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Thursday 03.30.2017

Fed official: U.S. economy finally back to normal

Congratulations, America. The economy is finally back to normal. That's what John Williams, the head of the Federal Reserve Bank of San Francisco, declared Wednesday.

"The data have spoken, and the message is clear: We've largely attained the hard-sought recovery we've been after for the past nine years," Williams told the Forecasters Club, a gathering of economists, in New York. He dubbed it a "Goldilocks economy."

Unemployment peaked at 10% after the Great Recession. Today it's just 4.7%, a level Williams said constitutes "full employment" because there will always be some job seekers, even in a healthy economy. Inflation is also "nearing" the Fed's goal of 2%, he said.

The Fed raised interest rates this month for only the third time since the financial crisis. The central bank is expected to raise rates two more times this year, but Williams hinted again that three more hikes might be appropriate in 2017. He said Wednesday that the Fed is as close "as we've ever been" to achieving its goals of full employment and stable inflation.

Gold Set to Soar to $1,500 as Inflation Makes a Comeback

Gold is poised to rally to levels last seen four years ago as rising inflation and negative real interest rates combine to boost demand, according to Incrementum AG, which says that the precious metal may be in the early stages of a bull market.

Prices may climb to $1,400 to $1,500 an ounce this year, said Ronald-Peter Stoeferle, managing partner at the Liechtenstein-based company, which oversees 100 million Swiss francs ($101.5 million). Spot bullion -- which was at $1,249 on Wednesday -- last traded at $1,400 in September 2013.

Gold has climbed this year as investors weigh risks that President Donald Trump won’t be able to implement his agenda, adding to uncertainty surrounding European elections and the Brexit process. Against that backdrop, investors are on alert for signs of faster inflation, with the Federal Reserve’s preferred gauge jumping recently to near the bank’s target. Policy makers raised rates this month, and kept forecasts showing two more hikes in 2017.

“For the short term, it’s in a bit of a technical no-man’s land, we also see that seasonality is not really favorable,” Stoeferle said in an interview in Singapore on Tuesday. “The real pick up in momentum might start beginning of summer. It’s in the very early stages of the bull market, so everybody is still kind of cautious or slightly negative, but this will improve.”

Report: St. Louis Stands To Lose 1,000 Jobs Over Minimum Wage Increase

An $11 minimum wage in St. Louis, Missouri may cost the city 1,000 jobs, mostly belonging to the area’s most vulnerable populations, according to a report from the Employment Policies Institute.

Using Census Bureau data, Dr. David Macpherson of Trinity University and Dr. William Even of Miami University estimate that over 25,000 employees in St. Louis would be affected by the increase to $11, and over 1,000 workers would lose their jobs.

The board of alderman in St. Louis approved a plan to raise the minimum wage to $11 an hour from $7.70 an hour in August of 2015. The planned increase was challenged in court, and initially, a trial court ruled that Missouri state wage laws prohibited the city to raise its local minimum wage.

The case rose all the way to the state Supreme Court, which ruled in February 2017 that a 1998 law that prohibited cities to increase its minimum wage laws was unconstitutional, and the court overturned the trial court’s decision.

Karl Denninger-We all Know How This Party is Going to End

Rexnord industrial company posts first layoffs as it prepares to move Indy operations to Mexico

Rexnord posted its first preliminary layoff notices Monday morning, according to union officials, as the company begins moving operations from Indianapolis to Mexico.

Twenty-three employees were notified Monday. In the end, nearly 300 jobs will be moved. "It's been going on, and we’ve been seeing machines go out the door now here for a couple months," Gary Canter said, a Rexnord employee. "We have our southern replacement workers in there being trained on our jobs for a couple months now."

Union officials said the company has hosted job fairs, one even inside the facility, but if employees leave and accept a job before they are officially laid off, they will lose severance pay and health benefits negotiated as part of the exit.

"If you’re going to bring people in like that to try to help us find jobs and then tell us we can’t go get those jobs, I mean that’s really dirty," Canter said. "There’s not a lot of other words to use. It’s just dirty." Chuck Jones, president of United Steelworkers Local 1999, said he is meeting with company leaders Tuesday in an effort to negotiate a better exit strategy and nail down exact end dates.

U.S. Ponzi Retirement Market In Big Trouble, Protect With Precious Metals

The U.S. Retirement Market is in BIG TROUBLE as annual benefits paid out are now larger than total contributions. Actually, the amount of net withdrawals were the highest in history. When payouts become larger than contributions… then we have the making of the typical PONZI SCHEME.

Americans who have invested their hard-earned money into a 401K, had no idea that it was the Greatest Ponzi Scheme in history. Unfortunately, when the markets crack, so will the value of the U.S. Retirement market. On the other hand, Americans who were wise enough to purchase physical precious metals will protect their wealth as the U.S. Paper Retirement Market collapses.

According to the most recent data by the ICI – Investment Company Institute, the U.S. Retirement Market ballooned to a new record high of $25.3 trillion at the end of 2016:

As we can see, the U.S. Retirement Market has nearly doubled since the collapse of the Housing & Banking sectors in 2008. Total value of the U.S. Retirement Market increased from a low of $13.9 trillion in 2008 to $25.3 trillion at the end of 2016. It’s not quite double… but close enough.

Stagnation is Stunting Economic Growth

The American economy is stagnating. The creative destruction of old businesses exiting and new ones starting up has slowed. Fewer people are working at new companies. These trends have only accelerated post-recession. Many of the fresh new entrants hailed as disruptive startups, such as Uber and Facebook, have been on the scene for a decade or more.

This stagnation reduces the amount of competition and the rate that new ideas are introduced. Economic growth and individual workers both suffer as a result. How much have things slowed down, and can anything reverse it?

Every year since 2008 has seen a lower rate of new firms starting, also referred to as the firm birth rate, than any year before that, according to data from the Census Bureau. This begins at the start of the data series in 1977, and encompasses multiple recessions and periods of economic turmoil. In 2010 the rate of firms exiting, or firm death rate, outpaced the birth rate for the first time on record. While the death rate has recovered to some extent, both remain below historical averages.

A lower flow of businesses entering and exiting is troubling in any individual year, but the accumulated harm of this trend persisting over time is even worse. The Kauffman Foundation calculates that the density of new companies per 1,000 firms has fallen significantly from 107 a decade ago to 80. If recent trends continue, this density will only deteriorate further in the coming years.

Farmers are hacking their tractors so they can actually fix them

You wouldn't think that farm equipment would turn into a battlefield for right-to-repair laws, but in 2017, anything is possible. American farmers are increasingly turning to hacked firmware in order to repair their John Deere tractors, Motherboard reports. The reason they're doing so is because John Deere has a license agreement wherein only Deere dealers and "authorized" shops can perform work on tractors.

That may seem fine at a glance -- John Deere built the tractor, so it knows the best way to fix it, right? That's just one part of it, though. According to the farmers Vice talked to, John Deere charges out the wazoo for its work, and technicians might not arrive to a broken tractor with sufficient haste, which can effect a farmer's bottom line in a big way.

In fact, Deere's license agreement specific forbids farmers from suing for "crop loss, lost profits, loss of goodwill, loss of use of equipment ... arising from the performance or non-performance of any aspect of the software."

Thus, farmers are turning to shady online forums where hackers are peddling cracked versions of John Deere software that bypasses required authorization, allowing farmers to once again work on their own tractors.

Barclays: Amazon is probably going to be one of the first 'trillion-dollar' companies

Amazon's stock price has been on a tear over the last year, gaining 46%. A Barclays equity research team led by Ross Sandler thinks that the party may just be getting started, initiating coverage of the stock with $1120 price target, or 29% upside.

In a flurry of notes released from their Internet & Media desk on March 29, Barclays picked Amazon as one of their favorites in the sector and made the case for the stock's market cap to reach one trillion dollars.

"Net/net, AMZN is likely to be one of the first trillion-dollar market cap companies; it’s just a question of when, not if, in our view," the team wrote. "AMZN is arguably the best story in the space, with the most open-ended growth opportunity & most highly functional organization."

Barclays says that while Amazon Web Services is past its infancy, it has penetrated only 1% to 2% of the potential market and eventually will be a $100 billion business.

Will Britain benefit from leaving the EU?

Gallup: Economic Confidence Drops to Lowest Level Since Election

Americans' confidence in the U.S. economy tumbled along with the Dow Jones industrial average last week. Though still in positive territory, Gallup's U.S. Economic Confidence Index (ECI) dropped six points to a score of +5 for the week ending March 26.

This is the lowest weekly average since the presidential election in November, Gallup reported. “Americans' falling confidence in the economy may be tied to events in Washington and on Wall Street. Last week, the Dow logged its worst week since September as congressional Republicans ultimately failed to vote on legislation that would repeal and replace the Affordable Care Act. However, confidence waned prior to the effort to replace the ACA dying in Congress on Friday. This suggests that the broader GOP infighting earlier in the week, rather than the decision to pull the bill itself, may have been a factor, in addition to the market's poor performance,” Gallup reported.

Rank-and-file Republicans became significantly less confident in the economy last week, with their index score falling to a still-robust +42 from +52 the week before. Independents, too, lost confidence, with their score retreating back into negative territory to -1 from +6 the previous week. Democrats' confidence in the economy changed little, with their current -20 score similar to the -18 they had in the week prior.

“Donald Trump's election spurred a renewed level of confidence among his fellow Republicans, which boosted the overall average for the index into positive territory. But, if his supporters perceive that the promises he made during the campaign are not being kept, or if Republicans lose faith in Trump's negotiating prowess, the party rank and file could become further depressed,” Gallup reported.

Uber Says 15% of U.S. Employees Hold Visas

Uber, which has made more headlines lately for a string of management controversies than its ride-hailing business, says it’s committed to hiring workers from other countries.

For the first time, the company disclosed that 15% of its U.S. employees are working under a visa, spanning 71 countries. The stat was disclosed in a broader diversity report the ride-sharing giant released this week.

In the report, Uber reiterated its opposition to President Donald Trump’s executive orders on immigration, stating, “We will continue to speak out against discrimination.” Uber, along with Facebook (FB), Apple (AAPL) and other tech giants, legally challenged Trump’s initial executive order labeling it as “discriminatory,” as reported by TechCrunch.

The diversity push comes as Uber, which has been valued around $70 billion, faces questions about its office culture. Last month, a former Uber engineer said her claims of sexual harassment by a supervisor were ignored by human resources. Travis Kalanick, Uber’s founder and CEO, opened an internal investigation, hiring former Attorney General Eric Holder to look into the case and other workplace issues. Kalanick drew criticism in late February when he was caught on camera arguing with an Uber driver.

BlackRock cuts jobs, turning to computers for stock-picking

BlackRock is overhauling its actively managed equities business, cutting jobs, dropping fees and relying more on computers to pick stocks, the company said on Tuesday. The shift highlights how difficult it has become for humans to beat the market.

The world’s biggest money manager has faced active stock fund withdrawals. The revamp is its biggest attempt yet to engineer a turnaround.

Last May, BlackRock said it had recruited Mark Wiseman, the head of Canada’s biggest public pension fund, to oversee the stockpicking operations after he revamped that fund’s operations to embrace data-mining and other technological approaches to investing.

BlackRock is rebranding or adjusting investment strategies on about 11 percent of its $275 billion active stock fund business, putting a greater emphasis on technology-driven investing approaches in the largest set of sweeping changes for the business since transformational mergers that allowed it to grow to manage more than $5 trillion in assets.

'I'm Impressed by Gold and Silver Right Now' - Jim Wyckoff

Ron Paul: The ‘euphoria’ in the markets has passed

One ardent critic of Donald Trump critic believes the so-called Trump rally will soon hit a wall.

"I think they're realizing that the euphoria has passed, [so] although the markets are up today, I think that's [why stocks fell this week]," former presidential hopeful Ron Paul said Tuesday on CNBC's "Futures Now."

The former Texas Republican congressman said markets will head lower this year. According to Paul, Trump has taken a "risky position" in claiming credit for the postelection market rally because Washington is largely unchanged, especially in light of Trump's failure to pass his health-care bill.

While stocks didn't immediately sell off after the bill was pulled, all three major indexes dropped on Monday before recovering much of the losses prior to the close. Still, the Dow did extend its eight-day losing streak, its longest since 2011, and investors were left wondering if Trump's other key agenda items, namely tax reform, will succeed.

How Many Jobs Do Robots Destroy?

How many jobs do robots – whether mechanical robots or software – destroy? Do these destroyed jobs get replaced by the Great American Economy with better jobs? That’s the big discussion these days.

The answers have been soothing. Economists cite the industrial revolution. At the time, most humans replaced by machines found better paid, more productive, less back-breaking jobs. Productivity soared, and society overall, after some big dislocations, came out ahead. The same principle applies today, the soothsayers coo.

But this isn’t the industrial revolution. These days, robots and algorithms are everywhere, replacing not just manufacturing jobs but all kinds jobs in air-conditioned offices that paid big salaries and fat bonuses.

Just today, BlackRock announced a plan to consolidate $30 billion of their actively managed mutual fund activities with funds that are managed by algorithms and quantitative models. As these software robots take over, “53 stock pickers are expected to step down from their funds. Dozens more are expected to leave the firm,” as the New York Times put it.

Jim Rogers warns clueless Federal Reserve will be the ‘ruin of us all’

Not everyone is a fan of the Federal Reserve System, or any of its chairmen. The Fed doesn’t have any idea what it is doing, and this ineptness will be “the ruin of us all,” says Jim Rogers, co-founder of the Quantum Fund, and perhaps the most charming man in the financial world.

Speaking in an interview with Bloomberg on Tuesday, Rogers explained that the United States central bank has driven interest rates to historical lows, causing the rest of the world to follow down the same path. This monetary policy experiment has also enabled debt to skyrocket unlike we have ever seen before.

“This is all going to end very, very badly,” said Rogers. “You don’t have to worry. You have job security because somebody is going to have to report on this disaster.”

The anchor went into defense mode and came to the aid of Ben Bernanke and Janet Yellen. Rogers didn’t have any of it, though. “I know what would have happened. We would have had some more bankruptcies, we would have had a horrible year or so, and then everything would be fine now. We’re all sitting here wondering how this is going to end. I know this is going to end badly,” added Rogers. "Propping up dead companies, propping up zombie banks is not the way the world is supposed to work.”

Wall Street Facing Headwinds as Boomers Forced to Liquidate Their IRAs, 401Ks

Under the law those reaching age 70 and a half must start taking their “required minimum distributions” (RMDs) from their various tax-deferred accounts. These include IRAs, 401Ks, profit-sharing plans, and SEPs. The trouble is that there are so many of them, and they control so many assets, that their RMDs are going to put enormous pressure on the stock market.

The Baby Boom population cohort is nearly 80 million people, and those born in 1946 are now 71, with millions following right behind. The top one percent own or control about one-third of that cohort’s assets, while the top 10 percent own more than two-thirds, according to the Congressional Budget Office.

The real question, according to Hamilton, is this: Who will buy when they are forced to sell? His conclusion is dismal: There are so few buyers compared to sellers that stock prices will be forced down as the sellers are forced to liquidate their holdings. As Hamilton explains:

At 70.5 years of age, retirees are mandated by force of law to sell tax-deferred assets accumulated over their lifetimes and do so over a 15-year period. Conversely, buyers [the younger cohort age 25-60] have a 35-year window of accumulation.... Over the past 65 years there were three new buyers for every new seller. [But] over the next 25 years there will be three new sellers for every new buyer.

Should mayors be arrested for not following Trump’s immigration laws?

Westinghouse Bankruptcy Puts Fate Of Four U.S. Nuclear Reactors In Limbo

When the Westinghouse Electric filed for Chapter 11 bankruptcy protection on Wednesday morning, few were surprised as the outcome was the only one which allowed the company's troubled, and near-insolvent Japanese parent, Toshiba, to continue operating, even if it meant the bankruptcy of the iconic company. Westinghouse was one of the originators of the nuclear age, building the world’s first commercial nuclear reactor 60 years ago. Its pressurized water reactor design is in 430 power plants and accounts for 10% of electricity generated in the world.

However, few were prepared for the unexpected aftermath of this particular bankruptcy, which has set off a showdown between Toshiba and a major U.S. utility, has left the fate of four half-finished nuclear reactors and is threatening to drive a wedge between the US and Japanese governments over the fate of industries each considers vital.

For those who have missed our previous discussion on the underlying cause for today's default, Westinghouse incurred billions in runaway cost overruns related to four nuclear reactors it is building in the southeastern U.S. These costs from the half-finished reactors had spiraled so large, they threatened the viability of its Japanese parent company, Toshiba, which in turn has been engulfed in a series of accounting and fraud scandals in recent years, has seen its profitability plummet and whose precarious finances have attracted attention of Japan’s government.

Admitting defeat in the nuclear business, Toshiba CEO Satoshi Tsunukawa said that “this is a de facto withdrawal from the overseas nuclear business for us. Therefore, we don’t see any more risk."

69 Percent of Americans Support Paid Paternity Leave — But Who Should Pay For It?

Nearly 7 out of 10 Americans feel that new dads should have access to paid paternity leave, according to a new study from Pew Research Center. Eighty-two percent of those surveyed say that mothers should have paid time off. The study also found broad support for paid leave due to serious medical conditions — 85 percent said workers should be able to take paid time off for their own health issues, while 67 percent supported paid leave to care for a family member.

Workers’ wishes diverge from the current reality in the United States, where only 60 percent of workers are eligible for unpaid leave through the Family and Medical Leave Act, and only 13 percent have paid leave from their employers. Higher earners are more likely to have access to paid leave than lower earners. Only 37 percent of respondents to Pew’s surveys who earned less than $30,000 per year had access to paid leave.

“Many lower-income leave takers say they faced difficult financial tradeoffs during their time away from work, including 48% among those who took unpaid or partially paid parental leave who say they went on public assistance in order to cover lost wages or salary,” write Juliana Menasce Horowitz, Kim Parker, Nikki Graf and Gretchen Livingston at Pew Research Center.

The benefits of paid leave — for both moms and dads — are clear. For lower income families, paid leave might mean staying above the poverty line. For higher income families, it makes it possible to balance having a family and having a career. Even employers benefit — but doesn’t necessarily mean they want (or are able to) shoulder the cost.

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