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A 6 Step Plan for Trump to Make Our Money Great Again

A 6 Step Plan for Trump to Make Our Money Great Again

By: Jp Cortez & Stefan Gleason | Tue, Nov 29, 2016
 Donald Trump will be sworn in as the 45th president of the United States in January. Americans will then find out then if “Make America Great Again” is more than a campaign slogan.

It isn’t going to be easy. On day one, he will inherit a $20 trillion federal deficit and a moribund economy increasingly reliant on low interest rates and central bank stimulus.

There are plenty of economic problems to address, but the lack of sound money lies at the heart of them all. The Federal Reserve Note — a privately issued, un-backed debt instrument that supplanted our gold and silver backed U.S. dollar — has lost more than 90% of its purchasing power since Nixon severed the final link to gold in 1971. Politicians and central bankers have since been borrowing and printing currency without restraint to bankroll today’s bloated and insolvent federal government.

Trump and Pence Have Voiced Support for Gold as Money

Gold Bars

There is some reason to believe that Trump will take meaningful steps to Make Our Money Great Again. During the campaign, Trump criticized the Federal Reserve’s loose money, low interest rate policies as a problem that must be addressed. Trump has also said “We used to have a very, very solid country because it was based on the gold standard… bringing back the gold standard would be very hard to do, but boy would it be wonderful. We’d have a standard on which to base our money.”

Vice President Elect Mike Pence has also suggested that policymakers should strive to restore sound money. He said, “Robert Zoellick, the president of the World Bank, encouraged that we rethink the international currency including the role of gold, and I agree. I think the time has come to have a debate over gold, and the proper role it should play in our nation’s monetary affairs.”

So, first and foremost, the Trump administration should form a commission to study and map out how best to reintroduce gold and silver as a formal part of our monetary system. In the meantime, there are several other steps the Trump administration should take to move us toward sound money in America:

Turn the Tables by Auditing the Money Masters

From Ron Paul to Bernie Sanders and many people in between, there has been plenty of support for “Audit the Fed” legislation. Politicians and constituents alike agree that the Federal Reserve lacks even the most basic oversight a government-sponsored institution should have — particularly when its officials can make decisions which can bring the American economy to its knees.

But Trump shouldn’t stop there; we need to audit the gold.

The last time there was a reasonably credible audit of America’s gold reserves was in the 1950s. Since then, there has been little more than peek-a-boo glances at the gold. The most recent status report done by the Department of the Treasury, claims that Fort Knox holds 147,341,858.382 fine troy ounces of gold.

However, many question the accuracy of that report and whether it tells the whole story. There is evidence the U.S. Treasury has engaged in gold leasing and other financial alchemy. Even if all the gold is still held in U.S. vaults, it may have been leased, sold, pledged as collateral, or could be encumbered in other ways. A full and independent audit is critical.

Remove Federal Taxation on Precious Metals

Another necessary step in freeing gold and silver to be used once again as money is to eliminate capital gains taxation on monetary metals. At the federal level, IRS bureaucrats insist that gold and silver be taxed when exchanged for Federal Reserve Notes — or when used in barter transactions.

When our government’s inflationary policies lower the purchasing power of the Federal Reserve Note, precious metals’ nominal dollar value generally rises, triggering a “gain.” The gain may be purely fictional in real terms. But these “gains” are still taxed — thus unfairly punishing people for owning precious metals as money.

Appoint Proponents of Sound Money to the Fed, CEA, and CFTC

President-elect Trump’s rhetoric is loaded with getting people back to work. He’ll play a hand in that directly when he makes appointments throughout his presidency. Among the most impactful will be his appointments to the Federal Reserve.

The Federal Reserve, the privately held central bank of the United States, has an unrivaled ability to manipulate and distort the economy. For much of the past 30 years, starting with Alan Greenspan, the Fed has loosened the money supply with low interest rates and quantitative easing. And it’s created moral hazards by bailing out irresponsible market players.

Tommy Behnke writes, “There are currently two vacant positions on the Federal Reserve Board of Governors, the main governing body of the central bank. Chairwoman Janet Yellen and Vice-Chair Stanley Fischer’s terms will expire by 2018. This means that… Trump will have the opportunity to replace four of the Fed’s seven leading officials with conservative figures during his presidency.”

The Council of Economic Advisors (CEA) advises the President on economic policy and prepares the Economic Report of the President. The council is comprised of 3 members nominated by the President and approved by the Senate, and its members are typically professors on a short-term leave of absence from their universities.

Trump has the opportunity to appoint new members to this advisory body. He should look to economists who ascribe to the Austrian school rather than selecting yet more Keynesian school economists who have been cheerleaders for central government planning and an inflationary monetary policy for decades.

The people Trump appoints to the U.S. Commodity Futures Trading Commission (CFTC) will also have substantial impact on the markets. In the recent past, the CFTC received complaints about concentrated short selling done intentionally to push silver and gold prices down. For example, there is strong evidence that unscrupulous banks and traders often attack during periods of low liquidity in the markets such as the middle of the night.

Former CFTC member Bart Chilton and others expressed alarm at the CFTC’s unwillingness to prosecute the manipulators who may be responsible for artificially low prices (and significant investment losses) in gold and silver. Lower gold and silver prices appeal to government and central bank officials who get uncomfortable when the shortcomings of their unbacked fiat currency system are exposed.

The largest contributor to inflation and financial turmoil is dishonest money — enabling bureaucrats to run perpetual government deficits and pile up the federal debt. If Trump takes the steps outlined above, he can indeed make our money great again.

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Trumponomics suddenly gets big Wall Street thumbs up

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Trumponomics suddenly gets big Wall Street thumbs up

  @byHeatherLong

Donald Trump’s economic plans are suddenly getting gold stars on Wall Street.

Big banks such as Bank of America (BAC), UBS (UBS) and HSBC (HSBC) are bumping up their predictions for U.S. growth and stock market gains. The reason? Trumponomics.

 “Following Donald Trump’s election victory, we have altered our GDP forecasts as we are now expecting a modest fiscal stimulus from lower tax rates and higher government spending,” wrote HSBC chief U.S. economist Kevin Logan in a recent report.

It’s a stunning reversal from the days before the election when economists and market experts at many Wall Street banks were forecasting dire consequences — a recession and a swift market drop — if Trump were elected president.

Now many are saying the opposite: Trump is good for growth.

“Well-executed U.S. fiscal policy could boost growth substantially,” says Don Rissmiller of investment firm Strategas. Rissmiller predicts GDP growth could be a full 1% higher in 2017 and 2018.

The U.S. has been expanding at a pace of about 2% a year. Trump vows to get America to 4%.

The Trump market rally

The stock market has surged to record levels after Trump’s election. Investors cheered his promises of massive tax cuts for individuals and businesses, a rollback on onerous regulations and up to $1 trillion of new government spending on roads, bridges and other infrastructure.

The Dow is up over 5% this month, and comes after three months of losses.

“The market has sailed through some of this year’s biggest shocks (U.K. Referendum, U.S. election),” wrote the Bank of America Merrill Lynch team in a recent report. The team raised its forecast for the S&P 500 index to end the year at 2,100, up from 2,000.

On top of the tax cuts, investors also like the idea of giving big businesses like Apple (AAPL, Tech30) a tax discount to bring the cash they have stashed overseas back to the United States. That money coming back could be spent on companies buying up more stock, which would further boost prices.

The big asterisk on Trumponomics

But Wall Steet’s newfound love for Trumponomics comes with a big asterisk: Trump can’t get too protectionist on trade and immigration.

Wells Fargo (WFC) put it this way: “Tax cuts and additional federal spending could stimulate economic growth, but tariffs and restricting immigration may slow the economy. These policy prospects create potentially offsetting effects.” Due to the trade concerns, Wells Fargo hasn’t hiked its GDP forecast. However it does expect higher inflation.

Mitt Romney — now under consideration to be Trump’s Secretary of State pick — was one of many business leaders who slammed Trump for his plans to place hefty taxes on Mexican and Chinese goods coming into the U.S. Romney even said Trump’s trade ideas would send the nation careening into a recession.

Trump’s plan for his first 100 days in office includes “renegotiating” or “withdrawing” from NAFTA and labeling China a “currency manipulator.” It’s unclear how far he will go.

A rundown of experts lifting their forecasts

Here’s a rundown of who’s lifted forecasts and what they’re saying:

Bank of America Merrill Lynch: “Our 2016 year-end target shifts to 2,100 from 2,000 previously.”

HSBC: We are raising our GDP forecast for 2017 to 2.3% from 2.1% in anticipation of a boost to consumption spending. The stimulus effect should be larger in 2018 as the full impact of tax cuts affects household finances. We forecast GDP growth in 2018 to average 2.7%, up from our previous forecast of 2.2%.”

UBS: “U.S. GDP is likely to accelerate next year…A new fiscal policy regime — corporate and household income tax cuts — may further contribute to broader GDP growth although there’s obviously uncertainty around new policy as well as an important drag from uncertainty around trade policy.”

Capital Economics: “We now expect GDP growth to accelerate to 2.75% next year (up from 2%), with CPI inflation climbing toward 3%.”

Yardeni Research: “In Trump World, pressure on profits could be very bullish for stocks thanks to over $2 trillion in repatriated cash and a significant cut in the corporate tax rate! That’s a new reality for sure.”

Strategas: “A key message of the market recently has been: Something is going to get done. Single-party government matters. It is possible that well-executed U.S. fiscal policy could boost growth substantially (1%+ on GDP) in 2017-18. Corporate earnings should benefit.”

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Published at Tue, 29 Nov 2016 17:10:08 +0000

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U.S. economy grew at a strong 3.2% in last 3 months

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U.S. economy grew at a strong 3.2% in last 3 months

  @CNNMoney

America’s economy is picking up more momentum than previously thought.

The U.S. economy grew 3.2% in the third quarter, according to new estimates published by the Commerce Department. It’s even better than the initial estimate of 2.9%.

 It remains the best quarter of growth in two years. The solid numbers were driven by a major, one-time increase in exports led by soybeans and solid consumer spending, which makes up the majority of the economy’s activity.

The strong economic growth numbers stand in sharp contrast to the narrative of sluggish growth that President-elect Donald Trump has talked about on his campaign trail. He promises to grow the economy at 4% a year.

With the unemployment rate already very low at 4.9%, many economists doubt America can grow at that pace because it would need a major influx of workers.

However, one red flag in the economy is that businesses aren’t investing in new buildings, equipment or projects. Spending on these, long-term assets has declined for four straight quarters. Economists believe the decline was not led by the uncertainty surrounding the U.S. election but an ongoing lack of confidence in the economy’s future.

The good news on Tuesday bodes well for growth going forward. The Atlanta Federal Reserve forecasts that growth in the fourth quarter — October to December — will be 3.6%.

CNNMoney (New York)First published November 29, 2016: 9:01 AM ET
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Published at Tue, 29 Nov 2016 14:01:51 +0000

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GLOBAL MARKETS-Dollar steadies with bonds, oil worn down by OPEC worry

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GLOBAL MARKETS-Dollar steadies with bonds, oil worn down by OPEC worry

By Wayne Cole | SYDNEY

The U.S. dollar took a breather on Tuesday as global bonds steadied from their recent rout, while equities flatlined as political risk resurfaced in Europe ahead of a referendum in Italy this weekend.

Oil prices wobbled on doubts Wednesday’s OPEC meeting would deliver a lasting deal, and even industrial commodities ran into profit-taking after their meteoric rise.

The action in Asian stocks was just as guarded with Australia flat , the Nikkei .N225 off 0.35 percent and Shanghai .SSEC ahead by 0.5 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS barely budged after two days of gains.

E-mini futures for the S&P 500 ESc1 were fraction softer, while spread betters pointed to opening losses for the major European bourses.

The cautious mood was set by Wall Street which suffered its worst performance in nearly a month as some investors booked profits in the financial and consumer discretionary sectors.

The Dow .DJI had ended Monday down 0.28 percent, while the S&P 500 .SPX lost 0.53 percent and the Nasdaq .IXIC 0.56 percent. The pan-European FTSEurofirst 300 index .FTEU3 fell 0.85 percent, led by a near-4 percent drop in Italian banks.

Worries about Italy’s banking system are building ahead of a Dec. 4 referendum on constitutional reform, which could decide the political future of Prime Minister Matteo Renzi.

“Citi’s base case is for a NO vote to prevail with political uncertainties likely to remain elevated over the near-term,” wrote analysts at Citi.

“It’s worth watching whether PM Renzi resigns in the event of a No vote as promised, before rushing into euro shorts.”

RED HOT METAL

The political risk kept the euro restrained despite the pullback in the dollar. The common currency EUR= was pinned at $1.0600, after failing to hold an 11-day high of $1.0686.

Citi sees major chart support at $1.0458-1.0523, a region also capturing the post-U.S. election low of $1.0518.

The dollar was again moving higher on the yen to reach 111.97 JPY=R, after profit-taking pulled it down as far as 111.58. It remains 7 percent higher for the month.

Dealers reported Japanese buying for the new month with orders today settling on Dec. 1. Against a basket of currencies, the dollar held at 101.280 .DXY and not far from last week’s 14-year peak.

The greenback was still on track for its strongest two-month gain since early 2015, underpinned by expectations the Federal Reserve is almost certain to hike interest rates next month.

Yields on two-year Treasury paper US2YT=RR have already hit their highest since early 2010 in anticipation, greatly fattening its premium over European and Japanese debt.

In commodity markets, investors anxiously awaited an OPEC meeting on Wednesday with none any wiser on whether producers will agree to lasting output cuts. [O/R]

U.S. crude CLc1 was last off 29 cents at $46.79 a barrel, after seesawing wildly on Monday. Brent LCOc1 eased 32 cents to $47.92. Traders fear a major selloff should OPEC fail to reach a deal after so much wrangling.

Industrial metals turned mixed after their blistering rally, which promises to generate a welcome inflationary pulse in the world economy.

While copper eased 2 percent CMCU3 it is still heading for the biggest monthly gain in more than a decade. Iron ore futures were near their highest since early 2014 DCIOcv1, while zinc touched a nine‑year peak and lead a five-year top. [MET/L]

Closures of steel plants in China have tightened supply while Beijing has approved a string of massive infrastructure projects, including a $36 billion railway plan just this week.

(Reporting by Wayne Cole; Editing by Simon Cameron-Moore)

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Published at Tue, 29 Nov 2016 05:19:30 +0000

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GLOBAL MARKETS-Oil rallies in choppy trade; dollar, stocks dip

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, NY, U.S. November 18, 2016.REUTERS/Brendan McDermid

GLOBAL MARKETS-Oil rallies in choppy trade; dollar, stocks dip

By Rodrigo Campos

NEW YORK, Nov 28 Crude futures rallied in choppy trading on Monday ahead of an OPEC meeting later in the week that could reap production cuts, while the U.S. dollar recovered from earlier losses but was still slightly lower.

The dollar index dipped 0.08 percent after having fallen as much as 0.8 percent. The U.S. currency sank as much as 1.6 percent against the yen, going as low as 111.32 yen before recovering to 112.3.

Most analysts said the dip in the dollar since Friday was simply a corrective pullback with the greenback still on track for its strongest two-month gain since early 2015.

“It looks much more like a correction than anything else – a Monday morning clearing of the decks before the end of the month,” said Societe Generale macro strategist Kit Juckes in London.

The euro was little changed versus the greenback after having gained nearly 1 percent to $1.0684 as it got a lift from the election of Francois Fillon as the center-right candidate in next year’s French presidential election. It was last at $1.0582.

Fillon, a former French prime minister, is favorite to become president, with a flash opinion poll suggesting he would easily beat far-right National Front leader Marine Le Pen in a second round run-off. Markets worry that Le Pen, who has promised a referendum on membership of the European Union if she wins, would threaten the future of the currency bloc.

On Wall Street, consumer and financial stocks weighed on the S&P 500 after rallying last week. Recently battered stocks in utilities and telecom services posted the largest gains.

“The absence of major economic news today offers investors a chance to take some light profit taking ahead of a barrage of macro news and the OPEC meeting,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

The Organization of the Petroleum Exporting Countries meets on Wednesday, while a week heavy in U.S. economic data including a GDP revision, inflation, factory and services activity is set to climax on Friday with the monthly jobs report.

The Dow Jones industrial average fell 44.64 points, or 0.23 percent, to 19,107.5, the S&P 500 lost 5.6 points, or 0.25 percent, to 2,207.75 and the Nasdaq Composite dropped 13.49 points, or 0.25 percent, to 5,385.43.

 
 The pan-European FTSEurofirst 300 index fell 0.85 percent, while MSCI’s gauge of stocks across the globe fell 0.16 percent.

Emerging market stocks rose 0.9 percent.

Asian shares rose 0.5 percent overnight led by gains in Hong Kong and Taiwan, though Japan’s Nikkei ended down 0.1 percent.

Oil prices jumped in volatile trading after falling as much as 2 percent, recouping losses as the market reacted to the shaky prospect of major producers being able to agree output cuts later this week.

U.S. crude last rose 2.5 percent to $47.23 a barrel and Brent traded at $48.42, up 2.5 percent on the day.

Industrial metals also remained red hot on hopes of strong demand for property and infrastructure investment in China and the United States. Chinese steel futures jumped nearly 6 percent.

Spot gold rose 0.7 percent to $1,191.15 an ounce. U.S. gold futures added 1.0 percent to $1,190.70 an ounce.

Copper reversed earlier gains to drop 0.4 percent to $5,856.00 a tonne.

In the bond market, the 10-year U.S. Treasury yield hit a session low at 2.312 percent. Benchmark 10-year notes last rose 12/32 in price to yield 2.3267 percent.

U.S. Treasury yields fell from last week’s multi-month or multi-year highs on month-end buying and views that the selloff that followed the surprise U.S. presidential election victory of Donald Trump earlier this month may have gone too far.

(Reporting by Rodrigo Campos, additional reporting by Sam Forgione, Jessica Resnick-Ault and Dion Rabouin; Editing by Nick Zieminski)

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Published at Mon, 28 Nov 2016 18:18:17 +0000

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Sunday Night Futures

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By PredragKezic from PixabaySunday Night Futures

Sunday Night Futures

by Bill McBride on 11/27/2016 08:18:00 PM

 The words of a President matter. Same with the words of a President-elect. Just like during the campaign, Donald Trump just keeps making stuff up …

“In addition to winning the Electoral College in a landslide, I won the popular vote if you deduct the millions of people who voted illegally” Donald Trump, Nov 27, 2016

There is no evidence of significant voter fraud. Sad. And dangerous. Trump is known to make up economic data too … and that could have negative consequences for the economy and stock market.

Weekend:
Schedule for Week of Nov 27, 2016

November NFP Forecasts

Monday:
• At 10:30 AM ET, Dallas Fed Survey of Manufacturing Activity for November. This is the last of the regional Fed surveys for October.

From CNBC: Pre-Market Data and Bloomberg futures: S&P futures are down 5, and DOW futures are down 30 (fair value).

Oil prices were up over the last week with WTI futures at $45.39 per barrel and Brent at $46.52 per barrel.  A year ago, WTI was at $41, and Brent was at $43 – so oil prices are up year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.12 per gallon – a year ago prices were at $2.04 per gallon – so gasoline prices are up slightly year-over-year.

Read more at http://www.calculatedriskblog.com/2016/11/sunday-night-futures_27.html#6c0W398t5rlClzaK.99

by Bill McBride on 11/27/2016 08:18:00 PM

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Published at Mon, 28 Nov 2016 01:18:00 +0000

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Oil tumbles as output cut looks elusive, shares slip

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Oil tumbles as output cut looks elusive, shares slip

By Hideyuki Sano | TOKYO

The dollar and U.S. bond yields fell on Monday as investors reversed a “Trumpflation” trade that has gripped markets since the U.S. elections, after oil prices slid on fears that producer countries meeting this week could fail to agree an output cut.

Brent crude futures last traded at $47.13 per barrel LCOc1, down slightly on the day, after having fallen by as much as 2.0 percent in early Asian trade, following on from a 3.6 percent fall on Friday as doubts arose over whether the Organization of the Petroleum Exporting Countries would reach a deal later this week.

Prospects of reduced upward pressure on inflation from oil prices, prompted investors to temper expectations for rises in U.S. interest rates, bring down treasury yields and the dollar.

That gave some relief to Asian shares, which had underperformed on worries about capital flight to higher-yielding U.S markets in the weeks since Donald Trump’s Nov.8 election win.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.6 percent, led by gains in Hong Kong .HSI and Taiwan .TWII.

In contrast, U.S. stock futures ESc1 slipped 0.2 percent after their stellar performance this month on hopes President-elect Trump’s policy of fiscal spending, deregulation and protection of domestic industries will boost U.S. inflation and benefit Corporate America.

European shares are expected to dip, with spread-betters looking at a fall of 0.2 percent in Germany’s DAX .GDAXI and 0.1 percent in Britain’s FTSE .FTSE.

Japan’s Nikkei average .N225, which had performed even better than Wall Street thanks to the yen’s fall, ended down 0.1 percent.

“It will be scary to think markets may fully reverse their moves since the elections, changing their mind that Trump’s policy may not be so good after all,” said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.

Wall Street’s four main indexes .DJI .SPX .IXIC all hit record highs last week, a feat last achieved in 1999.

Yet some investors question whether the market may have got carried away with optimism on Trump’s policy, given the uncertainty on the political neophyte’s presidency, including on how closely he can work together with the Congress.

But languishing oil prices, giving investors a more immediate reason to have second thoughts about how prospects for inflation and U.S. interest rates.

Saudi Arabia said on Friday it will not attend talks on Monday with non-OPEC producers to discuss supply cuts.

“Oil prices have fallen considerably on worries about the deal. That would pressure energy shares, and could hit the entire stock markets. Given their rally in recent days, it’s no surprise to see some adjustment,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Saudi Arabia’s energy minister Khalid al-Falih said on Sunday that he believed the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified.

His comments raised worries that a preliminary agreement reached in September for OPEC to reduce output to between 32.5 million and 33 million barrels per day may fall apart when OPEC ministers meet on Wednesday to finalize that deal.

OPEC also wants non-OPEC producers such as Russia to support the intervention by curbing their output and many market players still expect them to reach a deal.

As lower oil prices reduce inflationary pressure, they sapped momentum for a sell-off in U.S. Treasuries and a rally in the dollar, the market’s favorite play since the U.S. election.

The dollar sank more than 1.6 percent against the yen to as low as 111.355 yen JPY=, down sharply from its eight-month high of 113.90 set just on Friday. It last traded at 111.90 yen.

“As long as the dollar holds above 111-111.50 yen, I do not judge the (dollar’s rising) trend has changed,” said Koichi Yoshikawa, executive director of financial markets at Standard Chartered in Tokyo.

The dollar’s index against a basket of six major currencies .DXY =USD stood at 100.88, slipping 0.6 percent on day and off its 13 1/2-year high of 102.05 touched on Thursday.

The dollar shed more than 0.5 percent against many emerging market currencies, including the Mexico peso MXP=, the biggest loser after Trump’s election victory, the South African rand ZAR= and the Turkish lira TRY=.

The euro EUR= gained 0.8 percent to $1.0655, extending its rebound from its near one-year low of $1.0518 touched on Thursday.

The single currency has so far shown limited reaction to the French conservatives’ presidential primaries on Sunday.

Former Prime Minister Francois Fillon, a socially conservative free-marketeer, won the run-off, setting up a likely showdown next year with far-right leader Marine Le Pen that the pollsters expect him to win.

Gold XAU= bounced back to $1,192.0 per ounce from Friday’s low $1,171.5, which was its lowest level since early February.

The yield on 10-year U.S. Treasuries US10YT=RR dropped almost 5 basis points to 2.323 percent, off its 16-month high of 2.417 percent touched on Thursday.

On the other hand, some commodities gained sharply on hopes of strong demand for property and infrastructure investment in China and the United States.

Chinese steel futures SRBcv1 jumped over 6 percent, while iron ore futures DCIOcv1 also gained about six percent and zinc CMZN3, used to galvanize steel, powered to a nine-year high on the London Metal Exchange.

(Editing by Simon Cameron-Moore)

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Published at Mon, 28 Nov 2016 00:31:46 +0000

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Thanksgiving, Black Friday store sales fall, online rises

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Thanksgiving, Black Friday store sales fall, online rises

By Siddharth Cavale

Sales and traffic at U.S. brick-and-mortar stores on Thanksgiving Day and Black Friday declined from last year, as stores offered discounts well beyond the weekend and more customers shopped online.

Internet sales rose in the double digits on both days, surpassing $3 billion for the first time on Black Friday, according to data released on Saturday.

Data from analytics firm RetailNext showed net sales at brick-and-mortar stores fell 5.0 percent over the two days, while the number of transactions fell 7.9 percent.

Preliminary data from retail research firm ShopperTrak showed that shopper visits to such stores fell a combined 1 percent during Thanksgiving and Black Friday when compared with the same days in 2015.

The data highlights the waning importance of Black Friday, which until a few years ago kicked off the holiday shopping season, as more retailers start discounting earlier in the month and opened their doors on Thanksgiving Day.

“We knew it (holiday season) was going to be off to a slow start,” Shelley Kohan, vice president of retail consulting at RetailNext, said.

“The first couple of weeks with the election were a complete distracter from the normal course of business and…a warmer climate in November may have made the sales more stubborn,” she said, adding that she saw sales picking up in December.

Net sales on Black Friday slid 10.4 percent for brick-and-mortar chains, according to RetailNext.

“Stores that opened on Thursday were not very busy on Black Friday,… and while the Thanksgiving Day opt-outs were busier on Black Friday, they didn’t see the crowds they saw in previous years,” NPD group’s Chief Industry analyst Marshal Cohen said.

 

ONLINE SALES SHINE

Still, total holiday season sales are expected to jump 3.6 percent to $655.8 billion this year, according to the National Retail Federation, due to a tightening job market.

Unemployment rates hit their lowest in eight years in October and hourly wages this year saw their biggest increase since 2009, boosting consumers’ confidence and spending.

Consumers are expected to spend $636 on average on holiday purchases this year, up 3 percent from their 2015 spending plans, according to NPD.

Thanksgiving and Black Friday online sales tracked by Adobe Digital Index were $5.27 billion, up 18 percent from a year earlier and higher than its prior estimate of $5.05 billion.

Black Friday sales rose 21.6 percent to $3.34 billion, with purchases made on mobile devices contributing more than $1 billion in revenue, both record sales for the day.

(Reporting by Siddharth Cavale in Bengaluru; Editing by Jonathan Oatis and Andrew Hay)

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Published at Sun, 27 Nov 2016 00:00:28 +0000

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Investment focus: Is this the ‘Great Rotation’? Some banks think so

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Investment focus: Is this the ‘Great Rotation’? Some banks think so

By Dhara Ranasinghe and Vikram Subhedar | LONDON

After a number of false starts since the term was first coined five years ago, the idea of a ‘Great Rotation’ out of bonds into stocks is again gaining traction.

Almost $2 trillion has been wiped off the value of global bonds since Donald Trump was elected as the next U.S. president on Nov. 8, sparking a reassessment of growth and inflation views. In contrast, U.S. stocks have hit record highs.

According to Bank of America Merrill Lynch, the week to Nov. 16 saw the biggest equity inflows in two years at $28 billion and the biggest bond outflows in 3-1/2 years at $18 billion — the widest weekly disparity between stock and bond flows ever.

Whether this marks the start of a ‘Great Rotation,’ a phrase first used by Bank of America in 2011, remains to be seen but there are two reasons why this time it could be the real thing.

For starters, say analysts, a tighter U.S. jobs market and signs of stronger economic growth suggest inflation risks are rising.

Second, for the first time since the financial crisis there is a shift toward fiscal expansion — highlighted by the economic policies favored by Trump and by Britain’s budget statement this week that unveiled a $29 billion fund for infrastructure projects.

That change implies higher borrowing by governments and another source of inflationary pressures that support a view that an era of ultra-low yielding bonds may be in the past.

The only caveat is that this notion of investors shifting their hundreds of billions invested in bonds into stocks as a three-decade bond bull run comes to an end, propelling equity markets higher, has had several false starts before.

“I’ve been asked this question many times before – about whether we’re seeing a great rotation,” said Luca Paolini, Pictet Asset Management’s chief strategist. “We now see some significant inflation risks that were non-existent before. This is what’s different.”

In Germany, signs of a pick-up in inflation pushed yields sharply higher from record lows between late April and June last year – only to fall back as data suggested the region continued to battle with deflationary pressures.

U.S. 10-year bond yields rose more than 100 basis points during the so-called “taper tantrum” of 2013 as investors positioned for a scaling back of U.S. monetary stimulus. They subsequently fell back too, hitting record lows earlier this year, helped by a perception that any Federal Reserve monetary tightening would be glacial to support growth.

A Fed rate hike next month, widely expected, would mark the first increase in a year.

TURNING POINT?

But as inflation expectations are overhauled so are perceptions about the rate outlook – money markets are starting to price in one or more Federal Reserve rate hikes next year, a sea change from before the election when they priced in a less than 50 percent chance of a 2017 Fed hike.

It’s against this backdrop that early indicators of a rotation can be seen.

JPMorgan notes that over the past week, a record inflow into U.S. equity exchange traded funds (ETFs) was accompanied by a record outflow from bond ETFs.

Within equity markets a sharp rotation out of so-called “bond proxies” – dividend-paying sectors such as utilities, telecoms and healthcare which are favored by investors for their yield – and into more cyclical sectors such as banks, industrials and commodities-related sectors is already underway.

The fading allure of dividends could be a precursor to a broader asset-class switch out of bonds and into stocks, which are more geared to economic growth and an inflation pick-up.

This trend has taken hold across global equity markets. Basic resources and energy are now the best performing equity sectors within the MSCI all-country World indices .MIWD00000PUS, both up about a fifth this year. Healthcare, utilities and food and beverage stocks are the biggest laggards and the only three in the red for 2016.

“It’s too early to tell but this is the best chance I’ve seen in a long time,” said Michael Antonelli, an institutional sales trader at R W Baird & Co, referring to a great rotation.

“Money chases performance and it is thus and ever shall be so we need equity funds to start knocking the cover off the ball,” he added, alluding to an opportunity for equity funds to make strong gains.

One sign that a great rotation is taking hold is if investors continue to offload bonds on a large scale.

“We know in general that a lot of capital has gone into fixed income, so how investors react to this sell-off is really important,” said Michael Metcalfe, head of macro strategy at State Street Global Markets. “If they capitulate, they will drive the next leg of it clearly.”

TEPID ROTATION?

Any rotation is likely to be driven by the United States, where bonds have seen some of the steepest selling in years. In Europe and Japan, still subdued inflation and ultra-loose monetary policy is expected to provide some support to bonds.

Rising political risks in the euro area such as in Italy also suggest demand for safe-haven German bonds remains firm, with two-year yields hitting record lows on Friday at minus 0.75 percent.

Long-term investors such as pension funds, hurt by an era of negative bond yields, are also likely to welcome any sell-off to lock in yields at higher levels.

“Against that you could have someone like a retail investor not wanting to own fixed income. So really the idea of a great rotation will depend on who that marginal buyer or seller of fixed income is,” said Nick Gartside, chief investment officer for fixed income at JP Morgan Asset Management.”

(Graphic by Nigel Stephenson; Editing by Toby Chopra)

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Published at Fri, 25 Nov 2016 14:22:02 +0000

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Wall Street hit record highs as consumer staples, techs gain

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Wall Street hit record highs as consumer staples, techs gain

By Yashaswini Swamynathan

Wall Street extended its gains in thin trading on Friday, with the three main indexes hitting record intraday highs, helped by gains in consumer staples and technology stocks.

The U.S. stock market will close at 1:00 p.m. ET (1700 GMT) on the occasion of Black Friday.

The S&P 500 consumer staples sector .SPLRCS gave the broader index its biggest boost, rising 0.75 percent, led by gains in Procter & Gamble (PG.N) and Coca-Cola (KO.N).

Since the U.S. election, the three main U.S. indexes have hit all-time highs and closed at record levels multiple times in the past few days.

However, the defensive consumer staples and utilities .SPLRCU sectors have been the worst performers in that period.

“People are looking for value in the market. While many stocks have risen quite brusquely, investors are looking for some forgotten names in the rally,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.

“These orphaned stocks are being hunted today.”

At 12:27 p.m. ET the Dow Jones Industrial Average .DJI was up 53.62 points, or 0.28 percent, at 19,136.8.

The S&P 500 .SPX was up 5.97 points, or 0.27 percent, at 2,210.69.

The Nasdaq Composite .IXIC was up 12.02 points, or 0.22 percent, at 5,392.70.

Ten of the 11 major S&P sectors were trading higher, led by a 1.23 percent rise in utilities .SPLRCU.

The technology sector .SPLRCT was up 0.26 percent, led by Cisco (CSCO.O) and Apple (AAPL.O).

The energy sector .SPNY, fell 0.6 percent, pulled down by a 2.7 percent drop in oil prices amid uncertainty that the OPEC would arrive at a decision to cut production during a meeting next week. [O/R]

Johnson & Johnson (JNJ.N) inched up 0.8 percent rise after the company confirmed media reports that it was in talks to acquire Swiss biotechnology company Actelion (ATLN.S).

Advancing issues outnumbered decliners on the NYSE by 1,725 to 1,101. On the Nasdaq, 1,573 issues rose and 1,082 fell.

The S&P 500 index showed 44 new 52-week highs and no new lows, while the Nasdaq recorded 240 new highs and 11 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza)

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Published at Fri, 25 Nov 2016 17:45:12 +0000

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Five Economic Reasons to be Thankful

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Five Economic Reasons to be Thankful

by Bill McBride on 11/24/2016 10:26:00 AM

 With a Hat Tip to Neil Irwin (he started doing this a few years ago) … here are five economic reasons to be thankful this Thanksgiving …

 

1) Low unemployment claims.

The number of new claims for unemployment insurance benefits is at the lowest level in 40 years (with a much smaller population back then).  The four week average of new unemployment has fallen to 251,000, down from 297,000 a year ago, and down from the peak of 660,000 during the great recession.

Click on graph for larger image.

Here is a graph of initial weekly unemployment claims.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 251,000.

The low level of claims suggests relatively few layoffs.

2) Job Openings Near Record Levels.

There were 5.5 million job openings in September. This is close to the record high of 5.8 million in April 2016.
Job Openings and Labor Turnover Survey

This graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Job openings (yellow) have been above 5 million for 20 consecutive months.

Note that Quits are up 12% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for “quits”).

More job openings, and rising quits, are positive signs for the labor market.

3) Household Debt burdens are near record lows.

Household debt burdens have declined sharply over the last several years.

The Household debt service ratio was at 13.2% in 2007, and has fallen to under 10% now.
Financial Obligations

The graph, based on data from the Federal Reserve, shows the Total Debt Service Ratio (DSR), and the DSR for mortgages (blue) and consumer debt (yellow).

The overall Debt Service Ratio increased slightly in Q2 2016, and has been moving sideways and is near a record low.  Note: The financial obligation ratio (FOR) was unchanged in Q2 and is also near a record low (not shown).

The DSR for mortgages (blue) are near the low for the last 35 years.  This ratio increased rapidly during the housing bubble, and continued to increase until 2007. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined significantly.

This data suggests aggregate household cash flow has improved.

4) Gasoline prices are near the lows since the Great Recession.
Gasoline Prices

For consumers, lower gasoline prices are a huge positive.

Here is a 10 year graph from Gasbuddy.com for nationwide gasoline prices.

Gasoline prices are around $2.12 per gallon, slightly higher than last year at Thanksgiving, and near the lowest since the Great Recession.

5) Wages growth is picking up.
Wages CES, Nominal and RealThis graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka “Establishment”) monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in “Average Hourly Earnings” for all private employees.  Nominal wage growth was at 2.8% YoY in October.  This series is noisy, however overall wage growth is trending up – especially over the last year and a half.

There is much more positive economic news – solid auto sales, housing starts increasing, U-3 unemployment rate below 5%, and U-6 rate falling, the recent pickup in GDP – and much more.

There are still problems –  not everyone has participated in the current expansion, wealth and income inequality are record extremes, there is too much student debt, and climate change is posing a real threat to the economy in the future – but there are many economic reasons to be thankful this Thanksgiving.

Happy Thanksgiving to All!

Read more at http://www.calculatedriskblog.com/2016/11/five-economic-reasons-to-be-thankful.html#IYvQOcwX4XhxPMUf.99

by Bill McBride on 11/24/2016 10:26:00 AM

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Published at Thu, 24 Nov 2016 15:26:00 +0000

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Will Landlord-in-Chief Trump be good for real estate?

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Does Trump go far enough to eliminate conflicts?

Will Landlord-in-Chief Trump be good for real estate?

How’s this for irony? Donald Trump made his name and fortune from real estate. You can argue that he will soon be the nation’s first Landlord-in-Chief. But real estate stocks have tumbled since Trump was elected president.

The Real Estate Select Sector SPDR (XLRE), an ETF that owns big real estate firms like mall operator Simon (SPG) and apartment complex companies Equity Residential (EQR) and AvalonBay (AVB), has fallen 3% since Trump defeated Hillary Clinton.

The declines stand in sharp contrast to the rest of the market, which has enjoyed a Trump rally, led by financial and healthcare stocks, construction companies and retailers.

So why are real estate investment trusts, or REITs as they are commonly known, struggling?

REITs pay big dividends. And with bond yields surging since the election, partly due to expectations that Trump will need to rack up debt to make his $1 trillion infrastructure spending plans a reality, high yielding stocks like REITs are no longer attractive.

Investors are betting REITs and other big dividend payers will be less attractive in an environment where bond rates are going up. That’s why other big dividend payers, most notably utilities and consumer staples companies, have also lagged the market lately.

But is the market getting this wrong?

Yes, many investors have flocked to REITs solely for their dividends. But the market may be underestimating the possibility that Trump will look to take care of his own, so to speak.

Of course, Trump will need to be extra careful to avoid the appearance of any conflicts of interest. It doesn’t help that his daughter Ivanka is married to real estate developer Jared Kushner. And both are on his transition team.

Trump has already faced criticism about what he plans to do with his massive real estate holdings. Some think Trump should sell his investments outright, but he is planning to place them in a trust to be controlled by his adult children.

These issues aside, REITs should benefit from Trump stimulus.

Karin Ford, senior real estate analyst for MUFG Securities Americas, met with several REIT executives at an industry conference in Phoenix just after the election. In a report to clients, she noted that real estate leaders were upbeat.

“REIT managements believe that a Trump presidency will be positive for fundamentals. They expect commercial real estate to benefit from rising business confidence, lower tax rates, and fiscal stimulus,” Ford wrote.

Ford noted that executives at Camden Property Trus (CPT)were hopeful that Trump’s plans will lead to more job growth, which should lead to higher demand for apartments.

And executives at Alexandria Real Estate (ARE), a REIT that owns research labs used by drug and biotech companies, told Ford that their tenants should thrive under Trump since they believe that “drug pricing restrictions are not high on his agenda.”

Managers at another healthcare REIT, Healthcare Trust of America (HTA), also told Ford they weren’t worried about Trump unwinding the Affordable Care Act, or Obamacare.

“We even heard cautious optimism from a few healthcare REITs, the managements of which believe that changes to Obamacare may not be that harmful to their business,” she wrote.

Ford noted that the Healthcare Trust of America executives said “lower-cost, outpatient trends are here to stay and that accelerating economic activity could boost medical office rent growth.”

But what about other potential headwinds for REITs? Won’t inflation hurt the sector? Not necessarily.

Mitch Wasterlain, founder of CAPFUNDR, an investment firm focusing on real estate funds, said in a report after the election that inflation could lead to more pricing power for real estate companies. They’ll be able to demand higher rents.

“Historically, real estate has done well in high interest rate, inflationary environments,” Wasterlain wrote.

But the worst may be over given that REITs have been beaten up so much in the past few months due to fears that stimulus by either Trump or Clinton would drive up interest rates.

The Real Estate Select SPDR ETF has tumbled more than 10% since it was separated from S&P’s financial sector and became its own sector in September.

“With the pullback in REITs, valuations are now attractive, as fundamentals remain solid and balance sheets are as strong as they have ever been,” said William Lynch, director of investments at Hinsdale Associates, in a report.

So real estate may still wind up being a good investment during Trump’s tenure.

Now Trump just needs to figure out what he’ll do with all his real estate holdings to avoid any conflicts of interest.

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Published at Wed, 23 Nov 2016 17:41:39 +0000

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FINRA moves to speed up market manipulation crackdowns

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A sign for the Financial Industry Regulatory Authority (FINRA) is seen outside the offices in New York’s financial district July 22, 2015.REUTERS/Brendan McDermid

FINRA moves to speed up market manipulation crackdowns

By John McCrank | NEW YORK

Wall Street’s industry-funded watchdog took steps to crack down more quickly on manipulative trading practices in the securities markets but needs more authority, according to a regulatory filing.

The Financial Industry Regulatory Authority (FINRA) is concerned that it has no quick means to stop disruptive trading activity after it has been identified without resorting to proceedings that can take years to complete, according to a filing on Monday with the U.S. Securities and Exchange Commission.

“FINRA believes that there are certain clear cases of disruptive and manipulative behavior, or cases where the potential harm to investors is so large, that FINRA should have the authority to initiate an expedited proceeding to stop the behavior from continuing,” it said.

FINRA has proposed rules that take aim at practices known as “spoofing” and “layering,” in which one or more traders move the price of a security by placing bogus orders and then modifying or canceling them so that they never become actual trades. Once there is an appearance of interest in the security, the trader can then buy or sell on the other side at better prices.

Earlier this month, a London-based day trader pled guilty to U.S. federal charges of contributing to the May 2010 “flash crash” by spoofing futures on CME Group’s Chicago Mercantile Exchange.

FINRA would be better able to protect investors and market integrity if it had the ability to issue cease-and-desist orders more quickly to stop obvious disruptive and manipulative trading, the regulator said.

There also have been numerous cases in which manipulative trading originating from overseas, where FINRA has no direct jurisdiction, has been allowed to continue throughout lengthy investigation and enforcement procedures, FINRA said.

Under current rules, FINRA can initiate temporary cease-and-desist orders to alleged manipulators but they only remain in effect until the underlying disciplinary proceedings have concluded.

The proposed rules, which would require approval from the SEC, would allow FINRA to issue permanent cease-and-desist orders regardless of whether underlying disciplinary proceedings were taking place.

Only FINRA’s chief executive officer or a senior officer designated by the CEO, could initiate permanent cease-and-desist order proceedings, and only after other attempts to resolve the conduct had been attempted, FINRA said.

The proposed changes are similar to rules adopted in February by exchange operator Bats Global Markets.

FINRA polices all registered U.S. broker dealers and stock and options exchanges. It conducts cross-market surveillance and has surveillance agreements with 18 exchanges.

(Reporting by John McCrank; Editing by Bill Trott)

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Published at Tue, 22 Nov 2016 20:47:09 +0000

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U.S. tax refund delays may surprise low-income filers

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U.S. tax refund delays may surprise low-income filers

By Beth Pinsker
| NEW YORK

Deep within the recesses of recent tax policy is a provision that will delay refunds for millions of taxpayers who file for two popular credits aimed at helping low-income workers.

The Internal Revenue Service last week reminded filers that no refunds would be available before Feb. 15 for returns claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). The changes stem from the Protecting Americans From Tax Hikes Act of 2015, known as PATH.

The IRS will open up e-filing for 2016 returns around Jan. 23, three days after the inauguration of Donald Trump as president.

Many of those who claim these credits tend to file their taxes early and count on the money coming well within the IRS’s traditional 21-day refund period.

“It’s not highly publicized, but it will impact a lot of the hardest working and will hit them early and the most difficult period,” said Mark Steber, chief tax office at preparer Jackson Hewitt.

The reason for the delays is to prevent fraud and theft, which was particularly rampant among about 26 million returns claiming $65.6 billion of Earned Income Tax Credits for 2015.

The credits go to qualifying people whose deductions exceed their income. The average 2015 refund was $2,482, according to IRS data. The maximum allowed by law is $6,318 for a return claiming three or more children. The Additional Child Tax Credit can add up to an additional $3,000.

The IRS has said that it would process returns normally after Feb. 15, but tax preparers still have a lot of questions.

“Will all direct deposit returns go on Feb. 15? I don’t know,” said Jeffrey Schneider, an enrolled agent with SFS Tax & Accounting Services in Port St. Lucie, Florida. “I’m just making a presumption, but most of these filers don’t have bank accounts, so they don’t get direct deposit.”

A dozen or so clients of Schneider’s clients affected by these delays will be notified via his email newsletter, he said.

“If they get their W-2 early, and they’re expecting $8,000 – they’ll go nuts, I’ll guarantee you,” Schneider said.

Schneider and other tax preparers said they were worried that filers might seek advances from refund advance outfits, which charge high interest rates and fees.

Tax preparer Jackson Hewitt has an alternative, the Express Refund Advance, with no interest or fees, that will start early this year – on Dec. 15, with the option to pre-qualify before the end of November.

Jackson Hewitt arranges loans for qualifying clients through partner MetaBank for $200 to $1,300, and also helps them open a temporary deposit account with another partner bank for the refund. When the IRS direct-deposits the funds, the client repays the loan. If the refund falls short, Jackson Hewitt will take the loss.

“The client has told us that they don’t want to go into debt, but they already earned this money and we’re just getting it to them,” Jackson Hewitt President David Prokupek said.

If taxpayers can just hold out a few weeks, however, they can get their checks directly and not deal with any middlemen.

“What people need to know is, first of all, it’s industry-wide and the IRS says still to file. As soon as Feb. 15 hits, they will release the refund,” Lisa Greene-Lewis, a CPA and TurboTax blog editor, said.

(Editing by Lauren Young and Richard Chang)

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Published at Tue, 22 Nov 2016 20:35:10 +0000

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Industrials lift Dow to record, techs drag S&P and Nasdaq

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 22, 2016.REUTERS/Brendan McDermid

Industrials lift Dow to record, techs drag S&P and Nasdaq

The Dow and S&P 500 set record closing highs on Wednesday helped by gains in industrial stocks, but losses in technology shares limited the advance and weighed on the Nasdaq Composite.

The Dow Jones industrial average .DJI rose 59.31 points, or 0.31 percent, to 19,083.18, the S&P 500 .SPX gained 1.78 points, or 0.08 percent, to 2,204.72 and the Nasdaq Composite .IXIC dropped 5.67 points, or 0.11 percent, to 5,380.68.

The U.S. stock market will be closed Thursday for the Thanksgiving holiday.

(Reporting by Caroline Valetkevitch; Editing by Nick Zieminski)

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Published at Wed, 23 Nov 2016 17:53:34 +0000

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Weekly Initial Unemployment Claims increase to 251,000

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Weekly Initial Unemployment Claims increase to 251,000

by Bill McBride on 11/23/2016 08:39:00 AM

 The DOL reported:

In the week ending November 19, the advance figure for seasonally adjusted initial claims was 251,000, an increase of 18,000 from the previous week’s revised level. The previous week’s level was revised down by 2,000 from 235,000 to 233,000. The 4- week moving average was 251,000, a decrease of 2,000 from the previous week’s revised average. The previous week’s average was revised down by 500 from 253,500 to 253,000.

There were no special factors impacting this week’s initial claims. This marks 90 consecutive weeks of initial claims below 300,000, the longest streak since 1970.
emphasis added

The previous week was revised down.

The following graph shows the 4-week moving average of weekly claims since 1971.
Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 251,000.

This was at the consensus forecast. The low level of claims suggests relatively few layoffs.

Read more at http://www.calculatedriskblog.com/2016/11/weekly-initial-unemployment-claims_23.html#RAf0ghOLct6XjS47.99

by Bill McBride on 11/23/2016 08:39:00 AM

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Published at Wed, 23 Nov 2016 13:39:00 +0000

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Wednesday: New Home Sales, Unemployment Claims, FOMC Minutes, and More

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Wednesday: New Home Sales, Unemployment Claims, FOMC Minutes, and More

by Bill McBride on 11/22/2016 06:55:00 PM

Wednesday:

• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, The initial weekly unemployment claims report will be released.  The consensus is for 250 thousand initial claims, up from 235 thousand the previous week.

• Also at 8:30 AM, Durable Goods Orders for October from the Census Bureau. The consensus is for a 1.5% increase in durable goods orders.

• At 9:00 AM, FHFA House Price Index for September 2016. This was originally a GSE only repeat sales, however there is also an expanded index.  The consensus is for a 0.7% month-to-month increase for this index.

• At 10:00 AM, New Home Sales for September from the Census Bureau. The consensus is for an decrease in sales to 590 thousand Seasonally Adjusted Annual Rate (SAAR) in October from 593 thousand in September.

• Also at 10:00 AM, University of Michigan’s Consumer sentiment index (final for November). The consensus is for a reading of 91.6, unchanged from the preliminary reading 91.6.

• At 2:00 PM, FOMC Minutes for Meeting of November 1-2

Read more at http://www.calculatedriskblog.com/2016/11/wednesday-new-home-sales-unemployment.html#JZ6AXorJBm7H10DU.99

by Bill McBride on 11/22/2016 06:55:00 PM

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Published at Tue, 22 Nov 2016 23:55:00 +0000

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Market euphoria forgets Trump’s scary promises

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NAFTA explained

Market euphoria forgets Trump’s scary promises

Wall Street is in heaven these days. Donald Trump’s surprise election has led to a rally, carrying the Dow above 19,000 for the first time ever.

The Trump rally has been sparked by hopes that the president-elect will follow through on promises to slash taxes, roll back regulation and ramp up infrastructure spending. Many are betting a focus on these strategies will finally unleash the American economy after years of sluggish growth.

But lost in the post-election euphoria is the fact that this rally has been almost exclusively built on Trump’s pro-business campaign promises — not the ones that frighten many investors.

Trump has also promised to tear up NAFTA, slap big tariffs on China, break up big banks and audit the Federal Reserve — all events that make the markets very nervous. That’s not even counting Trump’s unpredictable nature, which suggests years of precisely the uncertainty that investors hate.

“The market seems to be grabbing on to all the prospective good things and ignoring the negative issues lurking out there,” said Mark Luschini, chief investment strategist at Janney Capital.

Luschini said he’s most concerned about Trump’s promises to “terminate” NAFTA and the risk that imposing big tariffs on goods from China and Mexico will ricochet back to the American economy.

“Trade is the big one. I’m worried about retaliatory practices by trade partners that could harm multinational revenues,” he said.

Peter Boockvar, chief market analyst at The Lindsey Group, shares those worries. “We just have to hope Trump doesn’t follow through with his trade stuff.”

Here’s a sampling of the Trump campaign rhetoric that investors seem to be forgetting, or at least hoping won’t turn into actual action:

Killing NAFTA: Trump’s promise this week to withdraw the U.S. from the Trans-Pacific Partnership (TPP) is a fresh reminder of the anti-trade stance he ran on. Once TPP is officially dead, Trump has pledged to renegotiate or “terminate” NAFTA, the North American Free Trade Agreement that he has called the “worst trade deal in history.”

Trump has the power to unilaterally withdraw from this trade deal with Mexico and Canada without the approval of Congress. Economists have warned that doing so would likely cost many U.S. jobs, millions of which depend on free trade with Mexico.

Tariffs could spark trade war: Trump didn’t just pledge to end NAFTA, he wants to slap big tariffs on China and Mexico. Again, Trump does have the authority to do this without Congress.

But what would happen if Trump installed 35% tariffs on Mexico and 45% on China, as he’s said? Many fear it would spark a tit-for-tat response from trading partners that devolves into a trade war. That is a scary outcome for the market, especially given that about half of S&P 500 revenues are from overseas.

Break up the big banks? Don’t let the rally for stocks — including big banks — fool you, Trump is no friend to Wall Street. In fact, Trump has advocated for breaking up America’s big banks. The GOP platform at this summer’s convention called for bringing back the Glass-Steagall Act, the Great Depression-era law that bans banks from serving both Wall Street and Main Street. A return of Glass-Steagall would force mega banks like JPMorgan Chase (JPM) and Citigroup (C)to shrink themselves.

Trump’s chief strategist, ex-Goldman Sachs banker Steve Bannon, would love this. Bannon told Buzzfeed in 2014 that the Wall Street meltdown was driven by bankers’ “greed” and took issue with the fact that bank execs didn’t face criminal charges.

Attacking the Federal Reserve: During the campaign, Trump broke from tradition by taking repeated shots at Fed chair Janet Yellen. He claimed Yellen was keeping rates low to help President Obama and “being more political than Secretary Clinton.” Trump also backs a GOP push called “Audit the Fed” that would allow the General Accountability Office to review the central bank’s monetary policy decisions.

Any legislation that threatens the Fed’s independence makes investors uneasy. The worry is the Fed would take orders from politicians, instead of basing interest rate decisions on the goal of a strong job market along with steady inflation. Yellen recently warned that this independence is “critically important” and noted that countries where central banks are “subject to political pressure” have suffered “terrible outcomes.”

Deporting 11 million undocumented immigrants: Trump has promised to take a much tougher stance on immigration and even pledged to deport up to 11 million illegal immigrants. But many warn that mass deportations would be extremely divisive and costly for both the government and businesses that rely on these workers. Research at the Wharton School estimates that the plan to deport undocumented workers would result in four million lost jobs by 2030. Luschini, the Janney strategist, worries that Trump’s immigration policies could hurt consumer spending, spark mass protests and fuel “undercurrents about inequality.”

Even Trump’s more moderate immigration ideas could hurt some companies. Specifically, Trump has threatened to crack down on the practice of hiring foreign workers through H-1B visas and Jeff Sessions, his proposed Attorney General, is a vocal critic of this program. Silicon Valley has long relied on the H-1B program to find talented workers that help fuel innovation.

— CNNMoney’s Patrick Gillespie and Heather Long contributed to this report.

 

Published at Tue, 22 Nov 2016 17:33:52 +0000

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Please stop winning! CNN complaining Trump is making the stock market rise too much!

U.S. President-elect Donald Trump in Manchester, New Hampshire, U.S., October 28, 2016. REUTERS/Carlo Allegri/File Photo

U.S. President-elect Donald Trump in Manchester, New Hampshire, U.S., October 28, 2016. REUTERS/Carlo Allegri/File Photo

Please stop winning! CNN complaining Trump is making the stock market rise too much!

CNN says stock is rising way too fast since Donald Trump was elected President:
Remember when the market rallied sharply last Monday? Most investors thought it was due to growing expectations that Hillary Clinton would be the next president after FBI Director James Comey cleared Clinton again after another probe of her emails.
The big surge on November 7 snapped a nine-day losing streak for stocks that many attributed to Donald Trump’s newfound momentum.  Wall Street had decided Clinton was going to be the next president — and they wholeheartedly approved.
So the fact that the market continued to rally last week after Trump won is, in some respects, even more surprising than the fact that he won in the first place.
The Dow jumped nearly 600 points — a 3.2% gain — in the three days after Trump’s victory. It was up again Monday and hit a new all-time high in the process.  The S&P 500 and Nasdaq also moved a bit higher after Trump’s win.
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Sunday Night Futures

Sunday Night Futures

by Bill McBride on 11/20/2016 07:34:00 PM

 Weekend:

Schedule for Week of Nov 20, 2016

Some early Thoughts on the Impact of the Trump Economic Policies

Goldman: “2017 Outlook: Under New Management”

Monday:
• At 8:30 AM ET, the Chicago Fed National Activity Index for October. This is a composite index of other data.

From CNBC: Pre-Market Data and Bloomberg futures: S&P and DOW futures are mostly unchanged (fair value).

Oil prices were up over the last week with WTI futures at $46.14 per barrel and Brent at $47.36 per barrel.  A year ago, WTI was at $39, and Brent was at $42 – so oil prices are up year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.13 per gallon – a year ago prices were at $2.09 per gallon – so gasoline prices are up slightly year-over-year.

Read more at http://www.calculatedriskblog.com/2016/11/sunday-night-futures_20.html#0efG2s1KckyOM7Lj.99

by Bill McBride on 11/20/2016 07:34:00 PM

Stock market, trading journal, daily journal, investing journal

My Trading Journal: 30 Day Trading Journal

Published at Mon, 21 Nov 2016 00:34:00 +0000

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