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Thursday 02.23.2017

Fed minutes show support for rate hike ‘fairly soon’

Minutes of the last Federal Reserve interest-rate meeting left members interested in hiking interest rates but wary of what stimulus package may be unveiled by the new president and a Republican Congress.

“Many” Federal Reserve officials expressed support for raising interest rates “fairly soon” if the economy stayed on course or strengthened, but the fiscal policy of the new Trump administration was a wild card, according to minutes of their meeting earlier this month released Wednesday.

Officials struggled what to do with interest rates in light of the “considerable uncertainty” surrounding the fiscal policy plans of the Trump administration and Republican Congress.

Only a “couple” of the 17 Fed officials argued that uncertainty over fiscal policy should not delay a near-term rate hike. Most officials said it would take “some time” for the outlook on fiscal policy to become clearer. Other Fed officials cautioned against adjusting interest rates “in anticipation of policy proposals that might not be enacted, or that, if enacted might turn out to have different consequences for economic activity and inflation than currently anticipated,” the minutes said.

Gold, Liberty, and the War on Cash

The War on Cash is not merely continuing, it is intensifying. It began in the West, with relatively minor infringements on our right to use the currency of our own nation . The War has now shifted to India, been radically ratcheted up, and inflicted upon a population of 1.2 billion people, where 68% of transactions were conducted with cash.

Regular readers have been warned in the past about the insidious corruption of the Modi regime, when it attempted to literally steal the gold of its own people with its “gold deposit scheme” (scam). Out of the blue, this oppressive regime announced a ban on 500- and 1,000-rupee notes – which represented 86% of all currency . Now it is going even farther.

No matter how badly India’s “experiment” fails, it will be labeled a success by the Western propaganda machine, and (of course) the Modi regime itself. And then it will be copied by our own corrupt regimes. For any readers, who do not comprehend the severity of this threat, understand the context. Our interest rates have been fraudulently manipulated to near-zero (or lower) in perpetuity. Meanwhile, inflation rages, while our puppet governments pretend it is near-zero. What this means is that all of our paper savings is perpetually blood-sucked by the full rate of that inflation. But even this isn’t enough.

“Negative” interest rates have now started appearing in the Western world, and those regimes which have not yet embarked upon this outrage are threatening to do so. There is no such thing as a negative interest rate . An interest rate, by definition, is a positive number. It is the price we pay for the use of capital. The use of capital is a valuable thing. A price of less-than-zero for the use of capital is not a transaction. It is a crime. Negative interest rates are a prima facie act of theft. Now combine negative interest rates and a War on Cash. We’re forced to deposit all of our (paper) wealth into banks, and then these “banks” (i.e. institutions of crime) steal that wealth, bit by bit, via “negative” interest rates.

Subprime auto lender facing Federal Trade Commission inquiry over GPS-tracking kill switches

The US Federal Trade Commission is investigating an auto lender that often requires subprime borrowers to have so-called GPS starter-interrupter devices enabled on purchased vehicles. The so-called kill switches, which can monitor a vehicle's constant whereabouts, also have the remote ability to shut a car off and to prevent a car from starting. This makes it easy for lenders to repossess the car for missed payments. But this modern-day version of the repo-man raises both safety and privacy concerns.

The Credit Acceptance Corp. of Michigan said in a Securities and Exchange Commission filing this month that it received a civil investigative demand from the FTC "seeking information on the Company’s policies, practices and procedures in allowing car dealers to use GPS Starter Interrupters on consumer vehicles. We are cooperating with the inquiry and cannot predict the eventual scope, duration or outcome at this time. As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation."

The lender did not immediately respond for comment. There are more than two million of these devices affixed to vehicles on US roads. They are often hidden, and they are required for car buyers with not-so-rosy credit scores as a condition of acquiring a car loan.

The FTC isn't commenting on the probe, which may include other lenders. The investigation likely centers on whether buyers are given adequate notice that the vehicles they are purchasing can track their every move and whether this is an acceptable business practice. The New York Times recently quoted a Texas man who said he was not told by his auto dealer that the vehicle he purchased had a kill switch installed. Others complained that their ignition was killed while in dangerous neighborhoods, at shopping malls, and even on the freeway.

U.S. Data Breaches Hit All-Time High

The number of reported U.S. data breaches hit an all-time high in 2016, thanks in part to new CEO phishing hacks that send phony emails to employees requesting sensitive business data.

Researchers from the Identity Theft Resource Center and data-security provider CyberScout scoured federal and state government records from 2016 and estimated a total of 1,093 breaches occurred last year. The record-high represents a 40% hike in the number of incidents over the previous period.

Experts are unsure whether the 2016 spike was caused by a surge of actual breaches, an uptick in incident reporting, or some combination of both.

“For the past 10 years, the ITRC has been aware of the under-reporting of data breach incidents on the national level and the need for more state or federal agencies to make breach notifications more publicly available,” said ITRC president and CEO Eva Velasquez. “This year we have seen a number of states take this step by making data breach notifications public on their websites.”

Fed's $2.5 Trillion Hoard of Treasuries Seen Barely Shrinking

For all the preoccupation in the bond market about the fate of the Federal Reserve’s $2.46 trillion portfolio of Treasuries, officials may ultimately be hard-pressed to pare down holdings amassed as part of the biggest economic stimulus program in history.

Reinvestment policy is back on investors’ radar as regional Fed presidents step up pressure for a debate on when to unwind emergency-era measures. More than a third of the securities come due by the end of 2019, leading traders to focus on Wednesday’s release of minutes from the latest FOMC meeting for any hint that officials intend to pull back on their policy of rolling proceeds from maturing obligations into newly issued debt.

Yet fund managers Thomas Atteberry, Mark MacQueen and Daniel Dektar, whose firms oversee more than $50 billion, say investors have little to fear as policy makers grapple with how to handle holdings that are about five times their 2008 level. The trio says the Fed simply won’t substantially scale back its government bond hoard. That’s in large part a consequence of post-crisis capital rules encouraging banks to hold cash at the central bank.

The upshot is that any move by the Fed to adjust its balance sheet probably won’t be as disruptive as the 2013 episode known as the Taper Tantrum, when 10-year yields soared by more than a percentage point over four months on a suggestion by then-Fed Chairman Ben S. Bernanke that the central bank could soon scale back bond purchases. This time around, yields across the curve may only rise by a quarter of that, according to Deutsche Bank AG.

The Fed isn't sure whether Trump will be good or bad for the economy

The Federal Reserve still hasn't made its mind up about President Donald Trump's policies.

Based on the central bank's most recent communication — the Fed minutes for the January/February meeting released on Wednesday — the members of the FOMC are still undecided about the ultimate effect of Trump's economic agenda, particularly fiscal stimulus, or if it will even happen at all.

"Participants again emphasized their considerable uncertainty about the prospects for changes in fiscal and other government policies as well as about the timing and magnitude of the net effects of such changes on economic activity," said the minutes.

It appears that while some members noted that a proposed $550 billion infrastructure plan and other stimulus moves from Trump could be a boon for economic growth, other members were concerned about the ultimate impact. "In discussing the risks to the economic outlook, participants continued to view the possibility of more expansionary fiscal policy as having increased the upside risks to their economic forecasts, although some noted that several potential changes in government policies could pose downside risks," said the Fed's minutes.

Exxon Caves to Oil Crash With Historic Global Reserves Cut

Exxon Mobil Corp. disclosed the deepest reserves cut in its modern history as prolonged routs in oil and natural gas markets erased the value of some North American fields.

The equivalent of about 3.3 billion barrels of untapped crude was removed from the so-called proved reserves category in Exxon’s books, the Irving, Texas-based explorer said in a statement. The revision, triggered when low energy prices made it mathematically impossible to harvest those fields at a profit in the near future. The biggest cut came in de-booking Canada’s 3.5-billion barrel Kearl oil-sands project.

The change amounts to the largest annual cut since at least the 1999 merger that created the company in its modern form, according to data compiled by Bloomberg. The previous record cut was a 3 percent reduction taken during the height of the global financial crisis in 2008.

Exxon, facing a U.S. Securities and Exchange Commission probe into how it valued its portfolio amid the worst oil market collapse in a generation, signaled in October and again last month that the revision was probably coming.

Market Obsession With Trump Will Be Good For Gold

With the Federal Reserve shedding little light on its trajectory of rate hikes, the market has found a new obsession, which should be good for gold, according to one portfolio analyst.

In a report Wednesday, Joe Foster, portfolio manager and gold strategist at VanEck, said that markets are now hyper-focused on President Donald Trump and concerns over his administration are growing as the irrational euphoria following his election win starts to fade.

“The risks of a Trump presidency, which we have been highlighting since the election, are coming into clearer focus. President Trump broke with tradition by indicating that a strong U.S. dollar is not necessarily in the best interest of the United States,” he said. ” Controversial executive orders and anti-trade maneuvering have damaged confidence and contributed to further dollar weakness. As a result, gold and gold shares have had an encouraging start to the year, bouncing off oversold yearend levels.”

Despite starting the week with technical profit taking, gold continues to hover just below its three-month highs. April gold futures last traded at $1,234.80 an ounce, down 0.33% on the day. Since the start of the year, gold futures have gained more than 7%.

Are we in a commercial real estate ice age?

Philadelphia soda tax killing sales, layoffs loom

Some Philadelphia supermarkets and beverage distributors say they're gearing up for layoffs because the city's new soda tax has cut beverage sales by 30 percent to 50 percent, worse than the city predicted.

An owner of six supermarkets tells The Philadelphia Inquirer he expects to cut 300 jobs, and a soft drink distributor predicts a 20 percent workforce reduction.

City officials expect business to rebound once customers get over sticker shock. They suggest the industry may be engaging in fearmongering to stop the spread of the tax to other cities.

Mayor Jim Kenney pushed through the 1.5-cent-per-ounce tax on sweetened and diet beverages to pay for nearly 2,000 pre-kindergarten slots and other programs. He tells the Inquirer he didn't think it's possible for the industry "to be any greedier."

Americans buy existing homes at fastest pace in a decade

Americans shrugged off rising mortgage rates and bought existing homes in January at the fastest pace since 2007. That has set off bidding wars that have pushed up prices as the supply of available homes has dwindled to record lows.

Home sales rose 3.3% in January from December to a seasonally adjusted annual rate of 5.69 million, the National Assn. of Realtors said Wednesday. Steady job gains, modest pay raises and rising consumer confidence are spurring healthy home buying even though borrowing costs have risen since last fall. Some potential buyers may be accelerating their home purchases to get ahead of any further increases in mortgage rates. With few homes available for sale, buyers feel pressure to rapidly close a deal when they find a suitable property.

The typical house for sale was on the market for just 50 days last month, down from 64 days a year earlier. Strong demand is pushing up the median home price, which jumped 7.1% from a year earlier to $228,900.

Just 1.69 million homes were on the market nationwide in January, near the lowest level since records began in 1999. It would take 3.6 months to deplete that supply at the current pace of sales, matching a record low reached in December. In a balanced housing market, supply is usually equal to about six months’ worth of sales.

‘Spain is Ruined For 50 Years’ Economist predicts crisis and slams ECB over ‘crazy’ loans

And it is only a matter of time before the Government is forced to default as a debt bubble and low wages effectively forge the worst declines in "living memory". Leading economist Roberto Centeno, who was an advisor to US president Donald Trump's election team on hispanic issues, says the country has borrowed £508 billion (€603) billion that it cannot conceivably pay back.

And he says Spanish politicians including Minister of Economy Luis de Guindos are "insulting their intelligence" after doing back door deals with the ECB. In a blog post Mr Centeno says there needs to be audits so the country can understand the magnitude of its debt mountain.

He said Spain was “moving steadily towards the suspension of payments which is the result of out of control public waste, financed with the largest debt bubble in our history, supported by the ECB with its crazy policy of zero interest rate expansion and without any supervision.”

The expert added the doomed situation will “lead to the ruin of several generations of Spaniards over the next 50 years”. And that current Prime Minister Rajoy has employed 2500 special advisors in his central government as opposed to other leaders.

Gasparino: Investors say fiscal stimulus is necessary to justify stock prices

Health insurer Aetna to spend $3.3B buying back stock

Aetna will spend $3.3 billion to buy back more than 20 million shares of its stock after the health insurer's board authorized more repurchases last week.

The nation's third largest insurer said Wednesday that it entered into accelerated buyback agreements with two dealers for about 10.4 million shares from each. Aetna will pay each dealer $1.65 billion and is using available cash to fund the deals.

Aetna had said on Friday that its board authorized the repurchase of up to an additional $4 billion worth of the company's stock. The Hartford, Connecticut, company also said it was doubling the quarterly dividend it pays stock owners to 50 cents per share.

That announcement came a few days after Aetna called off its roughly $34 billion acquisition of Medicare Advantage provider Humana Inc. That deal had already been rejected by a judge after federal regulators sued last summer to stop both it and a similar combination of the insurers Anthem Inc. and Cigna Corp.

San Francisco Tech Driven Real Estate Insanity: Current median home price at $1.3 million or $400,000 higher than the last housing bubble peak.

San Francisco tends to put Southern California to shame when it comes to real estate mania. The tech driven frenzy in the Bay Area is something to behold. What is so interesting is that San Francisco, being the hippie and alt-culture hub back in the baby boomers heyday, is now fully gentrified by tech and investor owners that really have little to do with the hippie and art subculture of the area. I mean how many hippies can afford a $1.3 million crap shack? The Bay Area continues to defy gravity when it comes to prices. People are having to “drive to qualify” if they aren’t the DINK tech couples or investors with large pockets.

Of course by definition the ultra-wealthy are a small part of the market but with few properties for sale, if they have a desire to buy they are going to buy. This is why you hear of stories of Google employees living out of vans even though they make what most would view as a fantastic salary. San Francisco continues to march on a unique path.

San Francisco real estate has been as hot as the NASDAQ. There is an allure to being part of the new tech-uber wealthy class. Wearable tech, top of the line phones, cars that drive for you even when you are half awake.

So it is interesting for a region so self-aware that they are more than happy to purchase $1.3 million crap shacks. Many younger tech workers are not falling for this and that is why the homeownership rate in San Francisco is among the lowest in the nation. Short of you wanting to mortgage your life away writing code for a company that might be out of fashion in two years, you need to be nimble and flexible with your ability to learn.

Credit card defaults continue to rise

One measure of how consumers are doing financially is how they are handling their debt. On the heels of a report showing a rising credit card default rate in December, consumers appeared to slip behind on all their debt payments last month.

The monthly S&P/Experian Consumer Credit Default Indices, a report that monitors changes in consumer credit defaults, shows the overall default rate ticked up three basis points from the previous month to 0.92% in January.

But it's the bank card default rate that's the headline number. It rose 26 basis points from December to 3.21%. That suggests consumers were having a harder time making their credit card payments on time in the aftermath of the holidays.

At the same time, defaults on car loans rose slightly from the previous month to 1.06%. Defaults on first mortgages rose even less, to a default rate of 0.72%. The five U.S. cities monitored each month all saw increases in debt defaults last month, with Miami experiencing the largest hike, up 14 basis points to 1.67%. That puts it at a 31-month high.

Lowe's Layoffs Number 525 in Recent Round of Cuts

Lowe’s announced more than 500 layoffs, including hundreds from its corporate office in Mooresville, North Carolina. The home improvement retailer announced 525 layoffs on Tuesday, including about 430 corporate employees, according to WSOC-TV.

The company is hopeful that these layoffs will lead to much-needed improvements in their corporate operating structure. “A couple of the guys who come here told me they lost their jobs,” said Alberto Ruiz, a restaurant owner in Mooresville, according to WSOC-TV. “They have families, rents and bills. Of course I feel bad for the employees, for sure,” Ruiz added.

“The mood was, it was pretty low in terms of morale. People were crying, people were upset,” said Rob Leis, an employee who was laid off after working for Lowe’s for nearly a decade.

“All you can do is sit there and wait until they call you in,” Leis added. “We’ve kind of known that something’s been in the works for a couple of months now,” Leis said.

Survey: People Don’t Really Want Fancy Technology To Help Them Shop

While retailers are falling all over themselves trying to incorporate the latest and greatest retail technology — anything from smart mirrors in fitting rooms to robots that answer questions you’d ask store employees — frankly, shoppers just don’t seem to give a damn.

That’s according to a new survey from GPShopper and market researcher YouGov cited by Bloomberg that seems to indicate we aren’t impressed by shopping tech.

For example, only 18% of more than 1,000 participants polled think smart mirrors will improve their shopping experience, while just 21% of shoppers said virtual assistants like the Amazon Echo and Google Home makes shopping better.

Basically, shoppers just want to get what they want as quickly and easily as possible. And although stores might be excited about their latest gadgets and gizmos, Maya Mikhailov, a co-founder of GPShopper told Bloomberg, “but consumers aren’t necessarily as eager as they are.”

Americans Are Eating Out a Lot Less and It’s Hurting Restaurants

A third of U.S. adults are eating out less frequently than three months ago, mostly because of cost, according to a new Reuters/Ipsos survey that illustrates the challenge for U.S. restaurants seeking to revive traffic after zero growth in 2016.

Penny-pinching diners and intense competition from supermarkets, meal kit sellers like Blue Apron and upstart grocers such as Amazon.com have been a growing problem for restaurants.

Annual traffic to U.S. restaurants has been flat or up just 1 percent since 2009, when there was a 2 percent drop in the wake of the debilitating financial crisis, according to data from the NPD Group. One-third of respondents to the Reuters/Ipsos opinion poll of more than 4,200 U.S. adults from Jan. 14 to 25 said they were eating out less often than three months ago. Of those diners, 62 percent said cost was the primary reason.

Recent minimum wage increases have prompted some U.S. restaurant operators to raise menu prices while less labor-intensive grocery stores have been able to pass lower food costs on to shoppers. The gap between grocery food prices and restaurant prices is at an historic high. The consumer price index for food away from home was up 2.4 percent year over year at the end of January compared to a 1.9 percent drop for food at home.

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