Janet Yellen Says Fed Could Raise Rates in Coming Months
Federal Reserve Chair Janet Yellen said Friday that an interest rate hike would be appropriate in the coming months if the economy keeps improving.
While economic growth was relatively weak at the end of last year and beginning of this year, it appears to be picking up now based on recent data, Yellen said during a discussion at Harvard University.
She said she expects the Fed to "gradually and cautiously increase" its key interest rate "and probably in the coming months, such a move would be appropriate."
Anticipation of a rate hike at either the next June meeting or in July have been rising since the Fed last week released the minutes of its discussions at its April meeting. The minutes showed that Fed officials believed the strengthening economy might warrant a rate hike in June. The minutes caught investors by surprise because they had come to believe the Fed would not move that quickly.
G7 summit: Why 'Helicopter money' could be next move for desperate central banks
The G7 countries' finance ministers recently ended their two-day meeting in Sendai, Japan, without an agreement on any economic policy issues, including those surrounding the recent sharp appreciation of the yen. The unwillingness of policymakers to address Japan's fervent appeals for exchange rate intervention may inadvertently hasten the implementation of "helicopter money" by Japan and other industrialized nations.
"Helicopter money"—named after Milton Friedman's colorful metaphor for an increase in public spending or a tax cut that is financed by a permanent increase in the money stock—is a central bank's last resort to stoke inflation, devalue the currency and induce consumer spending. Stuck with a moribund economy and a strengthening yen, if the Bank of Japan's (BOJ) monetary policy cannot get sufficient support from fiscal policymakers or from other central banks around the world, it may not be left with any other choice.
The Bank of Japan surprised markets with the unexpected adoption of negative interest rates earlier this year. This came after its long slog of large scale asset purchases -- which absorbs more than the annual net issuance of Japanese government bonds (JGBs) and has been expanded to include other assets -- failed to sufficiently boost inflation and inflation expectations.
Since January's negative-rate announcement, policymakers have been startled by the stark appreciation of the yen, an unwelcome outcome that, as of last week, had taken back about a third of the 40 percent Japanese currency depreciation against the U.S. dollar since the beginning of Abenomics. As the yen began its sharp rebound, the U.S. Treasury Secretary suddenly announced that if Japan intervened to slow or smooth the currency's rapid ascent, Washington would view it as currency manipulation. Secretary Lew suggested that Japan instead look to increase domestic demand rather than weaken its currency to make exports more attractive.
Owner of BMO Harris Bank announces job cuts
The owner of BMO Harris Bank is cutting costs in a restructuring that's leading to layoffs, including in the Chicago area, as fewer transactions are done in branches and more on mobile phones.
Canadian banking company BMO Financial Group on Wednesday said that it is working to "accelerate the use of technology to enhance customer experience" and become more efficient. The restructuring resulted in a $132 million after-tax charge against its second-quarter earnings.
Canada's fourth biggest bank will cut 4 percent of its total workforce as part of the cost-cutting measures, Reuters reported, citing a company memo. In the Chicago area, BMO Harris Bank has about 6,000 workers. BMO Harris Bank spokesman Patrick O'Herlihy declined to say how many local employees would lose their jobs or what types of positions they hold.
In a call with analysts Wednesday afternoon, BMO executives noted that the number of BMO bank branches in the short term would be "relatively stable to slightly down." The number of teller transactions in bank branches are down significantly, while mobile banking is up, the bank said.
Trump will be good for economy, bad for Wall Street
Sears is losing its last hope for staying in business
Sears is imploding. Sales are continuing to fall, and the company's one hope for survival — its home-appliances business — is now in decline.
"This was one of the main areas contributing to the decline — in spite of the fact that across retail as a whole this category grew strongly over the first part of this year," Neil Saunders, CEO of the retail consulting firm Conlumino, said in a note on Thursday.
"That Sears is unable to make gains in categories which are growing, and in which it has a more established presence, highlights its main issue: it has fallen out of favor with American shoppers who continue to abandon the chain at a fairly alarming rate." The department-store chain reported Thursday that its profit improved slightly in the most recent quarter because of trimmed expenses, but sales declined 8.3%. Kmart same-store sales dropped 5%, and Sears domestic same-store sales fell 7.1%.
The company said it was exploring the possible sale or licensing of Kenmore, Craftsman, and DieHard, three of its iconic appliance brands. The three brands "are beloved by the American consumer, and we believe that we can realize significant growth by further expanding the presence of these brands outside of Sears and Kmart," the company said.
The Historic Trend That Shows Gold Is Headed to $4,500 an Ounce
There have been more than a few awful people working on Wall Street and in the financial world. Bernie Madoff comes to mind. He ruined the lives of quite a few people with his colossal Ponzi scheme. The predatory lenders that created the U.S. housing crisis might also qualify. How about the guys at the top of Enron who sold boatloads of shares while the employee pension plan was directed into the sinking ship?
All of them terrible, but none of them compare to one particular “financial adviser”….Osama bin Laden. In 2010, bin Laden and al-Qaida came into a $5 million cash windfall. Where did it come from? Ransom proceeds from a kidnapping. Noble work if there ever was some.
Bin Laden had some very specific instructions on where that money should be kept for safe-keeping. He insisted that at least one-third of it be invested in gold. His exact words: In terms of buying gold, the overall price trend is upward. Even with occasional drops, in the next few years, the price of gold will probably reach $3,000 an ounce. OK, enough about bin Laden. Thankfully, he’s resting at the bottom of the sea.
However, it is a great time to look at gold… With the Midas metal just having its best quarterly performance in 30 years (up 17%), there are some indications that $3,000 per ounce (or more) may yet see the light of day. Gold prices peaked in September 2011 at just under $1,900 an ounce. That peak marked the commencement of a pretty nasty bear market that lopped the price of gold in half. That peak was 55 months ago.
McDonald's CEO Says No Plans to Replace Workers With Robots... Yet
Promises there will always be a “human element” to the restaurants. U.S. restaurant operators would probably not replace workers with robots if they had to pay the $15 hourly wage demanded by protesters, McDonald’s Chief Executive Officer Steve Easterbrook told shareholders at the company’s annual meeting on Thursday.
Outside the meeting at McDonald’s headquarters in Oak Brook, Illinois, about 1,000 fast-food workers and their supporters called for higher wages and benefits. The picketers are part of a national “Fight for $15” movement that, along with an improving job market, has spurred wage hikes at major employers such as Walmart Stores and McDonald’s, though not to the level demanded by protesters.
Current and former fast-food executives have said a $15 hourly wage would force restaurants to replace workers with kiosks, robotic french fry baggers, automatic pancake flippers and other technology.
“I don’t see it being a risk to job elimination,” Easterbrook said when asked about the wage/robot theory. “Ultimately we’re in the service business. We will always have an important human element.”
Brexit Could Wipe 300 Billion Pounds Off Pensions, Treasury Says
A decision by Britain to leave the European Union next month could leave pensioners as much as 300 billion pounds ($440 billion) worse off, the Treasury said in its latest warning about the financial and economic consequences of a so-called Brexit.
An exit from the 28-nation bloc risks fueling a rise in inflation, turmoil in financial markets and a drop in asset prices that could strip between 170 billion pounds and 300 billion pounds from the total assets held by those over 65, according to the analysis, published late Thursday.
“It’s important that pensioners understand what’s at stake for them too on June 23,” Chancellor of the Exchequer George Osborne said in a statement on Thursday. “My first responsibility is for people’s jobs, livelihoods and living standards. I couldn’t recommend something that we know would put all that at risk.”
The Treasury has been criticized by Brexit campaigners and some analysts for overstating the consequences of Britain leaving the EU amid accusations the government is playing on voters’ fears to keep the U.K. in the bloc. The referendum, now less than four weeks away, has split the ruling Conservative Party in two in a debate that’s become increasingly acrimonious, with accusations of smear tactics from both sides. The Treasury has argued over the past few days that an exit from the EU would spark a yearlong recession, cause hundreds of thousands of job losses and wipe up to a fifth off U.K. house prices.
Peak Idiocracy? Students Demand End To Midterms, Abolish Grades 'C' Or Below
Students on liberal arts college campuses may have just jumped the shark for special-snowflakedness. As The Week reports, students at Oberlin College are asking the school to put academics on the back burner so they can better turn their attention to activism.
More than 1,300 students at the Midwestern liberal arts college have now signed a petition asking that the college get rid of any grade below a C for the semester, and some students are requesting alternatives to the standard written midterm examination, such as a conversation with a professor in lieu of an essay.
The students say that between their activism work and their heavy course load, finding success within the usual grading parameters is increasingly difficult. "A lot of us worked alongside community members in Cleveland who were protesting," Megan Bautista, a co-liaison in Oberlin's student government, said, referring to the protests surrounding the shooting death of 12-year-old Tamir Rice by a police officer in 2014. "But we needed to organize on campus as well — it wasn't sustainable to keep driving 40 minutes away. A lot of us started suffering academically."
The student activists' request doesn't come without precedence: In the 1970s, Oberlin adjusted its grading to accommodate student activists protesting the Vietnam War and the Kent State shootings, The New Yorker reports. But current students contend that same luxury was not granted to them even though the recent Rice protests were over a police shooting that took place just 30 miles east of campus.
U. S. Service Sector Now At Stall Speed
Markit’s Services PMI fell to just 51.2 in May, dropping a rather large 1.6 points from 52.8 in April. That meant the combined US Composite PMI, which puts together both manufacturing and services, was barely above 50, registering just 50.8. As with all PMI’s the distinction around 50 is unimportant, what matters is the direction and for more than a single month. On that count, services reflect what we have seen in manufacturing: that the “rebound” in March and April was nothing more than a small relative improvement after the liquidation-driven start to the year. The economy didn’t get better, it for a few months just failed to get worse.
In terms of the Services survey, Markit reports several distressing indications including respondents’ views for the immediate future:
May data highlighted a renewed fall in business optimism across the service economy. Reflecting this, the balance of service sector firms forecasting a rise in business activity over the year-ahead eased to its lowest since the survey began in October 2009. Anecdotal evidence suggested that uncertainty related to the presidential election and concerns about the general economic outlook had continued to weigh on business confidence.
While I don’t want to overemphasize individual parts of individual sentiment surveys, it is quite a contrasting summation with the apparent self-delivered economic approval of the FOMC to execute the next policy communication (rate hike in name only). And this is not manufacturing, it is the services component that is supposed to steer the economy far away from the “manufacturing recession.” That was always a dubious proposition, particularly when so much of the supposed “services economy” itself relates to the transportation, management, and then sale of goods.
Madoff victims may get new $247M disbursement
Investment victims swindled by Bernard Madoff could soon receive their share of a new $247 million repayment to help cover losses from the historic fraud.
More than seven years after the Ponzi scheme mastermind's massive scam collapsed, court-appointed trustee Irving Picard on Thursday filed a motion seeking U.S. Bankruptcy Court approval for the new disbursement.
If the court grants approval at a scheduled June 15th hearing, the trustee would allocate roughly $171 million for immediate distribution to 972 accounts held by former Madoff investment clients. Approximately $76 million would be held in reserve for additional claims affected by pending litigation.
Total repayments to Madoff clients whose claims have been allowed would rise to approximately $9.45 billion under the new distribution plan.
Dollar stores earnings flourish
Donald Trump is great for gold
Donald Trump is great for gold. Or, at least, the possibility of his winning the presidential election in November is, according to Greg Collett, the World Gold Council's director of investment products.
The council sponsors the SPDR Gold Trust, the largest exchange-traded fund in the world that is backed by gold.
The possibility that the presumptive Republican nominee will win the general election could heighten the type of concern that drives investors to invest in the metal as a haven. "He's very unclear in his policies, and uncertainty tends to make people say, 'Maybe I should have something a little bit in gold,'" Collett told Business Insider on Wednesday.
He continued: If he's elected, this time next year, what does the country look like? Who knows? Who knows if companies can do business with China or Mexico, [or] if we're like rounding up people and deporting them, who knows? That sort of weighs on people's investments, except for gold. It helps gold.
Puerto Rico Senate overrides governor veto, nixes contentious tax hike
Puerto Rico's Senate on Thursday joined its House of Representatives in voting to block a new round of tax increases on business-to-business transactions and stop the establishment of a valued-added tax on the island.
The Senate voted 21 to 1 in favor of overriding a veto by Governor Alejandro Garcia Padilla who sought to maintain the latest phase of legislation passed just last year that would have boosted the tax rate to 10.5 percent from 4 percent on June 1. The vote in the Senate comes just a few days after the House voted 47 to 1 in favor, overriding the governor's veto on May 20th.
In both cases, the votes represented a flip-flop by the legislature and helped them maintain a partial repeal of the law they had created. The end result could bring relief for local businesses and signals growing discord in the island’s government as election season heats up. A spokeswoman for the governor had no immediate comment. Garcia Padilla announced in December that he would not seek reelection.
Puerto Rico faces $70 billion in total debt that it says it cannot pay, a staggering 45-percent poverty rate and rampant emigration that threatens to collapse its economy. The U.S. Congress is currently considering a bill to bring the island’s finances under federal oversight and allow it to cut repayments to creditors.
Insurers Seek Big Premium Boosts
After Losing $11 Billion on $9.4-billion Nokia Buy & Axing 27,650 Jobs, Microsoft Dumps Consumer Smartphones
Microsoft entered the final-final or pre-final-final episode of its Nokia saga. Its press release on Wednesday explained that it would “streamline” its smartphone hardware business. It would throw in the towel on smartphones for consumers and try to carve out a niche in corporate smartphones. It would be accompanied by more bloodletting.
With its usual big-money genius, Microsoft had acquired Nokia’s mobile-phone business and patents In September 2013. Nokia’s credit rating was junk. Its market share had collapsed. It had lost over $4 billion the prior year. But its smartphones were using the Windows Phones operating system.
The original terms of the deal called for a purchase price of $5.4 billion. This soon ballooned to a new purchase price of $7.2 billion. To make the deal go down better, Microsoft promised $600 million in annual cost savings within 18 months.
In an April 2015 SEC filing, Microsoft disclosed that the total purchase price ended up being $7.9 billion. Three months later, in its annual report for the year ended June 30, 2015, it disclosed that, after all the beans had been counted, the “total purchase price” of Nokia had ballooned to $9.4 billion.
European Central Bank to Accept Greek Bonds as Collateral
The European Central Bank has once again agreed to accept Greek bonds as collateral for loans in order to aid the country’s struggling banks, says a Financial Times report. The move comes after Wednesday’s agreement between Greece and creditors that would allow the next tranche of the country’s bailout loan and the agreement — in principle — to ease the country’s substantial debt. Next week, the ECB will start accepting Greek state bonds to boost the banking system.
According to the Financial Times, the ECB’s governing council, made up of six of the institution’s top officials and heads of national central banks in the euro zone, will meet next Thursday in Vienna. Greek officials were confident that the ECB would decide at that meeting to allow Greek lenders to use Greek sovereign debt as collateral to access central bank cash.
Last summer, ECB Vice President Vítor Constâncio said the board would reinstate the cash lifeline once it was satisfied there was “credible implementation” of the bailout program — a hurdle Athens is now expected to clear.
The report says that the ECB suspended the waiver which made Greek government debt eligible for the central bank’s auctions despite its junk rating with major credit rating agencies — in February 2015. Since then, Greek banks stayed afloat by emergency loans made by the Bank of Greece. If the ECB board votes in favor of reinstating the waiver, Greek banks will be able to access the central bank’s cheaper loans instead of the more expensive emergency loans, known as Emergency Liquidity Assistance, offered by Greece’s central bank. Limits to emergency loans, which the Bank of Greece can grant only at the behest of the ECB, led Greece to introduce capital controls in late June 2015.
iPhone Maker Foxconn replaces '60,000 factory workers with robots'
One factory has "reduced employee strength from 110,000 to 50,000 thanks to the introduction of robots", a government official told the South China Morning Post. xu Yulian, head of publicity for the Kunshan region, added: "More companies are likely to follow suit."
China is investing heavily in a robot workforce. In a statement to the BBC, Foxconn Technology Group confirmed that it was automating "many of the manufacturing tasks associated with our operations" but denied that it meant long-term job losses.
"We are applying robotics engineering and other innovative manufacturing technologies to replace repetitive tasks previously done by employees, and through training, also enable our employees to focus on higher value-added elements in the manufacturing process, such as research and development, process control and quality control.
"We will continue to harness automation and manpower in our manufacturing operations, and we expect to maintain our significant workforce in China." Since September 2014, 505 factories across Dongguan, in the Guangdong province, have invested 4.2bn yuan (£430m) in robots, aiming to replace thousands of workers.
Ron Paul: Audit The Fed Bill Is Marching To Victory
Powell: Fed Could Raise Rates 'Fairly Soon,' but Sees Gradual Pace
Federal Reserve Board governor Jerome Powell said Thursday it may be appropriate for the Fed to raise interest rates again "fairly soon," but said the Fed should proceed at a gradual pace.
In remarks prepared for delivery at the Peterson Institute for International Economics, Mr. Powell said he expects to see further improvement in the labor market, including strong job gains and increases in wage inflation. He anticipates inflation will move toward the Fed's 2% goal as the economy tightens.
"If incoming data continue to support those expectations, I would see it as appropriate to continue to gradually raise the federal funds rate," he said. "Depending on the incoming data and the evolving risks, another rate increase may be appropriate fairly soon."
Several of Mr. Powell's Fed colleagues have said in recent days they expect the central bank will raise interest rates two or three times this year.
U.S. Household Finances Show Modest Uptick
The financial well-being of U.S. households continued a modest improvement last year but even a small-scale financial disruption could be tough for nearly half of them to handle, according to a Federal Reserve survey.
More than two-thirds (69%) of respondents to the Fed’s 2015 Survey of Household Economics and Decision-making said they were either “living comfortably” or “doing okay,” up from 65% in 2014 and 62% in 2013.
Individuals were also 9 percentage points more likely to say that their financial well-being improved during the prior year than to say it declined, and 23% expect their income to be higher in the year after the survey, down from 29% in 2014 who expected income growth in the year after the 2014 survey.
But on the other side of the coin, there were indications of financial insecurity. Forty-six percent of adults said they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money. Eighteen percent indicated that either they, or their family living with them, experienced some form of financial hardship in the previous year, but that was a 6 percentage point improvement over the 2014 surve
Millennials' Most Common Roommates: Their Parents
Millennials have been bucking historical trends about where and how young people live: They are buying homes later in life, settling down in romantic partnerships years after previous generations, and migrating, contrary to many popular accounts, away from cities.
In 2014, for the first time in the past 130 years, young adults were slightly more likely to live at home, with their parents, than with a romantic partner, according to a new report.
The report, an analysis of U.S. Census data published by the Pew Research Center, compares the percentage of Millennials that lived at home with parents to the percentage living with spouses or partners, dating as far back as 1880. They found that while living with a romantic partner has historically been the most popular arrangement, by 1960 the percentage of the nation’s 18-to-34-year-olds who were living with a spouse or partner in their own household had peaked at 62 percent. Today only about half as many—31.6 percent—can say the same.
These shifts may be partially responsible for the sluggish rate of Millennial homeownership. Despite the fact that in many cases purchasing a home would be about 25 percent cheaper than renting, the percentage of Millennials who buy has been falling since 2009 (partly because scraping together a down payment is such a hurdle for a generation with tight finances).