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Tuesday 03.28.2017

Markets Can't Ignore Pension Crisis - Danielle DiMartino Booth

In late 2006, Aaron Krowne, a computer scientist and mathematician, started a website that documented the real-time destruction of the subprime mortgage lending industry.

The Mortgage Lender Implode-O-Meter caught on like wildfire with financial market voyeurs, regularly reaching 100,000 visitors. West Coast lenders, some may recall, were the first to fall in what eventually totaled 388 casualties.

A year earlier, to much less fanfare, Jack Dean launched another website in anticipation of the different kind of wave washing up on the California coastline. Called the Pension Tsunami, the website was originally conceived to provide Golden State taxpayers with a one-stop resource to track news stories on the state’s mammoth and numerous underfunded public pensions.

Dean came about his inspiration honestly: “I started tracking this issue in 2004 after the Orange County Board of Supervisors gave a retroactive pension formula increase of 62 percent to county employees,” he said. “I was stunned. It’s the main reason Orange County has a $4.5 billion underfunded liability today.” As the years have passed, though, the site has become a font of information for states and municipalities nationwide as well as corporate pensions. In all, over 40,000 headlines have been posted to the website to date.

“Big Short” 2017: When the Auto Industry Implodes

The first line of The Wall Street Journal’s March 21 story sums up the trend: “The auto finance sector has taken a bad turn.” “The auto finance sector just ran a red light and is about to T-bone a minivan” would’ve been more accurate. We first wrote about the coming carnage in U.S. auto finance in December. Now the story’s catching on. There’s big trouble in the U.S. auto market. That means there are also huge profit chances ahead, if you know what to do.

According to the WSJ, Ally Financial, one of the biggest auto finance companies, said defaults on auto loans for low-credit borrowers are still increasing. As I wrote in December, Experian’s market tracking shows that up to 40% of all auto debt in America today is “nonprime” or worse. Let’s take a closer look at what that means.

The more nonprime auto debt out there floating around, the higher the likelihood of defaults. That means more car repos. More repos cause massive used car inventory coming back onto lots. Which results in huge losses for automakers. More used car inventory means less fewer car sales. It also means lower prices for used cars.

Mike Shedlock hit a home run on this idea on March 20, in a post at MishTalk. He wrote that used car prices in February fell the most in any month since 2008. It was only the second February decline in used car prices in 20 years. Mish didn’t have to twist any arms to find those data. The WSJ quoted it too. It came from the National Automobile Dealers Association February report. Everyone knows there’s huge used car inventory. But nobody wants to admit what’s causing it.

Silver Looking "Fantastic," Could Hit $20

Giving people $1,000 in 'emergency cash' could prevent homelessness

For people on the brink of losing it all, cash can be a lifesaver. That's according to a study published in the August 2016 issue of Science, which found giving the near-homeless roughly $1,000 in "emergency cash" substantially reduced the chances they would end up on the street — over both the short and long term.

Researchers from the University of Notre Dame, who carried out the study, say the findings provide an important insight for helping millions of people remain dignified, independent members of society.

"Policymakers and housing experts have long debated how best to address the persistent problem of homelessness in the United States," James Sullivan, Notre Dame economist and study co-author, said in a statement. "Our study shows that not only do targeted prevention programs work, but they also can save the community money."

Each year, cities spend tens of thousands of dollars to keep homeless people alive. In New York City, where there are more than 62,000 homeless people, the city spends millions each year to put them up in publicly-funded hotel rooms and offer health-related services. The new study explores what happens when cities invest in prevention rather than treatment. Sullivan and his colleagues explored the impact of financial assistance for 4,500 people and families in Chicago who called the Homelessness Prevention Call Center between 2010 and 2012.

Taxpayers Spend 6.1 Billion Hours, $234 Billion Per Year on Tax Compliance

Taxpayers spend 6.1 billion hours a year just to comply with the federal tax code, according to experts at a Tax Foundation event on Monday.

Pete Sepp, president of the National Taxpayers Union, said that tax compliance costs taxpayers $234 billion per year in direct costs and lost productivity.

"The problem is the status quo—thinking that, well, if we don't do tax reform this year it will just be that bad," Sepp said. "No, the status quo is not the static quo—it's going to get worse." "The paperwork burden inventory at the Office of Management and Budget related to Treasury is expected to rise by another 2 billion hours in the next few years," he said. "One-third added to that, we're looking at tax compliance costs of north of $400 billion a year."

Sepp admitted that the failure of the Republican health care reform bill, with its projected deficit reductions, will make it more difficult for Republicans to pass a tax reform bill. "This is the important point right now, it's an especially important one in this current post-Obamacare repeal environment," Sepp said. "We now have about a trillion dollars of baseline problem now that we didn't think we would have before assuming Obamacare was going to be repealed."

RadioShack Warns State It May Lay Off All Headquarters Employees

As twice-bankrupt electronics retailer RadioShack cuts back on its remaining network of stores across the country, the company has notified the state of Texas that it may close its corporate headquarters in Fort Worth at the end of May, or at minimum lay off some of the people who work there as its store network shrinks even more.

The Dallas News reports that the Shack filed a WARN Act (Worker Adjustment and Retraining Notification Act) notice with the state two months ahead of the potential layoffs as required, explaining in a letter that it hopes to “reorganize and emerge from bankruptcy as an ongoing business,” but will have to close the headquarters and lay off all 150 people who work there if the company can’t make a go of it as a slimmed-down company that has severed its retail partnership with Sprint.

The company kept its corporate headquarters in Fort Worth after the 2015 bankruptcy, though its corporate campus full of Shack-themed art was sold to raise cash shortly after it opened in 2005.

RadioShack announced plans to close 200 stores and evaluate its options for the remaining 1,300 when it filed for its second bankruptcy in 25 months earlier this year. Those options turned out to be going-out-of-business sales at a few hundred more stores across the country.

Credit Suisse Downgrades Retail, As Hedge Funds Prepare To Profit

Is the Retail Apocalypse upon us? Not just Sears (SHLD) is in trouble some on the sell side and hedge fund community believe. Credit Suisse has downgraded retail (within the consumer discretionary sector), and consumer durables and apparel to market weight, saying several metrics were at their lowest since the 2008 global financial crisis. The sectors had been rated overweight on account of “deep valuation” appeal.

The downgrade comes days after Sears (SHLD) Holdings announced bleak annual results and expressed doubts about its “ability to continue as a going concern”. In a note out this morning, Evercore ISI opines the following regarding Sears:

2016 was another year of very poor operational results offset by assets sales. While the cash burn rate is improving as the company shrinks, they remain very far from sustainable levels of loss and require external liquidity. Given the very weak store base, continued comp declines, anemic sales productivity, and continued share loss in most major categories, SHLD does not appear well positioned for 2017.

As far back as 2015, Evercore predicted liquidation as a “base case” for Sears. Others have proclaimed a “retail Apocalypse” as many brick and mortars such as GameStop being the latest come under increasing pressure from Amazon. Speculation also raged about mall-related debt likely to be the next big short. In recent weeks, hedge funds such as Alder Hill Management have ramped up shorts against commercial mortgage-backed securities, while Deutsche Bank and Morgan Stanley have recommended buying credit protection on the BBB- tranche of CMBS, according to Bloomberg .

Fannie Mae: Lender optimism higher than ever

Lenders are now more confident than ever in the economy, however, a shift towards purchase mortgages creates challenges for their profit margins, according to Fannie Mae’s first quarter 2017 Mortgage Lender Sentiment Survey.

Mortgage lender expectations hit the highest level since the survey’s inception in the first quarter of 2014. Lenders from institutions of all sizes are more optimistic about the direction of the economy. This quarterly online survey polls senior executives of Fannie Mae’s lending customers to assess their current activities and market expectations.

“This quarter, lenders’ optimism toward the overall economy and home price appreciation hit survey highs, mirroring the consumer confidence seen in our February Home Price Sentiment Index,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “However, lenders’ profit margin outlook remains significantly less positive than this time last year and two years ago.”

Lenders are not as optimistic about the growth of purchase mortgage, as expectations declined significantly with the increase in mortgage rates. In fact, the share of lenders expecting an increase in purchase mortgages over the next three months fell to the lowest level in the survey’s history.

Will you have enough? Only 18% very confident about their retirement savings

Meet the worriers — the people who are afraid they won't ever be able to retire or that they will run out of money too early in retirement.

Three out of 10 say they are so stressed out they even think about it at work, according to the Employee Benefit Research Institute, a research organization that has been examining for years how prepared Americans are for retirement.

The findings show people have calmed down since the Great Recession, when a broad swath of Americans were horrified as they lost jobs and as the stock market crashed and destroyed a significant portion of the savings they'd worked hard to accumulate. Now, most are back at work, home values are recovering and the stock market has been kind to anyone with money in a 401(k). Measures of consumer confidence show Americans having a bright view of their future.

Yet, while people generally are feeling optimistic now about their jobs and putting food on the table, the optimism wanes for many when they ponder whether they will be OK in retirement. According to the EBRI study, only 18 percent are very confident they will have the savings they need for a comfortable retirement.

Nomi Prins: Financial System Worse Now Than 2007

Forget ObamaCare, RyanCare, and any Future ReformCare—the Healthcare System Is Completely Broken

As with many other complexities, opaque systems in the US, only those toiling in the murky depths of the healthcare system know just how broken the entire system is. Only those dealing daily with the perverse incentives, the Kafkaesque procedures, the endlessly negative unintended consequences, the soul-deadening paper-shuffling, the myriad forms of fraud, the recalcitrant patients who don't follow recommendations but demand to be magically returned to health anyway, and of course the hopelessness of the financial future of a system with runaway costs, a rapidly aging populace and profiteering cartels focused on maintaining their rackets regardless of the cost to the nation or the health of its people.

Ask any doctor or nurse, and you will hear first-hand how broken the system is, and how minor policy tweaks and reforms cannot possibly save the system from imploding. Based on my own first-hand experience and first-hand reports by physicians, here are a few of the hundreds of reasons why the system cannot be reformed or saved.

Say 6-year old Carlos gets a tummy-ache at school. To avoid liability, the school doesn't allow teachers to provide any care whatsoever. The school nurse (assuming the school has one) doesn't have the diagnostic tools on hand to absolutely rule out the possibility that Carlos has some serious condition, so the parents are called and told to take Carlos to their own doctor.

Their pediatrician is already booked, so Carlos ends up waiting in the ER (emergency room). Neither the school nurse nor the parents see the symptoms as worrisome or dangerous, but here they are in ER, where standards of care require a CT scan and bloodwork. Hours later, Carlos is released and some entity somewhere gets an $8,000 bill—for a tummy-ache that went away on its own without any treatment at all. Since the Kafkaesque billing system rewards quick turnarounds, observation is frowned upon unless it can be billed. So if an observation is deemed necessary (to avoid any liability, of course), Carlos might be wheeled into an "observation room" filled with other people, where a nurse pops in every once in a while. This adds $3,000 to the bill.

Sessions: 'Sanctuary cities' won't receive federal grants

State and local governments with "sanctuary city" status will lose federal grants from the Justice Department, Attorney General Jeff Sessions announced Monday at the White House.

"Such policies cannot continue. They make our nation less safe by putting dangerous criminals back on the streets," Sessions said in the White House press briefing room. "Today, I am urging states and local jurisdictions to comply with these federal laws."

"Sanctuary cities" refuse to work with Immigration and Customs Enforcement officials in enforcing immigration laws, including allowing ICE to take custody of the illegal immigrants for possible deportation. Under federal law, they are required to notify ICE when an illegal immigrant is in custody.

More than 140 jurisdictions have been designated as sanctuaries, including 37 cities. "LAPD has never participated in programs that deputise local law enforcement to act as immigration agents, and on my watch they never will," Los Angeles Mayor Eric Garcetti said last week at a news conference where he signed an executive order that ordered polic who patrol Los Angeles' airport and port to follow the Los Angeles Police Department policies.

It’s possible to still be broke in some U.S. cities with $500,000 per year in income

Not even a high six-figure salary is enough to keep New York City families out of the red. But spare a thought for the average American family, whose costs easily outpace the average income.

A recent analysis from Sam Dogen at his personal finance website Financial Samurai showed how difficult it is for high earners to escape the rat race in New York City, one of the priciest places to live in the world. He analyzed a mock budget for an imaginary family of four in which the two 35-year-old breadwinners each make $250,000 a year. After factoring in taxes, 401(k)contributions, home and child care costs, the family was left with just $7,300 for the year — as if they were living “paycheck to paycheck.”

Perhaps nobody is crying for lawyers making $500,000 a year or even $250,000, but the analysis shows just how easy it is for spending habits to take a high salary and turn it into table scraps. Dogen said pressure from peers to spend more is a big contributing factor, adding “everywhere I go, and I’ve been all over the world, high income earners are secretly feeling the same squeeze.”

“They are unhappy, getting divorces, and always comparing themselves to wealthier and wealthier people,” he said. “Heck, even a friend who is worth over $200 million after founding and taking public a company feels like he needs to continue working because he has to ‘keep up with the Zuckerbergs.’”

This precious metal has surged 32% in 2017

The price of rhodium is trading 32% up so far this year and has added nearly $400 an ounce since hitting 12-year lows mid-2016.

Rhodium's main application is to clean vehicle emissions and the price quoted by Johnson Matthey, the world's number one manufacturer of autocatalysts, on Monday breached $1,000 for the first time since June 2015. Due to rarity, the small size of the market and concentrated supply – South Africa alone produces roughly 80% of the world's rhodium – prices are typically volatile.

But rhodium (and sister metal ruthenium) stands out when it comes to price swings – the metal touched $10,025 an ounce just before the 2008 financial crisis hit, but would drop 90% before the end of that tumultuous year.

Robust car sales in China and the US, where gasoline vehicles dominate, coupled with rising emissions standards worldwide has been a boost for the metal. Rhodium and palladium finds application in gasoline vehicles while diesel-powered mostly use platinum for autocatalysts. Platinum at $970 an ounce has advanced 8% in 2017, while palladium is showing gains of 19%, climbing back above $800 an ounce recently.

$540,701,000,000: U.S. Property Taxes Hit Record in 2016

Americans paid a record $540,701,000,000 in property taxes to state and local governments in fiscal 2016, according to the U.S. Census Bureau.

That was up $16,748,620,000—or about 3.2 percent--from $523,952,380,000 in property taxes (in constant 2016 dollars) that state and local governments collected in fiscal 2015.

The prior national record for property taxes was set in fiscal 2009, when they hit $527,850,500,000 in constant 2016 dollars. Fiscal 2016's record total of $540,701,000,000 was up $12,850,000,000—or about 2.4 percent—from that previous record.

The nationwide state and local property tax receipts for fiscal 2016 were released last week with the Census Bureau’s “Quarterly Summary of State and Local Government Tax Revenue for 2016: Q4.” The fiscal year 2016 that the Census Bureau references in this data is the year that runs from July 1, 2015 to June 30, 2016. That is because most states end their fiscal years on June 30.

Contractors submitting bids to Trump wall specs

The Federal Government Won't Get Fixed Until It Breaks

Americans who are stuck with exploding health insurance premiums hate Obamacare. Trump won the election based, in part, on his commitment to "repeal and replace" the program. Congressional Republicans passed a repeal bill several times during the Obama years. But, somehow, now that they have a president who would actually sign the bill, it ain't gonna happen!

Instead of simply passing the same repeal, leadership trotted out a "reform" laden with most of the crushingly expensive mandates and big government control that conservatives hated about the Affordable Care Act. It failed when "Freedom Caucus" Republicans insisted on a more genuine reform.

All the sound and fury Republican leaders made about repealing Obamacare signified nothing. They aren't eager to betray the healthcare lobby, insurance providers, and pharmaceutical companies who worked with Congress to write the law and who paid so handsomely into campaign funds. They would rather betray voters. The federal government sunk its talons deep into healthcare with the Affordable Care Act, and it will never let go willfully. Perhaps it can be pried loose after the system collapses.

The truth is governments do not voluntarily shrink themselves. Politicians will only get serious about reforms after a crisis forces their hands, not before. President Trump acknowledged this truth Saturday when he tweeted, "ObamaCare will explode and we will all get together and piece together a great healthcare plan for THE PEOPLE. Do not worry!" His assurance would be more comforting if it didn't mean another year or two (or 10?) of exploding health care premiums and doctors leaving the system.

Restaurant group: Minneapolis servers make $28.56 per hour

A restaurant industry group that argues any rise in the minimum wage should exempt tipped workers released a survey Monday showing that average hourly pay for servers at 72 Minneapolis restaurants is $28.56.

The survey also showed that cooks average $13.89 an hour and that support employees, like busboys and hosts, make $12.64 an hour. “This survey proves what we as servers already know. Tipped restaurant employees in Minneapolis are making well above $15 an hour on average,” said Sarah Norton, a six-year Minneapolis server who leads Service Industry Staff for Change. “City leaders should focus on giving a raise to the cooks and support employees while preserving the jobs and pay structure for tipped employees.”

The survey comes amid a heated debate about how a higher minimum wage should be structured in Minneapolis, an issue the City Council expects to take up this summer.

Mayor Betsy Hodges has repeatedly said there should be no carveout for tipped workers, arguing that a municipal minimum wage should be the same for everyone. Most tipped workers don’t make $15 an hour, she says, citing Bureau of Labor Statistics data, and female servers are at greater risk of sexual harassment if they must depend on tips for a large portion of their compensation.

Did the Government Spy on Trump? Of Course. It Spies on All of Us! - Ron Paul

There was high drama last week when Rep. Devin Nunes announced at the White House that he had seen evidence that the communications of the Donald Trump campaign people, and perhaps even Trump himself, had been “incidentally collected” by the US government.

If true, this means that someone authorized the monitoring of Trump campaign communications using Section 702 of the FISA Act. Could it have been then-President Obama? We don’t know. Could it have been other political enemies looking for something to harm the Trump campaign or presidency? It is possible.

There is much we do not yet know about what happened and there is probably quite a bit we will never know. But we do know several very important things about the government spying on Americans.

First there is Section 702 itself. The provision was passed in 2008 as part of a package of amendments to the 1978 FISA bill. As with the PATRIOT Act, we were told that we had to give the government more power to spy on us so that it could catch terrorists. We had to give up some of our liberty for promises of more security, we were told. We were also told that the government would only spy on the bad guys, and that if we had nothing to hide we should have nothing to fear.

NEWS to Disturb the Comfortable...

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