000 As “Market Conditions Worsen” in Q2 -The Financial System Is Breaking Down At An Unimaginable Pace -Potential Crisis Triggers Continue To Pile Up In 2016 -Just In Time—–Big Wall Street Housing Investors Cashing-Out On Housing Bubble 2.0 -Corporate Bond Defaults Hit Highest Rate Since Financial Crisis

These are just some of the recent headlines pointing to BIG TROUBLE AHEAD. However, the U.S. financial system is in dire shape due to the SUBPRIMING of the entire economy. Today, anyone can purchase a car for little or nothing down and finance it for 84 months. The U.S. housing market is also in the same predicament.

According to the article, Are We Heading for Another Housing Crisis?, published on May 12th this year: While the economy and home prices have both rebounded, some people have expressed concern we are headed for a repeat housing bubble. As of January 2016, home prices were rising at a rate twice that of inflation, according to the S&P/Case-Shiller U.S. National Home Price Index. What’s more, Fannie Mae and Freddie Mac have unveiled programs to allow first-time homebuyers to make a purchase with only 3 percent down. Plus, some lenders are using alternate credit scores, which may make loans available to those who can’t get one under conventional credit scoring methods.

Series off Attacks May Lead Mall Owners to Increase Security

Attacks such as the one in a Munich shopping mall and at a nearby McDonald's Friday may lead mall owners to increase their security or even persuade global brands to focus expansion plans on the U.S. rather than Europe.

Retail industry experts also said that at this point big iconic brands don't appear to be the targets — it's just that many of them happen to be at public places that are vulnerable to attacks.

"There are lots of Starbucks and McDonald's, and they are in public places," said Trevor Wade, global marketing director at Landor, a marketing firm whose clients include BMW, FedEx and Procter & Gamble.

A gunman opened fire Friday at the Olympia Einkaufszentrum mall, one of Munich's largest, killing nine people and wounding at least 10. A body found near the scene was that of the shooter and he appeared to have acted alone, officials said. More global brands are setting their sights on the U.S. for expansion after recent attacks in Germany and France, said Faith Hope Consolo, chairman of retail leasing and marketing at Prudential Douglas Elliman. Consolo, who brokers deals with luxury brands, said her clients feel the security situation is more "under control" in the United States.

The US consumer is spending more, but it's only benefiting 2 parts of the economy

It’s a good time to be an American business — especially if that business is related to services or e-commerce, according to a new Macquarie Research report led by analyst David Doyle.

This is because the US consumer has been thriving and has consequently been demanding more services and goods online. Overall retail sales for June rose 0.6% sequentially, and were up 2.7% year over year. This continues a longer-term trend, with retail sales in May also growing year over year. Consumer confidence, as tracked by the University of Michigan, has also been trending upwards, and remains at relatively high levels despite a recent dip.

Moreover, record-low gas prices have also contributed to Americans’ ability to purchase other, more elastic goods.

This bodes very well for the economy, as around 70% of America’s GDP comes from consumer spending. However, the Macquarie Research report found that virtually all of the increase in consumer spending has been occurring in services and e-commerce.

How Soaring Corporate Debt Could Lead to the Next Financial Crisis

Economic bubbles always seem to stare us in the face before popping. That’s exactly what happened 10 years ago with the boom-turned-bust U.S. housing market — and it’s what could soon happen with global corporate debt…

According to a new report from Standard & Poor’s Global Ratings,corporate debt around the world is massively on the rise and could skyrocket to $75 trillion from the $51 trillion it’s at now.

This flurry in corporate borrowing is being driven by central banks around the world. For close to a decade, they have kept interest rates near zero (or even below) to encourage companies to pile on debt. Here in the United States, for example, interest rates have been near 0% since 2008 up until December 2015, when the U.S. Federal Reserve raised rates a meager 0.25 to 0.50 basis points.

The Bank of Japan and the European Central Bank are even buying corporate bonds, adding more fuel to the corporate debt machine. So far, the BOJ has bought 200 billion yen ($1.88 billion) in corporate bonds since August, while the ECB has bought €10.5 billion ($11.5 billion) in corporate bonds between June 8 and July 15, according to the Financial Times. This credit-fueled growth, while it has helped push the markets to new highs, isn’t sustainable. And if it keeps growing as S&P predicts, it could lead to a financial collapse that will rival the 2008 housing market crash.

Gold Demand Remains Stable During Sector Weakness

My favorite indicator for real time Gold demand is the amount of Gold in the GLD and its fluctuations over time. As we wrote in our book, the driving force for Gold is investment demand which is driven by changes in real interest rates. Western-based investment demand from big money (i.e Stan Druckenmiller and George Soros) shows up mostly in the ETFs and specifically, GLD. The amount of Gold in GLD has risen steadily even as Gold consolidated a few months back and has been stable in recent weeks even as Gold and gold stocks correct their Brexit breakouts.

The chart below includes the price of Gold, the amount of Gold in GLD (bottom) and the rolling quarterly change in the amount of Gold in GLD. Even as Gold consolidated for several months in the spring, the amount of Gold in GLD increased. Over the past few weeks Gold has retreated by $65/oz yet the GLD has only lost 2% of its Gold. Moreover, note that the recent demand surge (quarterly change) is the second strongest of the past 10 years.

Note how strong demand for Gold was from 2006 to the middle of 2010. Even though Gold corrected 30% during the financial crisis, GLD only experienced minor outflows of Gold. After Gold bottomed in October 2008, demand exploded.

Interestingly, demand peaked in the middle of 2010 and went sideways for a few years before succumbing to the bear market. That lack of strong demand in 2011 while Gold surged, in hindsight was a warning sign. In short, this data (amount of Gold in GLD) can be somewhat of a leading indicator for the sector. It has been in the past and it has worked well so far this year. Unless we see huge outflows from the GLD then there isn’t much reason to be concerned with the current correction in Gold and gold stocks.

Deere layoffs now reach nearly 2,000 across Illinois and Iowa

The sluggish farm economy continues to hurt the local workforce. Deere & Company plans to lay off another 120 workers from its Harvester Works in East Moline. The indefinite layoffs will take place on September 6, 2016. It now puts some 2,000 Deere workers on layoffs in Illinois and Iowa.

Inside a family business in Alpha, Illinois, Deere's downturn also hits close to home. "It's tough to see anybody lose their job," said Marion Calmer, a Henry County farmer and inventor who opened Calmer Corn Heads in 2005.

The company makes specialty parts to improve harvesting. But new sales are nearly cut in half this year. "Deere is very important to a business like us," he said. "They are very important to American agriculture." Friday's announcement offers no projections for Deere employees to return.

"It affects everybody," he continued. That's tough on local companies that supply parts or service products from the ag-giant. "When production levels are dropping below average, then these smaller companies that were producing extra parts -- they're just not needed any more," Calmer said. It's not a surprise for those in agribusiness. At Deere & Company's annual meeting in February 2016, shareholders learned that sales will likely drop by over $2 billion this year. That's forcing layoffs to meet product demand.

Escaping America

Why Obama’s half-brother says he’ll be voting for Donald Trump

President Obama’s Kenyan half-brother wants to make America great again — so he’s voting for Donald Trump. “I like Donald Trump because he speaks from the heart,” Malik Obama told The Post from his home in the rural village of Kogelo. “Make America Great Again is a great slogan. I would like to meet him.”

Obama, 58, a longtime Democrat, said his “deep disappointment” in his brother Barack’s administration has led him to recently switch allegiance to “the party of Lincoln.”

The last straw, he said, came earlier this month when FBI Director James Comey recommended not prosecuting Democratic presidential candidate Hillary Clinton over her use of a private e-mail servers while secretary of state.

“She should have known better as the custodian of classified information,” said Obama. He’s also annoyed that Clinton and President Obama killed Libyan leader Moammar Khadafy, whom he called one of his best friends. Malik Obama dedicated his 2012 biography of his late father to Khadafy and others who were “making this world a better place.”

Housing bubble? Experts say no

Home price escalation. Hot housing market. Soaring home sales. Sound familiar? That was the scene before the last recession when the housing bubble popped and sent the nation’s economy into a downward spiral.

Are we approaching that scenario again? Economists and real estate experts say no — that conditions are different now. A few warning clouds are on the horizon, but there’s no reason for alarm, according to Realtor.com.

“Things in the world of residential housing are generally safe and steady and continuing to grow,” according to the website operated by the National Association of Realtors. Higher housing prices are “mostly the result of a housing shortage rather than ominous signs of another real estate meltdown,” Realtor.com said. “The factors that led to the historic bust — easy-peasy credit for all, rampant flipping, frantic overbuilding — simply aren’t happening today.

Only highly qualified buyers are able to get mortgage financing, said Jonathan Smoke, chief economist for the website. “Flipping is back to normal. And we’re building about half as many homes as we need,” he said. The website lists Charleston as No. 9 of overheating real estate markets in the nation, but only with an elevated risk compared to the top six in descending order: San Jose, Calif.; San Francisco; Austin; Salt Lake City; Dallas; and Los Angeles.

Here’s what Donald Trump would do to the price of gold

The notion that stocks are enjoying a Donald Trump–inspired rally doesn’t pass the sniff test. Gold, however, might be another matter, if the Republican nominee ends up winning the White House, analysts say.

Trump’s pledge to tear up trade agreements and a rise in overall uncertainty over the policy outlook would likely dent the U.S. economy while spurring a rise in demand for gold, said Georgette Boele, a currency and precious-metals analyst at ABN Amro, in a Friday note.

To be sure, Boele’s forecast is based on highly pessimistic expectations in regard to Trump’s likely economic polices. “If Trump were to become president, gold prices will likely perform well, because we expect that his policies will be inward looking and will weaken the fundamentals of the U.S. economy,” Boele said. “In addition, his rhetoric and possibly policy actions could create domestic and international uncertainty at best, and upheaval at worst.”

Weaker U.S. growth would help push gold toward $1,850 an ounce “over the coming years,” she said. That would be a 40% rise from gold’s GCQ6, -0.11% current level just above $1,320 an ounce. Gold has rallied nearly 25% in 2016.

Charles Ortel-Clinton Foundation $100 Billion Criminal Conspiracy

Robots, drones help North Texas police

Now that a police robot has been used to kill a suspect in Dallas, can drones be far behind? The idea is a long way from becoming reality, experts say. The Arlington police department is the only one in the Metroplex that uses drones, and they’re used to protect lives.

A drone can “see” a situation before an officer is sent into danger, and can help with evacuating citizens, said Arlington police Lt. Brook Rollins, commander of the Technical Services Division. The department used drones to get a bird’s-eye view of heavily damaged buildings after a storm in October 2014 and for tactical surveillance when an armed suspect barricaded himself in a building.

While the military regularly uses drones to kill — the New America Foundation, which tracks drone strikes, estimates that the U.S. has conducted more than 400 drone strikes that killed at least 7,000 people — Arlington police wouldn’t use them that way, Rollins said. “We would never use them as a weapon — lethal or nonlethal,” he said.

The main priority is developing drones’ surveillance and visual capabilities, to help officers respond faster and protect innocent lives, said Thor Eells, National Tactical Officers Association board chairman.

Reports: Verizon Will Spend $4.8 Billion To Acquire Yahoo

Yahoo — home to all those email addresses you use for subscriptions you’d rather not have anyone else know about, and the Flickr account you probably haven’t updated since 2010 — will soon be under the same umbrella as former web 1.0 rival AOL, with multiple reports claiming that Verizon has agreed to acquire the ancient online operation for $4.8 billion.

Neither Verizon nor Yahoo has said anything publicly about the deal, but multiple news sources — all quoting “people familiar with the situation” who are definitely not publicists paid to leak this information in advance — say an announcement is coming Monday morning, before the stock market opens.

The Verizon deal will include all of Yahoo’s online properties. What Big V is not acquiring is Yahoo’s more expensive asset — its 15% ownership stake in Chinese online retail giant Alibaba and its shares of Yahoo Japan. Bloomberg reports that those two pieces alone are currently worth around $40 billion, more than eight times the sale value of Yahoo’s online businesses.

According to the Wall Street Journal, Verizon plans to keep the Yahoo brand intact and seems to believe it can keep much of the existing Yahoo sites and services up and running, continuing to offer an alternative to Google and Microsoft’s Bing.

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