Baker Hughes Cut 3,000 Jobs in Q2, Plunges Deeper Into Red
Oilfield services group Baker Hughes said on Thursday that it had cut 3,000 jobs in the second quarter in a bid to increase annualized savings as its loss widened to US$911 million, from US$188 million for the second quarter last year.
The adjusted net loss was US$0.90 per share, compared to expectations for a loss of US$0.62 per share by Thomson Reuters I/B/E/S. Revenues dropped by 39 percent annually and by 10 percent sequentially, to US$2.4 billion, on the back of steep decline in activities and increased pricing pressure, mostly in the Eastern Hemisphere.
Baker Hughes’s corporate costs dropped to US$29 million in the second quarter, from US$42 million in the same period last year. “The year-over-year reduction in corporate costs is mainly due to workforce reductions and lower spending,” the group said in its second-quarter statement. Prior to the second-quarter layoffs, Baker Hughes had dismissed 2,000 employees in the first quarter and another 18,000 in 2015.
In April to June, Baker Hughes implemented cost cuts which put it on track to reach its target to achieve US$500 million in annualized savings by the end of this year, chairman and chief executive Martin Craighead said.
Boeing Might Stop Making 747 Jumbo Jets After Recent Slump In Orders
The days of flying through the air in a jumbo jet filled with hundreds of other travelers may someday be a thing of the past, as Boeing says it’s considering stopping production on its 747s.
Not as many orders have been coming in for the jumbo jets, which first appeared on the scene in the 1970s, according to a regulatory filing on Wednesday. “If we are unable to obtain sufficient orders and/or market, production and other risks cannot be mitigated, we could record additional losses that may be material, and it is reasonably possible that we could decide to end production of the 747,” Boeing said.
It’s put the kibosh on plans to ramp up production of the 747 from its current one plane per month starting in 2019, and will stick to its decision to halve the production rate in September instead.
“On the 747 program, we decided to reduce future production expectations and revenue assumptions to account for current and anticipated weakness in the air cargo market,” Chief Executive Dennis Muilenburg said on a post-earnings call with analysts reported by Reuters.
Japan’s 2% Inflation Target – Chopper Money?
Imagine a helicopter flying overhead, spilling thousand-dollar bills all over your backyard. That’s the visual that comes to mind when I read about “helicopter money”, a proposed alternative to quantitative easing (QE). The most recent headlines on this topic have centered around Japan. As the Bank of Japan approaches practical limits on its purchase of government bonds, several economists have argued that it might be time to consider helicopter money.
Simply put, helicopter money is a direct transfer of money to raise inflation and output in an economy running substantially below potential. Thus far, conventional QE has not achieved Japan’s 2% inflation target. According to a paper by the St. Louis Fed, this could be due to expectations that it would eventually be unwound, diminishing the policy’s credibility. Since helicopter money is free and never has to be repaid, this approach may have a better shot at achieving Japan’s inflation target.
One form of helicopter money being discussed is the issuance of a zero coupon perpetual bond (with no maturity) by the Ministry of Finance to the Bank of Japan. The Bank of Japan “prints money” via an electronic credit of cash on its balance sheet, and uses the cash to buy the bonds. Because the bonds will pay no coupon and no principal, the Ministry of Finance would never have to pay it back. It is important to point out the distinction between this “helicopter money” approach and QE.
In QE, the central bank prints money and uses the money to buy bonds. However, the bonds eventually have to be repaid, so it adds to the overall debt levels of the country. The distinction here is the permanent nature of a perpetual bond. With QE, assets purchased are expected to be unwound at some point in the future, i.e. future generations would still have to pay back the money spent by today’s generation. With a zero coupon perpetual bond, the debt is never repaid, making this tool “helicopter money” rather than conventional QE.
Lloyds bank to cut 3,000 jobs and close 200 branches after Brexit
The bank said that it is bracing for a cut in interest rates following the UK’s decision to quit the European Union. The part state-backed bank said a cost-cutting programme announced in 2014 will be extended and the ‘expected lower for longer interest rate environment’ will see the new cuts come into effect by the end of 2017.
The Bank of England is widely expected to cut interest rates from 0.5 per centto 0.25 per cent next week as the fallout from the Brexit vote intensifies. Lloyds is targeting £1.4 billion in cost savings by the end of next year.
The bank made the announcement alongside results for the first half of the year, which saw statutory profits more than double to £2.5 billion, but the lender warned that Brexit could have an adverse impact on its future performance.
‘Given the uncertainty, it is too early to determine the impact on our formal longer term guidance at this stage. However, while the business will remain highly capital generative, it is possible that this capital generation may be somewhat lower in future years than previously guided,’ the bank said.
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Speak Loudly and Carry No Stick - Peter Schiff
Theodore Roosevelt’s famous mantra “speak softly and carry a big stick” suggested that the United States should seek to avoid creating controversies and expectations through loose or rash pronouncements, but be prepared to act decisively, with the most powerful weaponry, when the time came. More than a century later, the Federal Reserve has stood Teddy’s maxim on its head. As far as Janet Yellen and her colleagues at the Fed are concerned, the Fed should speak as loudly, frequently, and as circularly as possible to conceal that they are holding no stick whatsoever.
Roosevelt's "stick" was America’s military might, which in his day largely boiled down to the U.S. Navy, which he had enlarged and modernized. To demonstrate to a potential adversary that he was prepared to use these weapons, Roosevelt sent the fleet around the world in a massive show of force. However, he took care to couch the expedition in soothing rhetoric. He even ordered the battleships to be painted white to create the impression that they were angels of mercy rather than instruments of power. The combination proved effective. America’s global influence increased dramatically during his presidency even though few shots were fired.
The “sticks” that Janet Yellen is supposedly ready to employ are interest rate increases that are needed to help normalize the economy, fight inflation, and to stockpile ammunition to combat the next recession. Yet, in the last decade interest rates have essentially been fixed at zero. In fact, since the end of 2008 the Fed has raised rates a grand total of once…last December, by just one quarter of a percent. But what they have lacked in action they have more than made up for with torrents of talk. As a result of this “Loud Talk Policy,” American economic prestige in the 21st Century has fallen faster than it rose in the Roosevelt presidency.
Ever since the Fed finally wound down its quantitative easing programs back in 2014, the big question became when it would “normalize” interest rates, bringing them back to the three to four per cent levels that had been in place for much of the past century. Over that time, the Fed has issued countless statements, both officially and unofficially, that discussed why, when, and how fast it will raise interest rates. Never before have so many words been spilled and parsed over a policy development that never had any chance of coming to fruition.
Ford profits fall as it warns on US economic risks
Carmaker giant Ford has reported weaker-than-expected second quarter profits, in the face of stagnant US sales and a tougher market in China. It also said that while it expects strong results for 2016, there are "risks" to reaching its targets due to US economic uncertainty.
Quarterly net income fell 9% to $1.97bn (£1.5bn) from $2.16bn a year earlier. Ford shares fell by 9.5% in afternoon trading in New York on the news. Rival General Motors' shares fell by 3.65%.
The company said that sales in the US and China were lower than anticipated in the quarter, and Ford also announced its first quarterly loss in Asia Pacific for three years. Chief financial officer Bob Shanks said the US economic recovery was "maturing," a development which would hinder sales growth later this year.
Ford is heavily dependent on the US economy. It derived 90% of its $2.99bn pre-tax profit from North America during the quarter.
ConocoPhillips reports net loss of $1.1 billion in second quarter
ConocoPhillips reported on Thursday morning a second quarter loss of $1.1 billion, totaling about 86 cents a share, a much larger loss than the oil company's second quarter loss of $179 million last year. The company is also cutting capital expenditures by $200 million to $5.5 billion. The firm cut its debt by $800,000.
"We remain focused on successfully executing our operating plan," ConocoPhillips chief executive Ryan Lance said in a press release Thursday, "lowering the breakeven price of the business and positioning for strong momentum as prices recover." "The price environment remains challenging, but our business is running well and we continue to beat our production, capital expenditures, and operating cost targets," he said.
Production for the second quarter was 1,546 thousand barrels of oil per day, or MBOED, a decrease of 49 MBOED compared to a year ago, according to the ConocoPhillips press release.
The production loss is due to "normal field decline, dispositions, planned downtime and the impact of wildfires in Canada," according to the Houston-based company. Still, the company maintains that "operational performance was strong across the portfolio," according to the press release.
US Homeownership Rate of 62.9 Percent Matches a 51-Year Low
The proportion of U.S. households that own homes has matched its lowest level in 51 years — evidence that rising property prices, high rents and stagnant pay have made it hard for many to buy.
Just 62.9 percent of households owned a home in the April-June quarter this year, a decrease from 63.4 percent 12 months ago, the Census Bureau said Thursday. The share of homeowners now equals the rate in 1965, when the census began tracking the data.
The trend appears most pronounced among millennial households, ages 18 to 34, many of whom are straining under the weight of rising apartment rents and heavy student debt. Their homeownership rate fell 0.7 percentage point over the past year to 34.1 percent. That decline may reflect, in part, more young adults leaving their parents' homes for rental apartments.
The overall decline appears to be due largely to the increased formation of rental households, said Ralph McLaughlin, chief economist at the real estate site Trulia. McLaughlin cautioned, though, that the decrease in homeownership from a year ago was not statistically significant. America added nearly a million households over the past year and all of them were renters. Home ownership has declined even as the housing market has been recovering from the 2007 bust that triggered the Great Recession. Ownership peaked at 69.2 percent at the end of 2004.
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Expert economists: Latest drop in homeownership no big deal
Homeownership rates just dropped to their lowest level since 1965, but don’t worry, it’s not a significant change, or so say the experts. Actually, experts state that this fall in homeownership is more reflective of the rental market than anything else.
“The U.S. homeownership rate dropped to its lowest level since 1965, but the drop isn’t statistically significant from a year ago,” Trulia Chief Economist Ralph McLaughlin said. “However if the decline is real, it is more likely due to a large increase in the number of renter households than any real decline in the number of homeowner households.”
The homeownership rate for the second quarter of 62.9% was 0.5 percentage points lower than the second quarter in 2015 and 0.6 percentage points lower than the first quarter in 2016, according to the U.S. Census Bureau.
The Census Homeownership and Vacancy Survey provides optimism that the homeownership rate is stabilizing, a report from Trulia stated. Trulia also noted the large drop in homeownership rate for Millennials, down 0.7 percentage points to 34.1%. “While the Millennial homeownership rate continues to decline, it’s important to note that the decrease could be just as likely due to new renter household formation as it is their ability to buy homes,” McLaughlin said.
Experts can't agree on what the Fed said in its July statement
The Federal Reserve’s July policy statement has been parsed, sliced and diced by analysts looking for any clues about the next rate hike, and one particular line buried in the second paragraph of the release caught Wall Street’s attention: “Near-term risks to the economic outlook have diminished.”
For the first time this year the Fed acknowledged subsiding economic risks, a 180-degree pivot from the March statement when it warned of risks abroad. The new language brings the Fed one step closer to reintroducing its balance of risks statement, a sentence the Fed included in nearly all of its 2015 press releases, which read “[the] Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced.”
When the Fed finally voted to raise rates in December — for the first time in over a decade — the statement described risks as “balanced.” Many Fed watchers agree that including balanced risks language will be a prerequisite for another rate increase.
However, it seems analysts agree on little else in the July statement. Some believe the statement opens the Fed to a September rate hike, while others expect a rate increase in December. Still others think the Fed will hold off until next year. One thing is for sure: The Fed managed to leave its options open.
The Atlanta Fed just slashed its GDP outlook
It looks like the second quarter is going to be just another period of slow growth in the United States. Despite high hopes that gross domestic product gains might approach 3 percent, recent data indicate that the number, which will be reported Friday, will be considerably lower.
The Atlanta Fed, in its closely watched GDPNow indicator, on Thursday cut its forecast to 1.8 percent, a sharp reduction from the 2.3 percent expectation just a day earlier. Wall Street economists project the number to come in around 2.6 percent, according to FactSet.
If the Fed number is correct, that would put average growth for the first half of 2016 at just 1.45 percent, and just shy of 1.6 percent over the past four quarters. As recently as May 31, the Fed tracker was looking for a growth rate of 2.9 percent, but that's been on a steady decline since.
It was the second time this week that the indicator fell; the first was Wednesday after durable goods orders came in lower than expected, while Thursday's reduction was based on the first release of the U.S. Census Bureau's new advance economic indicators report, which logs retail and wholesale inventories as well as foreign trade in goods. Atlanta Fed officials noted that the report showed negative impacts from exports and inventory investment.
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Swiss Gold Exports To The U.S. Have Never Been This High
Make of this what you will, but apparently there has been a recent and drastic surge in gold imports to the United States. And strangely, it doesn’t seem to directly correlate with the gradual rise in the price of gold or the price of silver that we’ve been seeing over the past year.
Most notably, gold exports from Switzerland skyrocketed in the month of May. For almost every month of the prior year, gold shipments from Switzerland hovered between 0 and 1.3 metric tons. Then in April they suddenly bumped up to 1.78 metric tons. In May they jumped to an astonishing 20.7 metric tons.
That is 50 times more than the monthly average. And when you look at yearly averages going back to the year 2000, you’ll find that there has never been this much gold flowing into the US from Switzerland. The last record was in 2014 when 7.5 metric tons were sent to the US. Before that, it was rare for more than a single metric ton to be delivered here from Switzerland.
When you look at our imports and exports from all nations, another startling reality emerges. Total gold imports doubled in May, and exports were significantly lower than they were the year before.
Online Grocers Want to Accept Food Stamps
But political concerns stand in the way. Delivery-only grocery stores, like FreshDirect and Amazon Fresh, are all the rage with consumers today—but for many Americans who rely on government assistance to feed their families, these services are out of reach. While $74 billion in funds goes towards providing grocery money to the 46 million Americans reliant on the Supplemental Nutrition Assistance Program (SNAP), it is impossible to use those food stamp credits online. Now, online grocers are coming together to advocate for more flexible food stamp usage.
Gunnar Lovelace and Nick Green, the co-founders and CEOs of Thrive Market, have worked to provide for families in need through their "giving program," which offers a free yearly membership to a low-income family for every paid subscriber to their service. However, Lovelace tells TIME, "we hear from a lot of families in our giving program that they're on food stamps and they can't use the website to its full potential."
So, the duo decided to band together with fellow online retailers and organizations to fight for this cause. Their goal: to open up SNAP usage online, allowing those who live in "food deserts," where fresh, healthful food isn't readily available, to have expanded access to fruits, vegetables, and other nutrient-rich ingredients. "It was a very natural thing for us to focus on, as part of our investment in making good on our social mission as a business," says Lovelace.
The Thrive Market team has been working with the U.S. Department of Agriculture, which regulates the SNAP program, to expand the stamps' usage for over a year now, so far with glacial progress. Lovelace explains that the delay is likely due to the concerns over "fraud or the payment processors," that come with the controversial program. "I think [the USDA] is also just a very slow-moving organization that tends to be very cautious because of the highly politicized environment we live in," he adds.
IMF admits disastrous love affair with the euro, apologises for the immolation of Greece
The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory.
This is the lacerating verdict of the IMF’s top watchdog on the Fund’s tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions.
It describes a “culture of complacency”, prone to “superficial and mechanistic” analysis, and traces a shocking break-down in the governance of the IMF, leaving it unclear who is ultimately in charge of this extremely powerful organisation.
The report by the IMF’s Independent Evaluation Office (IEO) goes above the head of the managing director, Christine Lagarde. It answers solely to the board of executive directors, and those from Asia and Latin America are clearly incensed at the way EU insiders used the Fund to rescue their own rich currency union and banking system.
Why MainStreet Isn’t Buying Obama’s Economic Recovery Fantasy
President Obama took the stage at the Democratic National Convention to throw his support to Hillary Clinton in her bid for the Presidency. He also took the opportunity to take a victory lap for his economic achievements while in office.
With the 2016 Presidential Election fast approaching, this was one of the final chances the President will have to try and divert attention away from Hillary’s “trustworthiness” problem following continued revelations surrounding Benghazi, email scandals and the Clinton Foundation which is now under investigation by the IRS.
The problem for the Democrats currently, following a rather severe beating at the polls during the 2012 mid-terms, is the broad loss of faith in “hope and change.” With Donald Trump and Hillary Clinton virtually tied in the majority of polls (within a margin of error), it is imperative to regain those voters. Not surprisingly, since voters tend to “vote their pocketbook,” it wasn’t surprising to hear the President spin a decisively positive economic picture during his speech.
He hopes that by pointing to falling unemployment rates, economic growth and higher confidence levels; it will give voters a sense of confidence in the President’s accomplishments and be convinced the expect the same for Hillary. The question is whether the majority of the voting public will agree with the President’s message?
Why restaurant recession fears are on the rise
Americans eat out when they're feeling good about things. That's why a recent slowdown in restaurant sales is alarming some. In the past few weeks, McDonald's (MCD), Taco Bell owner Yum! Brands (YUM) and Starbucks (SBUX) have all described a new wave of caution that has crept up among customers, keeping them from splurging on meals out.
The precise cause of the shift is not clear, with some blaming rising prices and slowing job growth, and others suggesting security fears or even the 2016 election are playing a role. No matter the catalyst, the deceleration is pronounced enough for Stifel Nicolaus to warn of a looming "restaurant recession" that may represent a "harbinger" to a widespread U.S. recession in 2017.
"Restaurant industry sales tend to be the 'canary that lays the recessionary egg,'" Stifel analyst Paul Westra wrote in a research report published on Tuesday. The gloom-and-doom stands in stark contrast with the consensus among Wall Street economists, who see low chances of an imminent U.S. recession.
But Westra went even further, warning that such a U.S. recession could be the "worst ever" for restaurants because it would come just as they grapple with rising labor costs. He urged investors to sell Panera (PNRA) and Olive Garden owner Darden Restaurants (DRI), and warned that Chipotle (CMG) could lose half its value.
45 million US vehicles recalled between 2013 and 2015 haven't been fixed
Thanks in part to Takata and General Motors, recalls have occupied front-page headlines for the past couple of years. In fact, from January 1, 2013 to December 31, 2015, roughly 109 million cars, trucks and SUVs registered in the U.S. were recalled.
Unfortunately, many of those vehicles haven't been repaired. According to J.D. Power, 45 million vehicles from the three-year span are still in need of service. What's the hold up? Power identifies four important factors:
The age of affected vehicles: Newer models are far more likely to be repaired, perhaps because they tend to be owned by the original buyer, making communication about recalls easier for automakers. Among recalled cars from model-years 2013 and 2017, 73 percent have been repaired. Cars from model years 2003-2007, though, have repair rates around 44 percent.
The type of affected vehicles: Only 31 percent of mid-premium sports cars have been serviced for outstanding recalls. Large SUVs don't fare much better, with completion rates of 33 percent. Large vans, however, have repair rates of 86 percent, with compact premium SUVs coming just behind, at 85 percent.