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Monday 04.10.2017

The retail apocalypse is crushing a corner of Wall Street and triggering a downward spiral

One of the biggest waves of retail closures in decades is killing off malls across the US and taking some Wall Street investments with it. Struggling with online competition, huge retailers like Sears, JCPenney, and Macy's are closing hundreds of stores that typically anchor malls — meaning they occupy the largest spaces at mall entrances and drive a majority of shopper traffic.

When a big store shuts down, it triggers a chain reaction that can end with the shopping mall unable to collect enough rent to cover its debts, forcing it to default. By one measure, as many as a third of the malls in the US are at risk of facing this situation.

This has become a nightmare for investors who are expecting to collect on those debts. They own bonds — called commercial mortgage-backed securities, or CMBSs — that are backed by the mall properties' rents.

If this sounds familiar, that's because it's similar to one element of the financial crisis. Back then, mortgage-backed securities, which pooled homeowners' mortgages into a multitrillion-dollar financial market were part of the problem. They encouraged risky lending and, together with derivatives on the bonds that were ginned up by Wall Street, left banks and investors with massive losses that threatened the financial system as a whole.

The Debt Crisis Of 2017: Once Their Vacation Ends, Congress Will Have 4 Days To Avoid A Government Shutdown On April 29

April 2017 could turn out to be one of the most important months in U.S. history that we have seen in a very long time. On April 6th, Donald Trump attacked Syria on the 100th anniversary of the day that the U.S. officially entered World War I, and now at the end of this month we could be facing an unprecedented political crisis in Washington. On Friday, members of Congress left town for their two week “Easter vacation”, and they won’t resume work until April 25th. What this means is that Congress will have precisely four days when they get back to pass a bill to fund government operations or there will be a government shutdown starting on April 29th.

Up to this point, there has been very little urgency by either party to move a spending bill forward. It is almost as if everyone is already resigned to the fact that a government shutdown will happen. The Democrats will greatly benefit from a government shutdown because they can just blame the entire mess on the Republicans. But for the GOP, this is essentially the equivalent of political malpractice.

To me, there is simply no way that Congress is going to be able to agree on a bill that funds the entire government in just four days. And it turns out that this upcoming deadline comes exactly on the 100th day of Trump’s presidency…

The U.S. government is poised to shut down on Day 100 of Donald Trump’s presidency, unless Congress can pass a new spending bill or a continuing resolution before the current one expires on April 28.

Americans credit card debt hits $1 trillion

Americans are giving plastic money a workout. Credit card debt reached $1 trillion last year, according to the Federal Reserve, returning to a level not seen since 2008 as the Great Recession was gathering force.

It’s a sign of increased personal spending and a boost for the U.S. economy, in which consumers account for some 70 percent of activity. The higher credit card balances represent a 16 percent increase from 2012, and 6 percent from 2015, Fed data released on Friday show. Card balances tumbled during the recession as consumers cut back on spending.

Preliminary figures, subject to revision, indicate that the card debt totaled over $1 trillion at the end of February. “Credit card debt is rising quickly, but delinquencies are still really low,” said Matt Schulz, senior industry analyst at CreditCards.com, which analyzes the card business. The most recent delinquency rate was 2.3 percent, which is a big improvement from the peak of 6.8 percent in recession-ridden 2009.

Nevertheless, he cautioned, the nonpayment rate has begun to tick up. “Many Americans are doing a good job of controlling their debts,” Schultz said. “But eventually with big debts and rising interest rates, it’s likely that something will have to give.” He expects the nonpayment figure to keep rising later this year.

Automation nation

New York on verge of tuition-free college

Governor Andrew Cuomo has reached agreement with lawmakers on the state budget, and it includes a plan to make tuition free at public colleges for middle class New Yorkers. The state Assembly and Senate are expected to vote on and approve the budget before Monday.

New York will be the first state in the nation to make tuition free at both two- and four-year public colleges for residents who earn up to a specific income cap, which will be phased in over the first three years.

Starting this fall, undergraduate students who attend a State University of New York or City University of New York school will be eligible for the Excelsior Scholarship if their families earn no more than $100,000 a year. The income cap will lift to $110,000 next year and will reach $125,000 in 2019.

Those eligible will pay nothing for tuition, which costs $6,470 annually at four-year schools and about $4,350 a year at community colleges. But they will still be on the hook for the cost of fees and room and board if they live on campus. Those other expenses can add up to $14,000 a year.

The Retail Sector Lost 30,000 Jobs Last Month

We’ve focused a lot in recent months on the worrisome trend of retail bankruptcies and all the stores and malls being left vacant in their wake. But a new federal jobs report gives an idea of the impact these tough times have had on workers, with nearly 30,000 retail jobs vanishing in March.

According to data released today by the Labor Department’s Bureau of Labor Statistics, this is the second month in a row of significant employment losses in the retail sector.

Between the 29,700 decrease in March and a drop of 34,700 in February, nearly 65,000 retail jobs have been lost. According to the report, employment in general merchandise stores — department and other retailers — was hit the hardest, with 34,700 jobs lost between February and March.

Of those lost jobs, 12,600 were in department stores, while 22,100 were from other retailers. The job losses aren’t exactly unexpected. In just the first few months of 2017 a number of retailers —including Gordmans, hhgregg, RadioShack, Gander Mountain, BCBG Max Azria, MC Sports, Eastern Outfitters, Wet Seal, Payless, and The Limited — have announced store closures, bankruptcies and other restructuring measures; a trend that has already surpassed the number of closing in all of 2016.

Central Banks Still Have an Appetite for Gold

In case you haven’t already noticed, inflation has been steadily creeping up since July. In February, the most recent month of available data, consumer prices advanced at their fastest pace in five years, hitting 2.7 percent year-over-year. March data won’t be released until next week, but I expect prices to proceed on this upward trend, buttressed by rising mortgages and costs associated with health care and energy.

One of the consequences of strong inflation is that real rates—what you get when you subtract the current consumer price index (CPI) from the nominal rate—have turned negative. And when this happens, gold has typically been a beneficiary. This is the Fear Trade in action.

Gold shares an inverse relationship with the real 10-year Treasury yield, which is influenced by consumer prices. When inflation is soft and the yield goes up, gold contracts. But when inflation is strong, as it is now, it can push the Treasury yield into subzero territory, prompting many investors to move into other so-called safe haven assets, including gold.

Again, I expect consumer prices to continue rising, especially if President Donald Trump gets his way regarding immigration and trade. Slowing the stream of cheap labor from Mexico and other Latin American countries, coupled with raising new tariffs at the border, should have the effect of making consumer goods and services more expensive. Although it might sting your pocketbook, faster inflation could be constructive for gold investors.

Clif High-Fed Will Crash & Fed Is the Market

Great Debt Unwind: Consumer Bankruptcies Jump, First since 2010. Commercial Bankruptcies Spike

Commercial bankruptcy filings, from corporations to sole proprietorships, spiked 28% in March from February, the largest month-to-month move in the data series of the American Bankruptcy Institute going back to 2012. They’re up 8% year-over-year. Over the past 24 months, they soared 37%! At 3,658, they’re at the highest level for any March since 2013.

Commercial bankruptcy filings skyrocketed during the Financial Crisis and peaked in March 2010 at 9,004. Then they fell sharply until they reached their low point in October 2015. November 2015 was the turning point, when for the first time since March 2010, commercial bankruptcy filings rose year-over-year.

Bankruptcy filings are highly seasonal, reaching their annual lows in December and January. Then they rise into tax season, peak in March or April, and zigzag lower for the remainder of the year.

The data is not seasonally or otherwise adjusted – one of the raw and unvarnished measures of how businesses are faring in the economy.

Hhgregg to close all 220 stores after failing to find buyer

Electronics and home goods retailer hhgregg announced it will close all 220 retail outlets and will go out of business after the Indiana-based chain failed to find a buyer.

The 62-year-old company sought Chapter 11 bankruptcy protection in March, saying it was "the best path forward to ensure hhgregg's long-term success."

CEO Bob Riesbeck said there were discussions with more than 50 private equity firms, strategic buyers and other possible investors but nothing came to fruition.

"Unfortunately, we were unsuccessful in our plan to secure a viable buyer of the business on a going-concern basis within the expedited timeline set by our creditors," Riesbeck said.

Stockholm Terror Suspect a Rejected Asylum-Seeker; Trump Was Earlier Berated For Raising Sweden’s Immigration Policies

The man suspected of driving a truck into a crowd of people in Stockholm on Friday was a rejected asylum-seeker from Uzbekistan who four months ago was ordered to be deported, according to Swedish police.

Four people were killed when the unnamed 39-year-old man, now under arrest, allegedly drove a stolen beer truck into a busy department store in the capital.

Not only was the suspect wanted since February for failing to leave the country, but he was also reported by police on Sunday to have displayed sympathies to terrorist groups including the Islamic State of Iraq and Syria (ISIS/ISIL).

Sweden joins a growing list of European countries targeted by Islamic terror less than two months after its government responded coolly when President Trump drew attention in a speech to the security risks associated with the asylum policies of countries like Sweden and Germany. “They took in large numbers [of asylum-seekers],” Trump said of Sweden. “They’re having problems like they never thought possible.” The Swedish Embassy in Washington said at the time it looked forward to “informing the U.S. administration about Swedish immigration and integration policies.”

What’s Next For Gold Post-Jobs, U.S. Missile Strike on Syria? - Gerald Celente

How close are we to a cashless society?

Deutsche Bank’s Chief Executive, John Cryan, predicted at Davos last year that cash probably wouldn’t exist in ten years’ time. Sweden, where only 20% of all consumer payments are now made in cash, appears to be at the forefront of the movement to phase out notes and coins completely. It has been predicted that Australia could become cashless as early as 2022, and in recent months India’s citizens and small businesses have been actively exploring alternatives to cash since the government’s recently-launched demonetisation process.

Millennials born in the late 20th century have grown up understanding both the importance of cash and the ease and simplicity of digitally managing money. They appreciate the rise in digital payments: the simplicity of tapping your phone to pay and having the receipt appear on the screen almost instantaneously. Consumers have been driving the need for a cashless society, and the benefits of instant payments are easy to understand.

Businesses have also been moving to eliminate cash, cheques and manual processes for some time, as Andrew Reid, head of cash management corporates for Europe, the Middle East and Africa at Deutsche Bank points out:

“Corporate treasurers are already cashless in their minds – removing the costs and risks of dealing with cash is part of a wider drive for corporate efficiency (supported by their banking partners). As such, we can expect accelerated digitisation in the corporate space over the next few years, with the emergence of new business models and a stronger convergence with retail developments.”

Battle over sanctuary cities escalating

Immigration hardliners are threatening to hold potentially billions of dollars in state grants hostage as they seek to compel so-called sanctuary cities to cooperate with federal law enforcement officials.

Legislators in 33 states have introduced measures to limit or prevent cities from acting as sanctuaries for undocumented immigrants. Only one state this year, Mississippi, has enacted a ban on sanctuary jurisdictions, but several others, including Texas, Indiana, Iowa, Florida and Georgia, are advancing their own bills.

Sanctuary cities and counties often defy requests from federal Immigration and Customs Enforcement officials to hold undocumented immigrants so they can be picked up later for deportation. While there is no technical legal definition of a sanctuary city, many of the bills under consideration would require cities to swear under penalty of perjury that they comply with federal detainer requests.

“If a city calls itself a sanctuary city, that means a lot of different things to a lot of different cities,” said Pennsylvania state Sen. Guy Reschenthaler (R), who has sponsored a ban on what his legislation calls “municipalities of refuge.”

Oil Price Hike In Mexico Causes 400% Inflation Increase Compared To 2016

The increased price of gasoline in Mexico is causing inflation to increase in the North American country, according to a new report by Prensa Latina, which cited data from the National Institute of Statistics and Geography.

The government increased gasoline prices on January 1st. Right after the change, inflation began its upwards journey. In March, the peso inflated in value by 0.61 percent – four times the rate of inflation during the same month last year. Oil-related products have increased in price by as much as 17.09 percent, when calculated on an annual basis.

Mexico is in the midst of an oil sector liberalization that will allow foreign companies to operate in the nation’s lucrative oil and gas sector for the first time. The process required a 20 percent price hike in fuel prices at the beginning of the year. The sudden jump caused violent protests that led to 600 arrests and one police officer’s death.

On New Year’s Day, when the policy took effect, the cost of a gallon of standard-grade unleaded fuel was $2.95, up 14 percent from the price of $2.60 on December 31st. The price of premium fuel rose by up to 20 percent, according to the LA Times. Mexican President Enrique Peña Nieto had promised that fuel prices would go down with the energy sector reforms, so the increases have made it easy for opposition parties to spark protests.

Restaurants food costs fell in 2016 as labor costs rose

Food costs for publicly traded restaurants fell in 2016 as commodities, especially beef, came down from record prices. On average, restaurants’ cost of sales fell 0.6 percent to 29.1 percent of revenues in 2016, according to a quarterly analysis of restaurant industry performance from the consulting firm BDO.

“Luckily, [commodities are] still in restaurants’ favor,” said Dustin Minton, a partner with the firm. “Everybody’s good at managing cost of sales. A big part of that is technology. It used to be that people didn’t do so much for ideal food costing. But they’ve invested in technology to get improvement from cost of sales.”

But now restaurants face a new challenge in the form of labor costs. Intense competition for employees, coupled with overtime regulations, health care costs and increases in the minimum wage, have all conspired to drive up wages and labor costs. In some markets, it’s not uncommon to see advertisements on restaurant signs offering $13 or $14 per hour.

According to BDO, labor as a percent of sales increased 0.8 percent to 30.5 percent in 2016. In other words: Rising labor costs more than offset falling commodities to drive up restaurants’ overall prime costs by 0.2 percent.

Was strike on Syria a wake-up call for North Korea?

Economy experts: No jobs, no problem – unexpectedly low report not all bad

March’s employment report came in well below expectations with its increase of just 98,000 jobs, however experts say the report isn’t all bad news. “The soft hiring seen in March is not too concerning and likely a single month aberration,” said Lawrence Yun, the National Association of Realtors chief economist. “The recent high levels of voluntary quitting, presumably because of better job opportunities elsewhere, will lead to strengthening wage growth.”

What’s more, experts don’t think this dip will alter the strong spring home-buying season to come. “Housing demand still looks solid going forward,” Yun said. “Housing supply, on the other hand, could be constrained further because homebuilders still face worker shortages despite construction employment gains holding steady in recent months.”

Many economists blamed the Winter Storm Stella for the sudden drop, but say jobs will increase again in April. “The March employment report disappointed with the fewest jobs added since May of last year, but there are some caveats,” said Curt Long, the National Association of Federally-Insured Credit Unions chief economist. “Weak readings in the construction and retail sectors likely owed something to Winter Storm Stella.”

“Additionally, there was a larger than normal discrepancy between the modest gains in the payroll survey and those of the household survey and ADP estimate, which were far stronger,” Long said. “It would not be a surprise to see a strong bounce back in April, as well as upward revisions to the March figure.”

Can you guess how many workers have less than $1,000 saved for retirement?

While many people think $1 million is the retirement savings target they should aim for, the truth is that there's no such thing as a magic retirement number. In fact, if you're willing to live a modest lifestyle, you can quite possibly get by with far less and still enjoy a fulfilling retirement. But while you may not need to hit that $1 million threshold to retire in comfort, it's pretty safe to say that you'll need well more than $1,000 to cover your living expenses as a senior. But if a large number of Americans don't ramp up their savings efforts, that's all they'll have at the end of the day.

According to a new report by the Employee Benefit Research Institute (EBRI), almost 25% of current workers have less than $1,000 set aside for retirement. And while many workers have amassed significantly more than that, nearly 50% have less than $25,000 in savings for the future. Considering that most of the people surveyed by the EBRI think they'll need at least $500,000 in total retirement income, it's clear that many Americans are alarmingly far behind.

While this glaring lack of savings boils down to lifestyle choices for some people (taking on higher mortgage payments, choosing expensive colleges, and so forth), a large contributing factor is having access to the right savings tools.

Among workers with less than $1,000 set aside for retirement, the majority do not have access to a 401(k). In fact, a good 55 million U.S. workers don't get the option to participate in an employer-sponsored retirement plan, and while that's not a deal-breaker on the road to savings, it is another hurdle to jump.

Hackers Set Off Emergency Sirens Across Dallas

A network of 156 emergency sirens were triggered late Friday in Dallas, waking residents and sparking fears of a disaster. But according to city officials, the sirens were set off by hackers who penetrated the city’s emergency alert system.

Turning the sirens off took nearly two hours, triggering more than 4,400 calls to the city’s overtaxed 911 system. Many of those calls were reportedly from residents concerned that the sirens signaled a violent attack.

In a Facebook post following the attack, Dallas Mayor Mike Rawlings described the incident as “another serious example of the need for us to upgrade and better safeguard our city’s technology infrastructure.”

Last November, the Dallas City Council allocated $567,368 to upgrade the emergency sirens, which primarily serve to warn residents of the thunderstorms and tornadoes that regularly sweep through North Texas during the spring.

NEWS to Disturb the Comfortable...

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