Sears stock tanks as CEO takes aim at vendors, saying: 'We will not simply roll over'
After lashing out at the media last week, Sears Holdings CEO Eddie Lampert is speaking out again, this time saying he is "taking a stand" to protect his company as its vendors have a change of heart.
"There have been examples of parties we do business with trying to take advantage of negative rumors about Sears to make themselves a better deal — a deal that is unilaterally in their interest," Lampert wrote in a blog post on Monday.
This, as the embattled department store chain has been working with suppliers to try to ensure their level of credit risk is "both affordable and appropriate," Sears has said. "In such a case, we will not simply roll over and be taken advantage of — we will do what's right to protect the interests of our company and the millions of stakeholders we serve," Lampert went on.
The CEO mentioned one of Sears' vendors that has been particularly troublesome of late: One World, a China-based subsidiary of Techtronic Industries that makes various power tools for Sears under the Craftsman brand. Techtronic Industries wasn't immediately available for comment. "For over nine years, One World has enjoyed significant benefits from its relationship with Sears — we have paid One World more than $868 million since 2007," Lampert wrote.
Mexico: We'll talk NAFTA but don't dare use tariffs
Mexican officials are happy to renegotiate a trade deal with President Trump and his team to make it more balanced. But they warn their US counterparts: Don't play tough and slap taxes on us.
"As long as these objectives of rebalancing trade are not about introducing tariffs or introducing quotas, we're okay with talking about that," Mexico's economic secretary, Ildefonso Guajardo, told CNN's Richard Quest on Monday.
Guajardo is Mexico's top negotiator for NAFTA, the free trade deal between the US, Mexico and Canada. Trump regularly lambasts NAFTA and as recently as last month, threatened to pull out of it.
If Trump reiterates the threat, Guajardo indicated it would be a deal breaker for negotiations, which are expected to start in August or September. "Obviously, Mexico will not sit [at] the negotiating table with that kind of pressure," Guajardo told Quest.
Demand for Gold Coming From Uncanny Places Now
Gold prices are up roughly five percent since the beginning of the year. At these “low prices,” demand for gold is surging while supply is constrained. This is setting up gold for the perfect rally.
In fact, demand for gold is surging in uncanny places. Yes, in these pages I have talked about how demand for gold has been rising in gold-hungry countries like India and China, but—while the United States isn’t really known as a major gold-consuming country—between 2014 and 2015, demand for gold coins and bars in the U.S. soared 50%. Between 2015 and 2016, this figure grew another 32%. (Source: “Gold Demand Trends Q1 2017,” World Gold Council, last accessed May 9, 2017.)
In Germany, demand for gold coins and bars is up 13% in the first quarter of 2017, over the first quarter of 2016. In smaller countries like Thailand and Vietnam, demand for gold coins and bars is up six percent in the first quarter of 2017, over the same period of 2016.
According to Statista, world gold production was flat in 2016 compared to 2015. And, over the past 11 years, gold production has increased at an average annual rate of only 2.3%. (Source: “World gold production by year in mines from 2005 to 2015 (in metric tons),” Statista, last accessed May 11, 2017.) As for world central banks, they have been net buyers of gold for years now.
China, Japan Increase Holdings of U.S. Government Treasuries
Japan and China increased their holdings of U.S. Treasuries as overall net foreign purchases in March reached the strongest in a year.
China increased its ownership of U.S. government bonds, notes and bills by $27.9 billion to $1.09 trillion in March, remaining the second-largest foreign holder of American debt, according to a monthly Treasury Department report released on Monday. Japan, the largest non-U.S. holder of government debt, increased its total to $1.12 trillion, up $3.4 billion from a month earlier.
Total foreign ownership of U.S. Treasuries amounted to about $6.08 trillion in March -- the highest since September, but down from a peak of $6.3 trillion a year earlier. Net purchases of U.S. Treasury bonds and notes by foreigners were $24.4 billion, the data show. Demand by overseas creditors for U.S. debt played a key role as the nation borrowed to revive its economy from the last recession.
The rise in China’s Treasury holdings comes even as the nation tries to stem capital outflows and buttress the yuan through interventions in the currency market. The country’s foreign currency reserves ticked up for third month to $3.03 trillion in April, after falling below $3 trillion in January. They are still down sharply from a record $4 trillion in 2014.
Fed's new normal balance sheet could be huge
While Federal Reserve officials have said they plan to begin a process to normalize their balance sheet, the end result is likely to be a balance sheet that is anything but normal.
Interviews with Fed officials, and public statements they've made suggest the Fed's new normalized balance sheet could end up being three times as large as it was before the financial crisis. And it could be bigger than that.
The Fed has yet to announce a plan to run off its massive $4.4 trillion balance sheet, but market participants in the CNBC Fed Survey expect the process to begin in January 2018, months sooner than previously forecast. Some Fed officials have made no secret of their intentions to announce a plan later this year to reduce the balance sheet. That plan could include a target for the new normal level.
The balance sheet refers to the portfolio of securities — in large part various types of Treasury debt and mortgage-backed securities — that it has purchased.
Microsoft’s president blames NSA for WannaCry attack
A top Microsoft executive partly blamed the US government for the WannaCry ransomware attack, saying hackers found a crucial Windows vulnerability in data that had been stockpiled by the NSA.
First noticed on Friday, the WannaCry attack has affected at least 200,000 computers in more than 150 countries, with attackers locking people out of their computers while demanding a Bitcoin ransom.
“This attack provides yet another example of why the stockpiling of vulnerabilities by governments is such a problem,” Microsoft President Brad Smith wrote in a Sunday blog post.
At the same time, Smith tried to deflect criticism of Microsoft in the disaster, noting that the software giant issued a patch for the vulnerability earlier this year that many organizations ignored. Smith said the crisis is a “wake-up call,” and that Microsoft has been “working around the clock” to assist affected customers, including those on older versions of Windows that are no longer supported.
Tech worker forced to train replacement with H-1B visa running for Congress
Are Retail Sales Signaling Next Recession?
Retail sales estimates are not adjusted for inflation, but even so whenever they get down toward the 3% growth level you can be sure there is serious economic trouble.
The six-month average for overall retail sales dropped below 3% in March 2001, the month that marked the start of the official dot-com recession (though that is not the official name for the cyclical peak, it probably should be).
They would remain near or just less than 3% all the way until early 2003, the whole of the “jobless recovery” that convinced Federal Reserve officials more “stimulus” had been warranted even though the official end of the dot-com recession was November 2001.
In April 2007, retail sales growth, on average, fell to nearly 3% and would remain close to that mark while things began to steadily fall apart. They would rise in early 2008 as oil prices skyrocketed on misreading money, but only to an average of 4.4% and thus remaining consistently weak for more than a year before the total collapse. Three percent growth is trouble.
Millennials are skipping expensive weddings and going on group honeymoons
It’s wedding season—and debt is in the air. Brides and grooms (and their parents) are shelling out more than ever for their big day. The average cost of a wedding in the US rose to a record $35,329 last year, according to the wedding site TheKnot.com. Keep in mind the US is large. In Manhattan, the price to celebrate tying the knot is more than double that. No wonder wedding loans exist.
What’s driving up the price? A spare-no-expense attitude. Couples are opting for ever-more lavish affairs, with entertainment that includes photo booths and even fireworks, TheKnot.com found. The average cost per wedding guest in the US last year was $245, up from $194 in 2009.
Couples are getting slightly more selective when it comes to their receptions, though their honeymoons now may be more of a group activity. They’re are also inviting slightly fewer guests than they used to. But they may as well pad out the list with some college acquaintances and water-cooler friends from work because many guests are finding the affair out of their budgets.
Nearly 40% of millennials surveyed by the travel site Priceline.com say they have opted out of attending a wedding or related event because the travel and other costs were too high. Millennials spend an average of $600 for wedding-related events, the survey found. More than a third of respondents said their accommodations were their biggest cost.
OPEC Lost $76 Billion Last Year Due To US Fracking
The Organization of the Petroleum Exporting Countries (OPEC) lost $76 billion in 2016 due to low oil prices caused by rising U.S. oil production, according to a report published Monday by the U.S. Energy Information Administration (EIA).
EIA’s report estimates that in 2016, OPEC earned about $433 billion in net oil export revenues. That’s 15 percent lower and $76 billion less than the $509 billion the cartel earned in 2015. This is the lowest earnings posted by OPEC since 2004.
EIA notes that OPEC’s relative losses were largely due to a decrease in the average annual crude oil prices during the year, and to falling net oil exports. New American oil production is the reason OPEC’s efforts to increase global prices have failed. OPEC wants the price of oil to be between $50 and $60 per barrel, but current prices are hovering around $47 a barrel. As recently as June 2014, the price of a barrel was almost $109.
As U.S. oil production increased in recent years, OPEC oil got edged out of the lucrative American oil market. America imported about 60 percent of its oil in 2007, but by 2014, the U.S. only imported 27 percent of its oil, according to government data. The rising U.S. oil production reduced demand for Saudi oil abroad too, keeping prices low.
Delta Air Lines plans to use facial recognition to speed up bag drops
In an effort to speed up bag drops for priority customers, Delta Air Lines will be testing facial recognition technology at Minneapolis-St. Paul International Airport starting this summer. Customers will be required to scan their passports at specially equipped kiosks, where a camera will scan their face to confirm their identity.
Four new self-service bag drop kiosks are being installed in Minneapolis, but only one will include the facial recognition software. Delta will be collecting customer feedback during the process to gauge how it will expand the service to other airports in the future, a spokesperson said. Delta is spending $600,000 on the new machines.
The announcement comes as the US government has been reshaping its security processes around the use of more facial recognition. Customs and Border Protection is registering visitors leaving the US using facial recognition, and it’s mulling over making facial scans necessary for US citizens as well.
CBP began testing facial recognition systems at Dulles Airport in 2015, then expanded the tests to New York’s JFK Airport last year. Face-reading check-in kiosks will be appearing at Ottawa International Airport this spring, and British Airways is rolling out a similar system at London’s Heathrow Airport, comparing faces captured at security screenings with a separate capture at the boarding gate.
Miss USA 2017 Kara McCullough: Healthcare is not a right, it's a privilege
The looming healthcare crisis on top of Puerto Rico's economic woes
While headlines run all day about how high the Nasdaq closed, how many jobs were created last month, or perhaps the future of electric cars, there is one news story that needs more attention: the economic collapse and impoverishment of Puerto Rico. You may not realize it, but Congress is on the verge of deciding whether hundreds of thousands of impoverished Puerto Ricans will have access to healthcare coverage.
To provide some background, the island with a population of roughly 3.4 million people has been struggling for quite some time. With more than $70 billion dollars in debt, the Commonwealth defaulted on its debt in July 2016. At the urging of President Obama and Congress, an oversight board known as the “OB” was created with the goal of creating a sound and long-term fiscal plan. Unfortunately for the citizens of Puerto Rico, there is no solution in sight as the board and the governor of Puerto Rico have not finalized their economic plan.
As if matters could not get worse, the territory of Puerto Rico is facing a massive healthcare problem as funds are set to run out before the end of the year. According to the U.S. Department of Health and Human Services, it is projected that funds will run out in the first few months of 2018. According to the U.S. Census Bureau, about 46.2 percent of Puerto Ricans live below the poverty line, compared with 14.8 percent in the United States. Even though this difference is substantial and growing, Puerto Rico receives less than the rest of the 50 states.
In recognition of this crisis, our organization, the National Hispanic Medical Association (NHMA) sent a letter to Congressional leadership, which included the following passage: “What is most troubling about the current situation is that even though Puerto Ricans pay the same Medicare and Social Security taxes as citizens living in the mainland, the funding for Medicare and Medicaid in the Commonwealth can be about half of those received on the mainland.”
Have Analysts Finally Given Up on JC Penney?
Closing stores and selling assets to boost earnings works for a while, but like all things that can’t go on forever, these won’t either. J.C. Penney Co. Inc. (NYSE: JCP) may have reached that point.
When the company reported earnings last Friday, investors pushed the shares down nearly 14% on the day, and the shares traded down another 5% early Monday morning.
Analysts are weighing in Monday as well, and ratings downgrades and price target cuts are the order of the day. The plain fact is that despite the company’s efforts to turn itself around, there are too many challenges to warrant much optimism.
Analysts are Robert W. Baird downgraded the stock from Outperform to Neutral and cut their price target from $8 to $5. Here’s their comment: While [Baird] continues to believe mgmt has put JCP on a better path, core EBITDA growth looks more tenuous and valuation expansion is difficult to justify as industry headwinds intensify and earnings quality erodes (cost cuts, asset sales key drivers). As such [analysts] have recalibrated their JCP ests and valuation framework to better align with their cautious stance on the department store sector, yielding their new $5 price target and balanced risk/reward at current levels.
Are bogus visas being used to work in the U.S.?
The H-1B visa program that brings tens of thousands of temporary workers to the U.S. each year is under scrutiny by the Trump administration, which wants to limit the number of foreigners coming into the country. Drawing less attention is how people might use bogus visas, as well as fake academic degrees, to enter the U.S.
There's precedent for such concerns. The Nigerian man who pleaded guilty to trying to blow up a U.S.-bound plane on Christmas Day of 2009 had previously tried to return to London to study "life coaching" at what British officials determined was a bogus college, while one of the September 11 hijackers came to the U.S. on a student visa to attend an English-language school in California. but instead took flight lessons in Arizona.
The General Accounting Office in 2011 recommended that the departments of Homeland Security and Labor take steps to improve their monitoring of the H-1B program, saying that it was unknown just how many H-1B workers were in the U.S. at any one time and how long they had been in the country.
The watchdog agency the following year found that U.S. Immigration and Customs Enforcement, or ICE, had not implemented fraud-prevention practices to verify the legitimacy and eligibility of schools giving out student visas, both during their initial certification and after these schools began accepting foreign students. A number of schools certified to issue visas to international students were not licensed by the state in which they operated.
The Coming Central Bank Crisis
I have warned that whenever a government creates a solution to any crisis, that solution becomes the next crisis. This is what I have called the Paradox of Solution.The unfolding of the exit of the central banks from the Quantitative Easing monetary policy will become a much more serious threat to the financial markets than anyone suspects. The Federal Reserve has already exited and begun to raise rates while also announcing it will NOT be reinvesting the money when the government debt they bought expires. The Federal Reserve is already shortening their balance sheet. Bills of $426 billion will be due at the Fed in 2018, and again about $357 billion a year later. So the Fed will not repurchase that debt. The US economy is absorbing this because US dollars are effectively the only real reserve currency in the world right now.
The real problem lies with the European Central Bank (ECB) and the Japanese central bank and when they exit their Quantitative Easing programs, their economies are not the reserve currency and lack a solid bid from international capital. The end of QE will lead to a sharp increase in yields on the bond markets, and thus the financing costs for the states will explode far more rapidly today than at any time in past history. It is also possible that other sectors of the financial system, such as the stock markets and the foreign exchange markets in peripheral economies to the USA, will be cast into turmoil experiencing great difficulties without the financial support of the central banks.
Since 2008, the Bank of Japan recorded an increase of 107 trillion yen. The ECB has more than doubled its balance sheet from EUR 2 trillion to EUR 4.1 trillion and holds 40% of member state debt while tensions rise against the EU. The crisis emerges when governments, who are the ones who have been subsidized since 2008, find no bid for their paper. This will really send rates upward at a rapid pace.
As central banks appeared as omnipotent purchasers of government bonds to the un-savvy trader, the yields of the debt by no means reflect the risk of a default in the country’s payments. The decline in yields masked the rising risks from fiscal mismanagement that has been widespread.
Taxpayers Just Spent $300k To Rearrange the Furniture In College Classrooms
I genuinely, with all my heart wish I were kidding about this. But I'm not. Taxpayers – i.e., you and I, assuming you also have a steady job through which you also fork boo-koos of cash over to the government – just shucked out $300,000 hard-earned dollars to rearrange the furniture in college classrooms. Seriously.
According to this grant description published Monday, the National Science Foundation just gave $300k to the University of Michigan Ann Arbor so one Cynthia Finelli can study whether using “flexible furniture” (otherwise known as anything not bolted to the floor) is more conducive to student learning than regular fixed desks or lecture-style seating. Read this tidbit for yourself, straight from the grant proposal:
Most university classrooms feature either a traditional lecture-style layout with tables and chairs arranged in front-facing rows or round tables permanently arranged in groups. Some universities, though, are building classrooms of the future that have highly flexible furniture and integrated technology. These innovative classrooms can be reconfigured for multiple uses, such as lecture-style teaching, having students work together in groups, and engaging in a whole-class discussion.
Finelli purports that the ability to shuffle desks around a college classroom may help improve student learning and teacher performance. Therefore, we all get to be on the hook for the study's $300,000 bill – for what, exactly, the grant doesn’t say.