Headline News Archives

Tuesday 04.25.2017

Trump Wants Tax Plan to Cut Corporate Rate to 15%

President Donald Trump has ordered White House aides to draft a tax plan that slashes the corporate tax rate to 15%, even if that means a loss of revenue and exacerbating the procedural and partisan hurdles he faces in search of his first major legislative victory, according to people familiar with the directive.

During a meeting inside the Oval Office last week, Mr. Trump told staff he wants a massive tax cut to sell to the American people, these people said. He told aides it was less important to him that such a plan could result in a loss of revenue, though that could make it more difficult to pass through Congress. Mr. Trump told his team to "get it done," in time to release a plan by Wednesday.

Mr. Trump's push for a 15% corporate tax rate would prioritize steep rate cuts over attempts to prevent deficits from running higher. That choice could make it much harder to pass tax cuts that are permanent because Republicans plan on using a procedural tool that allows legislation to pass with a 51-vote majority in the Senate. Under those rules, changes can't add to deficits beyond a decade.

"It's the same discussion they had about the Bush tax cuts in the previous administration: Are you better off having a smaller cut that is permanent, or a larger cut that is temporary," said Mick Mulvaney, the president's budget director, in an interview last week.

Panera is replacing cashiers with robots — but it's hiring thousands of workers for Delivery Service

Panera is expanding its delivery service — and that means hiring more workers. The sandwich chain announced on Monday that it expects to add more than 10,000 new in-cafe and delivery driver jobs by the end of 2017, as the company expands delivery services to 35% to 40% of its locations by the end of the year.

"In many places across the country, all that's available for delivery is pizza or Chinese food," Ron Shaich, Panera founder and CEO said in a statement. "We’re closing the gap in delivery alternatives and creating a way for people to have more options for real food delivered to their homes and workplaces."

Panera's announcement comes as the company increases its reliance on automation. With ordering kiosks at nearly all of its locations and a growing emphasis on digital ordering, Panera has been in the prime position to cut labor costs by hiring fewer workers.

"Labor is going to go down," Shaich said in an earnings call in October 2015. "And as digital utilization goes up — like the sun comes up in the morning — it is going to continue to go up. Digital utilization. You are seeing it happen in Panera today."

Amazon Now Working On Self-Driving Vehicles For Deliverie Service

Between drones, leased planes, and its own fleet of Flex drivers, Amazon has a decent foothold in the transportation-and-delivery market. But now the company apparently has an eye on the future, and it involves driverless vehicles.

The Wall Street Journal, citing people familiar with the case, reports that Amazon created a team last year tasked with figuring out how the e-commerce giant can use autonomous vehicles to deliver goods in the future. The in-house think tank, as it’s described, will focus on determining how the company can quickly and efficiently deliver packages for less.

Amazon declined to provide comment to the WSJ on the program. Sources tell the WSJ that the autonomous vehicle initiative could include trucks, forklifts, and drones, as well as sedans that would close the gap on so-called last-mile delivery.

By using autonomous vehicles, the WSJ notes Amazon could avoid some aspects of delivery that slow down the process. For instance, while people have a 10-hour limit when driving, a self-driving truck could continue uninterrupted. With driverless vehicles, a several-day trip could be done in a fraction of the time.

Government shutdown is a very real possibility

Survey of economists finds optimism about growth prospects

Business economists are generally optimistic about the U.S. economy with most expecting stronger growth than last year's poor performance.

Economists surveyed by the National Association for Business Economics also expect improved or unchanged sales and profits at their companies in the second quarter, with most reporting no changes in hiring or investment in response to policy changes expected after the November election.

Nearly two-thirds of economists in the poll released Monday expect gross domestic product growth of 2.1 percent to 3 percent in the next four quarters. That would be a significant improvement from anemic growth of 1.6 percent in 2016, the weakest showing in five years. Since the Great Recession ended in June 2009, the economy has averaged annual GDP growth of just 2.1 percent, the slowest recovery since the end of World War II. Only 1 percent of the economists expected no growth or a decline in GDP during the next year.

President Donald Trump has pledged to boost GDP growth to 4 percent or better, though private economists are doubtful he can achieve that goal given the headwinds the economy faces from an aging workforce and disappointing productivity growth.

Fearing a worker shortage, farmers push back on immigration

America’s farmers are feeling anxious about President Donald Trump’s crackdown on illegal immigration. Patricia Dudley, the head of Bethel Heights Vineyard, looked out over the 100 acres of vines her crew of 20 Mexicans had just finished pruning, worried about what will happen if the Trump administration presses ahead with its crackdown on immigrants.

From tending the plants to harvesting the grapes, it takes skill and a strong work ethic to produce the winery’s pinot noir and chardonnay, and native-born Americans just aren’t willing to work that hard, Dudley said as a cold rain drenched the vineyard in the hills of Oregon. “Who’s going to come out here and do this work when they deport them all?” she asked.

President Donald Trump’s hard line against immigrants in the U.S. illegally has sent a chill through the nation’s agricultural industry, which fears a crackdown will deprive it of the labor it needs to plant, grow and pick the crops that feed the country. In New Jersey, blueberry farmers are worried because they rely on laborers to hand-pick the berries, since machines tend to sweep up green, unripe berries along with sweet blue ones, costing them sales and hurting profits.

The Trump administration’s immigration restrictions “are going to push us out of business,” said Bill Mortellite, whose New Jersey operation is called Blueberry Bill Farms, in an interview, joking that “I hope Donald Trump comes to pick, because I would hire him.”

Retailers on Record Bankruptcy Pace: S&P

The economic situation for U.S. retailers has gotten so bad that analysts have added a new word to an investor’s vocabulary: over-stored. That means just what it implies: there are too many retail stores in the United States.

So far this year, 14 retail chains have filed for bankruptcy protection or liquidation, according to a report issued last Friday by S&P Global Market Intelligence. In all of 2016, there were 18 filings. The highest recent total was 42 in 2010, and if 2017 continues on its current pace, that record is in serious danger.

The decline in retail fortunes comes as U.S. incomes are rising and so is Americans’ spending. Spending rose 0.2% in March while incomes rose 0.4%. So what’s happening? According to S&P:

"Retail’s troubles are manifold, and the diagnosis is different in each struggling company’s case, but it is widely agreed that the U.S. is over-stored and that the solution for flat or declining in-store sales resides to a significant degree online, where the most sales growth is now taking place."

Danielle DiMartino Booth - Fed has on it's Beer Goggels

In Venezuela, The Fruits Of Socialism Are… No Fruit (Or Any Other Food)

If you’re looking for a poster child to illustrate the effects of switching from a capitalist society to a socialist one, look no further than Venezuela. When you examine recent events, it’s clear that the fruits of socialism are… no fruit (or any other food).

Once a wealthy and modern nation, a popular socialist movement led by Hugo Chavez (think Bernie Sanders on steroids) miraculously transformed Venezuela into, well, Cuba. Despite having a dubious plan for future prosperity, Chavez remained popular until his death in 2013. The country is now run by his hand-picked successor, Nicolas Maduro.

Hugo Chavez was able to use his Fidel-like charisma to mesmerize the people into believing his grand Utopian vision. Mr. Maduro? Not so much. The masses regularly protest his government.

Few true believers on the Left thought the collapse of Venezuela was possible. The country controls huge oil reserves and counted upon the then-high price of crude to prop up its socialist revolution. It worked for a while, with a trillion dollars going into the country’s coffers. But the oil boom went bust, and socialist mismanagement has caused shortages of food and other staples. Now, with the economy in free fall, government offices are closed much of the week due to, of all things, efforts to save electricity.

Wells Fargo board pays price for letting whistleblowers whistle in the wind

Wells Fargo & Co directors could have avoided a shareholder backlash over a sales practices scandal if they had paid more attention to scores of whistleblowers who complained, in vain, for years. A slow response to warnings is not unique to Wells Fargo, but it is an immediate concern at the third-largest U.S. bank, whose board is facing a no-confidence vote at its annual shareholder meeting on Tuesday.

Wells Fargo has been engulfed in scandal since September, when it reached a $190 million settlement with regulators over complaints that its retail banking staff had opened as many as 2.1 million unauthorized client accounts. The bank fired 5,300 employees for improper sales tactics over five years, but did not make more substantive changes to policies and procedures or hold managers accountable until there was a public outcry.

An third-party investigation commissioned by the board found such practices were not flagged as "a noteworthy risk" until 2014, even thought lawsuits and complaints suggested the problem existed at least as far back as 2010.

George Sard, a spokesman for Wells Fargo's board, declined to comment. The bank's spokeswoman Richele Messick said Wells Fargo takes the issue "very seriously" and detailed multiple steps the bank has taken to improve procedures since the scandal erupted, including reviews of its ethics hot line and new standards and training for employees. "It's critical that all team members feel safe escalating concerns, and have confidence those concerns will be addressed," Messick said.

New York Wants Its Students to Learn at the Expense of Everyone Else

New York is adopting free tuition under the Excelsior Scholarship. “Excelsior” is a reference to the state’s motto, and supposedly how lawmakers envision the recipients. But if students will be reaching “still higher,” they will do so while standing on the backs of others.

College is not food. It is not shelter. You don’t need it to live. You don’t even need it to live well. Despite Mr. Cuomo’s insistence that a college degree is necessary for success, it is simply not true that the only path to a good job must involve dozens of hours in general education classes.

High school graduates are awash with alternatives. Electricians, nurses, dental hygienists, plumbers, HVAC mechanics, and many others all pay well above the median U.S. salary. None of these require a four-year degree. But they aren’t the office jobs twenty-somethings dream of and so these openings remain unfilled.

College is neither necessary nor sufficient to get a good job. It makes little sense to make it free for so many. Excelsior attempts to address this concern with its residency requirement: recipients must live and work in the state of New York for the number of years they benefited from the scholarship (generally four). But that scheme won’t work so cleanly.

No French Love Affair for Gold, But Rebounds from 2-week Low

Automation Could Replace Over 99% of U.S. Jobs Sooner Than You Think

Until recently, many have feared job losses resulting from an influx of immigrants. That argument says that migrants would be willing to work for less money. Yet, apart from economic studies to the contrary, Americans should worry more about robots taking jobs. Yes, the biggest threat to U.S. jobs comes from automation.

Automation is coming faster than anybody could have predicted. Indeed, nobody could have expected the wave of robots taking over jobs. Consider that robots, or automation, has eliminated just one job in the past 60 years. Consider that, according to a Harvard University study, only lift operators have been completely replaced in the U.S. by automation.

But in the future only teachers, managers, lawyers, consulting professionals and medical experts staff might be spared from the proverbial axe. Thus, while at first glance, it might have looked like humans had a chance, fully automated jobs are coming. While, it’s easy to understand if some humans might use the proverbial axe to smash them to smithereens, there’s little to stop the onslaught of robots. The real unemployment rate will explode.

Even actors have to start worrying. We already have a robotized form of wrestling. Radio-controlled robots, called “fighting bots” have their own TV shows and leagues already. Future technology could easily adapt that concept to the Hollywood star system. In the 2013 movie Her, Joaquin Phoenix gives a credible performance of a man falling in love with a software program. The prospect of a world ruled by bots is materializing before our eyes. Such a world raises many questions about where society is going. Automation and robots—and who knows, even half-bot/half-human hybrids as in Robocop—will force us to reconsider the ethical, social, and economic foundations of life.

Sears’Named Third CFO in Past Year

Sears has named Rob Riecker as its new finance chief, the third person to hold the position in the past year as the retailer struggles to implement a turnaround plan amid severe liquidity problems. Riecker, currently Sears’ controller and head of capital market activities, replaces Jason Hollar, who resigned after only six months as CFO.

Sears announced Riecker’s promotion at the same time it disclosed it had raised its savings goal for this year from $1 billion to $1.25 billion, a target it hopes to reach by cutting some senior management positions, and closing 92 pharmacies in Kmart stores, along with 50 Sears Auto Centers.

The company also noted that since the beginning of this year, it had “successfully executed numerous transactions to raise additional capital to fund its operations and continued transformation,” including completing the sale of its Craftsman brand to Stanley Black& Decker and generating $177.5 million from the real estate sales.

According to a news release, Sears is now reviewing bids in excess of $700 million on over 60 real estate properties. But as Business Insider reports, Sears is now facing a looming payment in July from the maturation of a $500 million loan facility. And S&P Global Market Intelligence has identified Sears as the most vulnerable public retail company in the U.S., saying it has a 24% chance of default within a year.

Bursting Auto Lenders' Bubble

Since the dawn of the automobile, U.S. consumers have been car crazy. The 2008 financial crisis dampened their enthusiasm, as high oil prices and tightening credit deterred Americans from buying new cars, and especially the larger vehicles that had become the mainstay of U.S. automakers. Once the crisis passed and lines of credit opened back up, though, Americans returned to the auto market in full force. Larger cars started coming back in fashion, with help from improved fuel efficiency and lower oil prices, and average vehicle prices have risen by 30 percent since 2009. The result has been a seven-year boom in sales, which climbed from an annualized 9 million units in February 2009 to 18.3 million units in December 2016.

As car prices have soared, so, too, has the value of car loans — up to a record average of $29,469 per vehicle. These factors combined have contributed to a jump in consumer debt, from $698 billion in 2010 to $1.1 trillion at the end of 2016. And since automakers pushed back on the Securities and Exchange Commission's proposed 60-month cap on auto loans in 2008, lenders have been offering borrowers ever-looser terms, leading to increasing levels of riskier "subprime" loans.

The tendency to package the loans into securities and sell them to investors on the open market as asset-backed securities (ABS), meanwhile, has invited comparisons with the subprime mortgages and collateralized mortgage-backed securities of the 2008 crisis. Together, these trends have prompted speculation over the past several years that auto loans will spark the United States' next economic calamity. Though the predictions have so far proved premature, the sector may finally be reaching critical mass.

Until recently, talk of another looming economic catastrophe emerging from the auto loan industry has seemed far-fetched. For one thing, car loans are not mortgages. The risk of lender loss is lower, since vehicles, unlike real estate, can be quickly repossessed and resold into the comparatively liquid used car market. Consequently, lenders can rest assured that they will retain at least some of their investments' value. For another, new car sales have kept thriving, supporting the market and staving off creeping negativity.

U.S. Sanctions 271 Syria Government Employees

Hasbro Climbs After Board Games, Digital Products Fuel Sales

Hasbro Inc., the maker of Monopoly, rose the most in 11 weeks after reporting profit and sales that topped analysts’ estimates, helped by sales of board games and digital gaming. Profit was 54 cents a share in first quarter, the Pawtucket, Rhode Island-based company said Monday. That far exceeded the average 38-cent projection of analysts.

Revenue climbed for a seventh straight quarter, led by a 43 percent increase in its games division. That was driven by digital gaming and new releases, including Speak Out and Toilet Trouble, the company said. Those gains offset a decline in Star Wars and Marvel products, which are in a lull because new movies for those franchises won’t come out till later this year.

Hasbro shares rose as much as 8.4 percent to $104.14 in New York, the biggest intraday advance since Feb. 6. The stock had already climbed 23 percent this year through Friday’s close.

Sales climbed to $849.7 million last quarter, beating the average estimate of $818.2 million. The growth contrasted with dismal results from Mattel Inc., Hasbro’s larger competitor. Mattel posted a first-quarter loss last week, with sales sliding 13 percent at its biggest property: Barbie.

Millennials Are Better Educated, Less Financially Independent

Today’s young adults value their studies highly—a larger percentage earn four-year-degrees than their grandparent’s generation did—but that does not necessarily mean that they are better off, according to a government report released last week.

The study, “The Changing Economics and Demographics of Young Adulthood: 1975-2016” was issued by the U.S. Census Bureau last Wednesday. The author, Jonathan Vespa, studied changes over time in marriage rates, living arrangements, educational levels, and financial independence among young adults, or those between the ages of 18 and 34.

Hidden in the top line finding, reported elsewhere, that “millennials,” or the current crop of young adults, earn less than baby boomers did at their same age, are big improvements among educational attainment and earnings for young women. According to the report, the percentage of women with four-year-degrees increased from 18.4 percent in 1975 to 40 percent in 2016, and their median personal income increased by just under $7,000 to $29,429 in that time-span. Overall, the median income for young adults dropped just over $2,000 from $36,858 to $34,837 (after adjusting for inflation) meaning that while men still earn more than women, their overall earnings outlook is getting worse.

The changing trends in educational outcomes and professional opportunities for young people have correlated to major shifts in how they organize their family life. Millennials are getting married later and are more likely to live at home than previous generations. These changes correspond to findings that millennials believe that finishing their formal schooling is the most important milestone to surpass along the transition to adulthood.

India's Central Bank Chief Says Cash Ban's Effects ‘Transitory’

India’s central bank chief said the cash ban imposed in 2016 probably had no more than a temporary effect on Asia’s third-largest economy, as lending continued to flow. The “accumulating evidence points to” the effects of so-called demonetization as “transitory,” Governor Urjit Patel, who took over from Raghuram Rajan in September, told an audience Monday at Columbia University in New York. “Credit is more important than currency, and credit was not affected at all.”

Authorities have been seeking to rein in liquidity after the government’s November recall of high-denomination currency notes flooded the banking system with cash. The excess funds not only threaten to stoke inflation, but have also constrained the RBI’s ability to intervene at a time when the rupee is rallying.

Households’ inflation expectations “continue to be adaptive and therefore difficult to bring down in a durable manner,” said Patel, who rarely appears in public. In a bid to burnish the Reserve Bank of India’s credentials as an inflation-fighting central bank, Patel has called for “close vigilance” on inflation. Consumer prices rose 3.81 percent in March from a year earlier, having risen 3.65 percent in February. India’s central bank targets keeping inflation around 4 percent in the medium term.

Earlier this month, India unexpectedly raised the reverse repo rate while keeping the benchmark unchanged, effectively tightening policy to step up the fight against inflation.

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