All posts in "Politics"

Fed signals June rate hike likely

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Here's what's in Trump's budget
Here’s what’s in Trump’s budget

Fed signals June rate hike likely

  @CNNMoney

Get ready for the third rate hike in seven months.

Federal Reserve officials indicated they may raise rates again in June, according to minutes from their meeting in May released on Wednesday.

“Most participants judged…it would soon be appropriate,” to raise rates if the economy stays on track, according to the minutes.

That sentiment was widely expected by investors, who have already been betting that there is about an 80% chance of a June rate hike.

Fed officials also indicated that they would likely start to wind down its $4 trillion balance sheet this year. The Fed bought trillions of dollars in debt during the housing and financial crisis and the recession that followed to help the economy recover. The officials say they want to raise rates a little more before they start selling that debt.

A June rate increase would mark a faster pace for the Fed. It raised rates in December 2015 for the first time in nearly a decade, then again an entire year later in December 2016, followed by another one in March.

Those rate hikes reflect the Fed’s confidence in an economy that has recovered well from the Great Recession. In the aftermath of the recession, the US unemployment rate hit 10%. Today unemployment is very low at 4.4%.

“The simple message is, the economy is doing well,” Fed Chair Janet Yellen said at a March press conference.

However, Yellen is the first to acknowledge the US economy still faces challenges, such as slow growth, sluggish wage growth and millions of workers who feel left out of the recovery from the recession.

With America coming up on 8 years of economic expansion, the Fed’s medicine isn’t needed as much.

“The patient isn’t fully recovered — the economy hasn’t gotten back to its long term potential, but it’s no longer sick so we need to get the patient off the medicine,” says Ernesto Ramos, head of equities at BMO Global Asset Management.
Published at Wed, 24 May 2017 18:40:49 +0000

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Elizabeth Warren and Steven Mnuchin go at it over breaking up big banks

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Mnuchin: thank me for rally in bank stocks
Mnuchin: thank me for rally in bank stocks

Elizabeth Warren and Steven Mnuchin go at it over breaking up big banks

  @CNNMoney

President Trump suggested during the campaign that he would break up big banks. But Treasury Secretary Stephen Mnuchin said that’s not what he meant.

At issue is a Depression-era law known as Glass-Steagall. It prevented Main Street banks that take government-insured deposits from customers from participating in the riskier investment banking business associated with Wall Street. It was repealed in 1999, leading to mergers that created banking behemoths such as JPMorgan Chase(JPM), Citigroup(C) and Bank of America(BAC).

Congressional proposals, including legislation introduced by Senator Elizabeth Warren, a vocal critic of Wall Street, would reimpose those limits and require breaking up those banks. And Trump has made statements that seem to suggest he supports the idea.
“Some people … want to go back to the old system, right? So we’re going to look at that,” Trump said earlier this month when asked about breaking up banks.

But in a testy exchange with Warren at a Senate hearing on Thursday, Mnuchin said that when Trump spoke of supporting a 21st Century version of Glass-Steagall, he did not support strict limits that would require breaking up the banks.

“There are aspects of [Glass-Steagall] that we think may make sense,” Mnuchin said. “But we never said before that we supported a full separation of banking and investment banking.”

Warren called that distinction “bizarre.” She said the phrase “Glass-Steagall” means breaking up the banks. In response, Mnuchin said voicing support for a 21st Century version didn’t mean breaking up the banks.

Warren replied by mocking him: “We are in favor of a bill called breaking up the banks, only don’t break up the banks.”

Mnuchin said the administration’s position is “complicated,” but that it definitely does not want to reimpose a wall between the two types of banking.

It “would be a huge mistake” to break banks apart because it would dampen lending to business, he said.

“If we did go back to a full separation, you would have an enormous impact on liquidity and lending to small and medium-sized businesses,” Mnuchin added.
Published at Fri, 19 May 2017 14:04:01 +0000

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The dollar’s Trump bump has vanished

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The Trump rally, 100 days in
The Trump rally, 100 days in

President Trump’s victory and promise to implement an “America First” agenda propelled the US dollar to 13-year highs.

But the Trump bump has proved fleeting for the greenback, which has lost virtually all of its post-election gains.

The US dollar lost further ground against rivals on Tuesday. The euro jumped 1% to $1.109, the strongest level since the days before Trump’s victory in November.

Likewise, the dollar index, which measures the greenback against a basket of rival currencies, dropped to territory unseen since just after the election.

So why is the dollar in the doldrums? Currency analysts point to a range of factors, including relief over France’s presidential election, weak US economic growth to kick off this year and concern that Trump’s political trouble will doom his economic agenda.

“Today, your key driver is the fact that Trump is facing an existential threat here,” said Karl Schamotta, director of global market strategy at Cambridge Global Payments.

Schamotta pointed to the political fallout over reports that Trump shared classified information with a Russian official. (Trump has defended his conversations with Russia.)

Win Thin, a currency strategist at Brown Brothers Harriman, similarly blamed the new dollar weakness in part on Trump’s latest Russia controversy.

The news “not only heightened ongoing concerns about the Administration’s ties with Russia but also is seen by some as jeopardizing the administration’s aggressive legislative agenda,” Thin wrote in a report on Tuesday.

Trump’s economic proposals — slashing taxes, cutting regulation and pumping up infrastructure spending — lifted the US dollar after the election because many thought they could give the American economy a shot in the arm.

But Trump’s agenda has been delayed by political setbacks, as evidenced by the failure thus far to repeal and replace Obamacare.

However, other currency analysts think the US dollar’s stumble has little to do with Trump. They point to how the stock market appears unfazed by Trump’s problems, with the S&P 500 hitting a record high on Tuesday.

“Trump’s new soap opera story,” isn’t a main driver for the dollar, Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a report.

Instead, Boockvar believes the greenback has been hurt by shifts in the global economy and central bank policy. He pointed to how the euro has been helped by a record European trade surplus in March, highlighted by a 13% jump in goods exports.

While Europe’s economy has regained momentum, the US slowed down significantly at the beginning of this year. First-quarter GDP was just 0.7%, the weakest in three years. That’s a far cry from the 3% or 4% growth Trump has been promising.

“It’s not full steam ahead here by any means,” said Schamotta.

Another big difference between the US and Europe: the euro has recently benefited from positive political news. France relieved global markets by electing Emmanuel Macron as its next president over Marine Le Pen, who had called for the nation to dump the euro.

The retreat for the US dollar isn’t great news for Americans planning to travel abroad. Don’t expect a big discount while shopping in Europe.

But the currency shift is just fine for big multinationals like Nike(NKE) and Apple(AAPL, Tech30) that sell lots of stuff overseas. A strong dollar makes an iPhone more expensive to foreign buyers.

That’s why last month Trump told The Wall Street Journal the dollar is “getting too strong.”

“Partially that’s my fault because people have confidence in me,” Trump said at the time.

 Published at Tue, 16 May 2017 16:00:43 +0000

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Trump adviser Icahn may have broken trading laws: Senators

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Icahn: I'm against the stupidity of some regulations
Icahn: I’m against the stupidity of some regulations

 Trump adviser Icahn may have broken trading laws: Senators

  @mattmegan5

Democratic Senators want federal authorities to investigate whether President Trump’s special adviser, Carl Icahn, violated trading laws.

The lawmakers sent a letter on Tuesday to the SEC and two other regulators pointing to “troubling” evidence, including “massive” profits Icahn reportedly reaped in the market for renewable fuel credits.

“Publicly available evidence raises serious questions about Mr. Icahn’s conduct,” eight Senate Democrats led by Senators Elizabeth Warren and Sherrod Brown wrote in the letter.

They argue that these profits warrant a probe into whether Icahn, who has retained control of his vast business empire despite being named by Trump a special adviser on regulatory reform, violated insider trading, anti-market manipulation or other laws.

Additionally, the Democrats want SEC chair Jay Clayton and EPA administrator Scott Pruitt to consider recusing themselves from this matter. Why? Because Icahn was involved in the vetting practice for both positions in the Trump administration and even met with Pruitt before his nomination.

Icahn did not immediately respond to a request for comment.

However, in March the billionaire investor dismissed conflict-of-interest allegations in an interview with CNNMoney as “absurd” and “completely ridiculous.” He added, “I don’t talk to Donald that often.”

Related: Trump adviser Icahn is betting against the Trump rally

The crux of the controversy is linked to Icahn’s continued 82% ownership stake in CVR Energy(CVI), a small oil refinery. CVR has been hurt by EPA regulations that require oil refiners to either blend their oil with renewable fuels or buy credits.

Not surprisingly, Icahn has been a vocal opponent of these EPA rules, telling CNN’s Poppy Harlow they are “natural stupidity” and could cost CVR $200 million in 2017.

Senate Democrats note that Icahn may have benefited from a collapse in the market for these biofuel credits that he helped cause.

According to Reuters, CVR Energy, which is majority controlled by Icahn, generated an “extremely rare profit” on biofuels credits by betting against them in the months before Trump took office.

Biofuel credit prices plunged after Icahn became a special adviser to Trump. They took another hit after Bloomberg News revealed that Icahn and a trade group presented the White House with a deal to revamp the renewable fuel standard.

The collapse in biofuel credit prices allowed CVR to post a net gain of $6.4 million last quarter, a $50 million reversal from last year — according to Reuters.

Senate Democrats want regulators to investigate whether Icahn’s conduct violated any laws. They also asked regulators to investigate the “precise nature and extent” of Icahn’s communications with Trump officials, including the president himself.

The White House didn’t respond to a request for comment. A spokesperson for the administration in a previous statement emphasized that Icahn does not have a formal position with the administration. Icahn is “simply a private citizen whose opinion the President respects and whom the President speaks with from time to time.”

Published at Tue, 09 May 2017 20:07:35 +0000

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Billionaire joins Twitter to fight media

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Trump: Twitter lets me bypass the media
Trump: Twitter lets me bypass the media

Billionaire joins Twitter to fight media

  @mattmegan5

The king of the bond market is angry.

Billionaire investor Jeff Gundlach says he’s joined Twitter because he’s “getting tired” of inaccurate reporting about him.

“I’ve had five consecutive news reports that are completely fallacious,” Gundlach said Monday at the 22nd annual Sohn Investment Conference in Manhattan.

Gundlach, whose recent success has given him the unofficial “bond king” title that used to be reserved for rival Bill Gross, didn’t explain which stories upset him.

The CEO of DoubleLine Capital said he’s “shunned social media,” other than Twitter. His Twitter handle? @TruthGundlach.

Within two hours, Gundlach amassed more than 4,000 followers, compared with just two followers when he began speaking.

Gundlach’s love for Twitter(TWTR, Tech30) gives him something in common with President Trump, who famously uses the platform to bypass the mainstream media and get his message directly to supporters.

Gundlach surprised the crowd of finance professionals at last year’s Sohn conference by predicting an upset in the race for the White House.

“I think you need to prepare for a Trump presidency,” Gundlach said at the May 2016 event, adding that Trump would dramatically add to the U.S. debt by ramping up government spending.

Financial professionals pay $5,000 for tickets to attend the Sohn conference. This year’s event raised more than $3 million to treat and cure pediatric cancer.

Besides bashing the media, Gundlach expressed skepticism about the Trump rally on Wall Street. Gundlach, who mostly invests in bonds, said the S&P 500’s valuation is at a “stretched level” when compared to the total size of the U.S. economy.

“There’s just not a lot of upside,” Gundlach said.
Published at Mon, 08 May 2017 22:45:48 +0000

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Yellen’s solution for the US economy: More working women

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Unemployment rate at lowest in 10 years
Unemployment rate at lowest in 10 years

If women worked at the same rate as men, the US economy would be 5% bigger, according to Federal Reserve Chair Janet Yellen, who cited a 2012 study.

“We, as a country, have reaped great benefits from the increasing role that women have played in the economy,” Yellen said Friday at Brown University, her alma mater, which is celebrating 125 years of admitting female students. “But evidence suggests that barriers to women’s continued progress remain.”

Yellen shed light on the legacy and challenges faced by women in the workforce.

Her chief point: America needs better policies to encourage more women to work full careers. Sustained careers could help narrow the gender wage gap and boost growth overall.

Women working full-time still earn about 17% less than men per week, Yellen said. Even when comparing men and women in the same job positions with similar backgrounds, the wage gap is 10%.

Yellen also warned that the US is falling behind other advanced economies in Europe. The rate of working women in the US economy — known as female labor force participation — ranks 17th out of 22 advanced nations.

What’s troubling is that female participation among those who could be working has declined since 2000. Participation of “prime age” women between 25 and 54 years old is at 74.7% today, down from its peak of 77.3% in 2000, though it did make progress last year.

Male participation is much higher at 88.8%.

Yellen argued that European economies are seeing more working women due to expanded parental leave policies, increased affordability of child care and more opportunities for part-time work.

Citing research, Yellen said if the US had such workplace policies as those in Europe, female participation could jump to 82% from 74.3%.

That would boost the economy, she argued.

“We cannot all succeed when half of us are held back,” Yellen said, quoting Malala Yousafzai, the Pakistani advocate for women’s education and Nobel Prize winner.
Published at Fri, 05 May 2017 19:47:38 +0000

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Which Surviving Spouses Get VA Mortgage Benefits

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Which Surviving Spouses Get VA Mortgage Benefits

Past and present military personnel have access to services that include Veterans Administration (VA)-guaranteed mortgage loans. If the veteran passes away, does his or her spouse has access to the same VA mortgage benefits? That depends, and it makes a difference. VA mortgages often come with better terms than conventional mortgages. (For more, see The Unique Advantages of VA Mortgages.)

Here’s what veterans and their families need to know.

VA Mortgage Loans Are Still Private

Don’t be fooled; the VA isn’t in the business of offering mortgage loans. Private mortgage lenders still make the loan, but the VA guarantees a portion of it and occasionally takes part in the process of obtaining it. Such actions allow the mortgage lender to be more confident that the loan won’t default, and if it does, at least the VA’s portion will be paid.

This means that even if the applicant falls below the standards the lender uses to approve the loan, the VA guarantee might be enough to gain approval. If you’re looking for a VA loan, don’t call the VA; work with your bank, credit union or mortgage broker.

They Come with Lots of Perks

VA loans come with benefits that often make them a better deal than conventional loans.

  • There is no down payment, providing that the sales price doesn’t exceed the home’s appraised value.
  • You don’t need private mortgage insurance, and with the annual cost of that at 0.5% to 1% of the entire loan, that’s a large savings.
  • You can only be charged a certain amount of closing costs.
  • There is no penalty for paying the loan off early.
  • The VA might help you if you have trouble making payments.
  • The loan is assumable by anybody who meets the qualifications for the loan.

Many Surviving Spouses Are Eligible

Not all surviving spouses are eligible. If any of these conditions apply to you, though, you probably are:

  • Spouses of military personal who died in active duty or from a service-connected disability who have not remarried
  • A surviving spouse who remarries after age 57 and on or after Dec. 16, 2003
  • A surviving spouse of some permanently disabled veterans whose injuries were or were not a result of their military service
  • The spouse of a person who is missing in action or a prisoner of war

Applying for a VA Loan Is Easy

First, find a lender that offers VA mortgages. Many do. As with any mortgage, you will have to meet eligibility requirements, including income, credit and other standards set by the creditor.

Second, the home must be the principal residence of the eligible surviving spouse. It cannot be an investment property, second home or a home being purchased for somebody else.

You’ll also need a certificate of eligibility (COE). This proves to the lender that the deceased veteran was eligible and allows the surviving spouse to receive those same benefits. To learn how to apply for a COE, click here. Often, you can also apply for one through your lender. The company will guide you through the process. For more information on eligibility, go to the VA’s website.

You Can Refinance, Too

Along with a loan to purchase a home, surviving spouses may be eligible for refinance an existing VA loan. The interest rate reduction refinance loan allows the surviving spouse to refinance an existing loan and roll into it all loan origination costs, so he or she doesn’t have to use existing cash to lower payments.

Dependents Aren’t Eligible

Unfortunately, VA mortgage benefits don’t extend to children of a deceased veteran. Only surviving spouses are eligible to apply.

The Bottom Line

Surviving spouses are often eligible for the same VA mortgage benefits as the deceased veteran. To learn if you are, contact the VA for further guidance. (For more, see How to Buy a House with a VA Loan.
Published at Wed, 03 May 2017 15:40:00 +0000

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Health Carriers Hit New Highs Despite ACA Debacle

by NatoPereira from Pixabay

 

Health Carriers Hit New Highs Despite ACA Debacle

By Alan Farley | May 3, 2017 — 11:35 AM EDT

Aetna, Inc. (AET) and Humana, Inc. (HUM) ended their $34-billion merger agreement in February 2017 after government opposition, but neither stock has suffered from the untimely split, as evidenced by this week’s bullish first-quarter earnings results. Both health insurance giants have rocketed to all-time highs after their releases, ignoring the breakup as well as Congressional disagreement on the fate of Obamacare.

Health carriers have enjoyed all the perks of their Affordable Care Act (ACA) participation since it became law in March 2010 but few of the shortfalls because they can pull out of markets or the entire program whenever they choose. Even so, the risk is now rising geometrically because whatever form health insurance takes in coming years; carriers are less likely to avoid the weight of bad legislation, underwriting or case management.

AET

Aetna stumbled in the middle of the last decade, stalling just above $50 in 2006 and testing that resistance level in early 2008. Aggressive sellers took control at that time, dumping the stock in a major decline that accelerated during the economic collapse. Selling pressure eased at a 5-year low in the mid-teens at year’s end, ahead of a modest bounce that stalled in the mid-30s in 2009.

A 2010 test at that level triggered a reversal and pullback, ahead of a 2011 breakout that reached the 2007 high in 2013. It jumped above that resistance level quickly, entering a trend advance that continued into the June 2015 high at $134.40, ahead of a volatile correction that continued into the first quarter of 2016. Support in the low-90s denied short sellers, ahead of a slow and steady recovery wave into the fourth quarter.

The stock took off after the November election, in reaction to the President-elect’s call to repeal Obamacare, and stalled at 2015 resistance in December. A pullback into the first quarter of 2017 found willing buyers, ahead of constructive action that completed a cup and handle pattern. The stock broke out this week after strong earnings, with a measured move target in the 170s likely to attract a healthy momentum bid.

HUM

Humana topped out at $88.10 in January 2008 following a long uptrend and sold off in a vertical slide that continued into the March 2009 low at $18.57. The subsequent recovery wave unfolded at the same trajectory as the prior decline, completing a 100% round trip into resistance in 2011. Sellers took control at that time, triggering broad sideways action that continued for more than two years, ahead of a 2013 breakout.

The uptrend yielded the most fruitful period in the stock’s long public history, topping out above $200 in June 2015, ahead of a rounded correction that found support at $150 in July 2016. A fitful recovery intensified after the election in a vertical buying wave that reached within 2-points of 2105 resistance in December. A pullback into January 2017 found support at the 50-day EMA, ahead of a rally that finally reached resistance in March.

The company reported inline first-quarter earnings on Wednesday morning while reaffirming fiscal year 2017 guidance, triggering a gap up to an all-time high, followed by a pullback that’s testing shareholder commitment. It’s likely that bulls will win this conflict, allowing the breakout to gather momentum in a trend advance that could reach $300 later this year.

The Bottom Line

Former merger partners Humana and Aetna are trading near all-time highs after strong earnings reports that highlight health carrier abundance at a time that many Americans are struggling with the high treatment costs. The results could influence D.C. efforts to reform or repeal Obamacare, increasing carrier risk despite this week’s earnings euphoria.
Published at Wed, 03 May 2017 15:35:00 +0000

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Trump’s NAFTA is already running out of time

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NAFTA explained
NAFTA explained

  @CNNMoney

President Trump wants a new trade deal with Mexico and Canada soon. But he’s running out of time.

Trump says his promise to get tough on America’s trade partners — particularly China and Mexico — is a big reason why he was elected in the first place.

“It’s probably one of the primary reasons I’m sitting here today as president,” Trump said on April 20.

He’s labeled NAFTA, the free trade deal with Canada and Mexico, the worst in history.

Adding uncertainty to NAFTA’s fate, two senior Trump administration officials told CNN on Wednesday that Trump is considering an executive order to pull out of the deal.

Trump has said he wants a deal that benefits US workers, but hasn’t said exactly what he wants in a new deal.

If Trump decides to stay in and renegotiate, time isn’t on his side.

His trade team, led by Commerce Secretary Wilbur Ross, must trigger a 90-day consultation period before trade talks can begin. At the earliest, talks could start in August.

Edward Alden, a senior fellow at the Council on Foreign Relations, said “it’s completely unrealistic” to get a deal done this year.

“The notion that you’re going to have a negotiation that’s both fast and productive is just an illusion,” Alden added.

It’s also worth noting that the original NAFTA agreement, which became law in 1994, took years to put together.

Ross said Tuesday he hasn’t started the consultation period because U.S. Trade Representative Robert Lighthizer, a longtime trade expert, hasn’t been confirmed by the full Senate yet. (He was approved Tuesday by the Senate Finance Committee.)

But that’s not the only problem.

Mexican leaders want negotiations done by early 2018 because Mexico has presidential elections in July of next year. There’s no telling whether the next Mexican president will cooperate with Trump on NAFTA.

“It will be in the best advantage of the countries involved that we finish this negotiation within the context of this year,” said Mexico’s economic minister, Ildefonso Guajardo, to CNNMoney earlier this month.

Trump added a twist to talks on Monday, slapping a 20% tariff on Canadian softwood lumber. Experts say that won’t help Trump’s future trade negotiations with Canada.

“You’ve disturbed a lot of waters. It’s going to be a long negotiation,” says Gary Clyde Hufbauer, a trade expert at the Peterson Institute for International Economics. “Getting a deal done by early 2018 or the end of this year was wishful thinking.”

Canadian leaders denounced Trump’s decision, saying it was made on “baseless” accusations of government subsidies provided to Canadian lumber companies.

And Canada isn’t even Trump’s main target. Mexico is. Experts say Trump could use all the help he can get from Canada if he plans to strong arm Mexico.

Mexican and Canadian leaders say they’re ready to negotiate. They’re just waiting for Trump.

“We are ready to come to the table anytime, but the United States, in fact, has yet to actually initiate the negotiating process,” Canada’s Foreign Minister Chrystia Freeland told CNN on Tuesday.

The Commerce Department and the White House were not immediately available for comment.

–Jeremy Diamond contributed reporting to this article
Published at Wed, 26 Apr 2017 14:59:44 +0000

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Swamp Creatures Sack D.C.; and Fed Drops MOAB on Wall Street

Swamp Creatures Sack D.C.; and Fed Drops MOAB on Wall Street

  @lamonicabuzz


Wall Street and our central bank are in for a rude awakening very soon! The
idea that the US economy is on stable footing and about to experience a surge
in growth is ridiculous. Hence, the consensus that the Fed can normalize interest
rates and its balance sheet is nothing short of a bad joke…and it’s on them.

For starters, the government’s fiscal deficit for the month of March came
in at $176.2 billion, which means the deficit 6 months into fiscal 2017 is
$526.9 billion and running 15% over last year. If not for the calendar timing
of receipts and payments, our government’s deficit would be a year-to-date
$564.0 billion or 23% above last year. In addition, there was an 18% decline
in corporate income tax collection. We all know there was no corporate tax
reform passed. So the credible conclusion must be reached that corporations
are not growing there profits…they are actually shrinking.

The nation will now bump up against the $20 trillion debt ceiling on April
28th and is facing a possible government shutdown. This will happen to coincide
with day 100 of Trump’s Presidency.

Unfortunately, Trump resembles more like a swamp creature as the days go on.
Sadly, he becoming a flip-flopping carnival barker that duped the American
public into believing he was actually going to cause an earthquake in Washington
that shook the government back down to its constitutional foundation.

He no longer wants a strong dollar and an end to endless interest rate manipulations
that has been robbing the middle class of its purchasing power for decades.
Instead he’s become a Yellen supporting, bubble blowing, XM bank funding, NATO
backing, China loving, card carrying member of the neocons in D.C.

But even though Trump now loves low interest rates, the Fed has probably already
tightened monetary policy enough to send stocks into a bear market and the
already anemic US economy into recession. More proof of recession and deflation
came from the economic data released on Good Friday: CPI down 0.3% in March
and even the core rate fell 0.1%, Retail sales fell 0.2% in March and February
sales were revised sharply lower to minus 0.3%, from previously reported up
0.1%

Housing starts, Empire State Manufacturing and Industrial Production have
all recently disappointed estimates. Housing starts fell a very steep 6.8 percent
to a 1.215 million annualized rate. Empire State Manufacturing dropped from
16.4 in March, to just 5.2 in April and within Industrial Production, the manufacturing
component shrank to minus 0.4 percent.

The sad truth is Trump isn’t draining the swamp…he’s flooding it with more
of the same swamp creature from Goldman Sachs that have mucked up D.C. and
the Fed for decades.

The Fed is About to Drop the MOAB on Wall Street

The mystery here is why the Fed is raising rates when Q1 GDP growth is just
0.5%, there was under 100K net Non-Farm Payroll job growth and a negative reading
on both the headline and core rate of consumer price inflation?

Could it really be that Yellen realizes that savers must finally be rewarded
for putting money in the bank? Perhaps she has come to the conclusion that
asset bubbles must correct down to a level that can be supported by the free
market? If only that were true. What is much more likely is that the clueless
Fed has duped itself into believing it fixed the economy by its massive distortion
of interest rates (100 months of less than 1% Fed Funds Rate), which has forced
stock and home prices to record highs–and debt levels soaring to levels never
before seen.

Wall Street and the Fed (which is a charter member of the swamp club) have
been quick to explain this economic malaise away. The floundering GDP growth
is being explained by a perennially weak first quarter. March NFP growth of
just 98k is excused by the bad weather that occurred during the survey weak.
And negative CPI is being brushed aside by what the Fed hopes are just temporary
factors. But unless the data turns around quickly, the Fed’s days of tightening
monetary policy may have passed.

The economy won’t accelerate unless Trump is able to push through a massive
tax cut very soon. But that doesn’t look likely in the least. Most importantly,
keep in mind, the Fed has been tightening monetary policy since December 2013
when it began tapering QE. Now, after three rate hikes, the economy is teetering
on outright contraction and deflation.

What all this warrants is extreme caution in Bubbleville. With geopolitical
risk flashing bright red, half percent GDP growth, record high equity valuations
and a delusional Fed that continues threatening interest rate normalization;
the market’s reality check is surly imminent.


Michael Pento

Michael Pento, President
Pento Portfolio Strategies

Michael Pento

Michael Pento produces the weekly podcast “The
Mid-week Reality Check”
, is the President and Founder of Pento
Portfolio Strategies
and Author of the book ““The
Coming Bond Market Collapse
.”

PPS is a Registered Investment Advisory Firm that provides money management
services and research for individual and institutional clients.

Michael is a well-established specialist in markets and economics and a regular
guest on CNBC, CNN, Bloomberg, FOX Business News and other international media
outlets. His market analysis can also be read in most major financial publications,
including the Wall Street Journal. He also acts as a Financial Columnist for
Forbes, Contributor to thestreet.com and is a blogger at the Huffington Post.

Prior to starting PPS, Michael served as a senior economist and vice president
of the managed products division of Euro Pacific Capital. There, he also led
an external sales division that marketed their managed products to outside
broker-dealers and registered investment advisors.

Additionally, Michael has worked at an investment advisory firm where he helped
create ETFs and UITs that were sold throughout Wall Street. Earlier in his
career he spent two years on the floor of the New York Stock Exchange. He has
carried series 7, 63, 65, 55 and Life and Health Insurance Licenses. Michael
Pento graduated from Rowan University in 1991.

Copyright © 2011-2017 Michael Pento

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Published at Mon, 24 Apr 2017 08:06:32 +0000

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Trump to American steelworkers: I’ve got your back

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Blackstone CEO: Infrastructure most important for Trump
Blackstone CEO: Infrastructure most important for Trump

  @lamonicabuzz

President Trump and Commerce Secretary Wilbur Ross have a message for big American steel companies. We’ll protect you.

Ross said Thursday that the Commerce Department plans to launch an investigation into whether or not foreign steel companies, particularly those from China, are dumping steel on the U.S. market.

Ross argued that China is not acting in good faith to cut back on exports.

He said in a press conference that steel imports “have continued to rise, and they’ve continued to rise despite repeated Chinese claims that they were going to reduce their steel capacity when instead they have actually been increasing it consistently.”

Ross noted that steel imports are up nearly 20% so far this year and that foreign steel now makes up more than a quarter of the entire U.S. market. He said that has had “a very serious impact” on the domestic steel industry and that it could impinge on “our economic and national defense security.”

Shares of many American steel companies, including U.S. Steel(X), Nucor(NUE), Cliffs Natural Resources(CLF), AK Steel(AKS) and Steel Dynamics(STLD) all soared on the news, with some of the steel stocks climbing nearly 10%.

Steel Dynamics also reported solid earnings Wednesday and Nucor issued a strong report Thursday, further helping to lift the group.

The broader market was in rally mode too, thanks in large part to comments from Treasury Secretary Steven Mnuchin about the possibility of a tax reform plan being announced soon. The Dow surged nearly 200 points.

Ross told reporters that no firm decisions had been made yet about what the U.S. will do to try and make American steel more competitive.

But he did not rule out the possibility of tariffs, saying that the plan likely “won’t be to prohibit foreign imports, it just will be to change the price.”

Any moves by the Trump administration would be another example of the president’s desire to protect old school, blue collar U.S. industries, many of which have been laying off workers due to a combination of the effects of automation and globalization.

Trump has also pledged to try and help workers in hard hit sectors such as oil and coal mining.

Whether or not tariffs or other protectionist measures will actually boost any of these industries remains to be seen. But steel companies were quick to applaud the president.

U.S. Steel said in a statement that it is “pleased” that the president is launching a national security investigation into steel dumping.

“For too long, China and other nations have been conducting economic warfare against the American steel industry by subsidizing their steel industries, distorting global markets, and dumping excess steel into the United States” the company said.

U.S. Steel added that “tens of thousands of workers in the American steel industry, the industry’s supply chain and the communities in which our industry operates have lost their jobs due to unfair and illegal practices by foreign producers.”

And AK Steel CEO Roger Newport said in a statement that “we are hopeful that this action on behalf of our Administration will help us and other steel producers in America compete on an even playing field in all of our markets.”

Newport, U.S. Steel chief Mario Longhi and several other steel CEOs met with Trump at the White House on Thursday to discuss the state of the industry and the administration’s plans to crack down on steel dumping.

Trump and Ross need to tread cautiously though. If the U.S. clamps down too aggressively on Chinese steel, China could retaliate by slapping tariffs on American-made cars, electronics and other consumer goods.

China also owns more than $1 trillion worth of U.S. government bonds. China has been steadily trimming its Treasury holdings in recent months. If China ramps up the pace of its sales, that could send long-term bond yields sharply higher –something Trump would not want to see as he tries to stimulate the U.S. economy.

But Trump seems to recognize the need to be careful with China. He has already backed off his campaign pledge to label China a currency manipulator in his first few days in office for example.
Published at Thu, 20 Apr 2017 19:29:41 +0000

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U.S. Social Security reform: the clock is ticking

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U.S. Social Security reform: the clock is ticking

By Mark Miller| CHICAGO

Can you count on your Social Security benefits when retirement rolls around?

Most Americans worry about this – partly due to the nonsense they hear from political opponents of Social Security and ill-informed media. You will hear that the program is bankrupt, its reserves are nothing but a bunch of IOUs, or that Social Security is a Ponzi scheme.

All of those claims are false, but there is one good reason for concern. Social Security faces a long-term financial imbalance that would force sharp benefit cuts in 2034 unless the government makes changes. The problem stems from falling fertility rates and labor force growth – which reduces collection of payroll taxes that fund the system – and also from the retirement of baby boomers, which increases benefit costs.

Absent reform, Social Security could continue to pay roughly 75 percent of promised benefits. The cuts would mean that the typical 65-year-old worker could expect Social Security to replace 27 percent of pre-retirement income, down from 36 percent today, according to the Center for Retirement Research at Boston College.

No surprise, then, that only 37 percent of workers are “very or somewhat confident” that Social Security will be able to maintain current benefit levels in the future, according to survey research by the Employee Benefit Research Institute (EBRI) – although confidence is much higher among older workers and retirees.

From a math standpoint, potential solutions to the problem are straightforward. The cuts can be avoided through increased revenue, benefit reductions or some combination of the two. But the politics are another matter.

Republicans are far from holding a unified position on the issue. For example, U.S. Representative Sam Johnson, a Texas Republican who chairs the House Ways and Means subcommittee on Social Security, has proposed legislation containing two significant benefit cuts: gradually raising full retirement ages to 69 by 2030, and using a less generous annual cost-of-living adjustment formula known as the chained CPI.

Meanwhile, President Donald Trump has so far held to his campaign promise of opposing cuts. He has suggested that economic growth will solve the problem by stimulating wage growth and payroll tax collections – a position most economists dismiss as unrealistic.

 

REPUBLICAN ENTHUSIASM LACKING

The last major Republican reform proposal dates back to the George W. Bush administration, which proposed shifting the program to personal savings accounts – an idea that aroused Republican passion but that went down in flames.

“That was an idea that got people excited, but there hasn’t been much enthusiasm for Social Security reform among Republicans since then,” said Andrew Biggs, resident scholar at the conservative American Enterprise Institute. Biggs worked on Social Security reform as an associate director of the White House National Economic Council.

Meanwhile, Democrats are in no mood to work with the Trump administration on anything that forces a compromise on their core values – and they have shifted significantly to the left on Social Security reform. Representative John Larson has introduced legislation that would not only restore trust fund balance but expand benefits. That is by far the best approach, since roughly half of all households have saved less than $25,000, according to EBRI. Larson’s bill is cosponsored by more than 80 percent of the Democratic House caucus – more than any previous expansion bill.

The bill would increase benefits by 2 percent across the board, shift to a more generous annual cost-of-living adjustment that reflects spending by seniors and set a new minimum benefit at 25 percent above the poverty line. It also would cut taxes for millions of retirees by boosting significantly the threshold for taxation of benefits.

 

The plan raises revenue by gradually increasing the payroll tax rates that fund the program. The rate hikes would begin in 2019, and by 2042, workers and employers would pay 7.4 percent each, instead of the current 6.2 percent.

Larson, a Connecticut Democrat, also proposes changes to the payroll tax cap for very wealthy beneficiaries. Currently, payroll tax is collected only on wages up to $127,200; the plan would start collecting taxes again on wages above $400,000. That exempts more income than many earlier expansion plans, which either removed the cap entirely or resumed taxation at $250,000.

The payroll tax cap feature played an important role in boosting support for expansion legislation, according to Max Richtman, CEO of the National Committee to Preserve Social Security and Medicare, a progressive advocacy group that supports the bill. “It brought many of the more conservative Democratic legislators on board,” he said.

Of course, the Larson bill is going nowhere in the Republican-controlled Congress, so Social Security reform will not happen before the 2018 midterm elections at the earliest – and perhaps much later than that. But that does not mean beneficiaries should worry about draconian cuts in 2034.

Even if reform is not achieved by 2034, Biggs thinks the problem likely would be solved at the 11th hour through tax increases – simply because benefit cuts must be enacted and phased in over long periods to give beneficiaries time to adjust.

“If they were going to do this by cutting benefits, it should have been enacted 20 years ago,” he said. “If you want to do it by raising taxes you want to wait as long as possible, so that you get to the point where the only solution is to put more money into the program.”

But the uncertainty on Social Security policy will continue to undermine public confidence in the program – and that is worrying. Meanwhile, the clock is ticking.

 

(Editing by Matthew Lewis)
Published at Thu, 20 Apr 2017 14:29:27 +0000

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Top Reagan economist tells Trump: Cut taxes ASAP

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Trump signs 'Buy American, Hire American' order
Trump signs ‘Buy American, Hire American’ order

  @byHeatherLong

One of President Ronald Reagan’s top economic advisers has some blunt advice for President Trump: Put health care aside and focus on cutting taxes.

“Cut the corporate tax. Just do it,” economist Arthur Laffer told CNNMoney.

Trump really wanted a big win in his first 100 days in office, but the repeal of Obamacare failed spectacularly in March. Trump refuses to let it go. Last week, he stunned many by saying he still wants to “do health care first,” before tackling tax reform.

Laffer thinks that’s the wrong move. Laffer advised Trump during the campaign. He’s an informal counselor now, but he’s telling everyone in the White House who will listen to do what the Reagan team did: break up tax reform into small bits instead of trying to cram it all into one huge bill.

The easy win would be cutting business taxes, Laffer argues. It could even be done by August (the original deadline the White House set for action on taxes but has since backed away from).

“There’s no one who thinks a 35% federal corporate tax rate is appropriate,” Laffer says. He notes the U.S. has the highest tax rate on businesses out of any major economy in the world.

Trump proposed slashing business taxes to 15% on the campaign trail. Republican House Speaker Paul Ryan has pushed for a 20% top rate on business.

Republican economists tell Trump: Cut taxes ASAP

There’s a loud chorus of right-leaning economists telling Trump to drop health care and move on to tax cuts. In an Op-Ed in the New York Times on Wednesday, four of Trump’s top economic advisers from the campaign — Laffer, Steve Forbes, Larry Kudlow and Stephen Moore (a CNN contributor) — wrote, “Tax reform probably should have gone first, but now is the time to move it forward with urgency.”

The Op-Ed comes on the heels of Glenn Hubbard, President George W. Bush’s top economist, giving Trump that same advice back in March.

It’s notable though that Goldman Sachs(GS), the Wall Street firm that used to employseveral of Trump’s top advisers, now predicts tax cuts are “likely to slip to early 2018.”

The chorus of GOP economists says Trump should enact business tax cuts in 2017 and then tax reform for individuals in 2018.

Arthur Laffer says: Cut taxes but don’t cut spending yet

arthur laffer
Arthur Laffer was one of President Reagan’s key economic advisers. He also advised Trump during his campaign.

 

Laffer says the only reason Trump wants to tackle health care first is because overhauling Obamacare could generate more money for the U.S. Treasury. However, he argues Congress and the White House should stop obsessing about having tax cuts “paid for.” That would mean tax cuts do not add anything to America’s $19 trillion debt.

“The ‘pay for rule’ is the silliest rule I have ever heard in my life,” Laffer says. “You cannot balance the budget in the U.S. without growth.”

Laffer is telling Trump to cut taxes now and keep government spending about the same. The Trump Administration doesn’t appear to be heeding that advice. The White House is mulling deep cuts to the federal budget in order to fund an increase in military spending.

“Do not cut government spending right away. Wait until tax cuts have their effect on economic growth,” Laffer cautions.

How to revive Trump’s approval rating

Trump’s approval rating is just 41%, according to Gallup. That’s actually up from 35% a few weeks ago. But Laffer says Reagan faced something just as bad in his early years in the White House.

“Our first two years were a disaster,” Laffer says of the Reagan administration. He believes Trump will rebound if he gets back on track with tax cuts. “People criticized Reagan non-stop. Reagan made gaffes as well.”

President Reagan’s approval rating did hit a low of 35% as well, but that didn’t happen until 1983, two years into Reagan’s first term. During his first 100 days in office, Reagan had an approval rating of almost 70%.

Ronald Reagan approval ratings

 

The Kansas warning sign?

Laffer is a big champion of cutting taxes to spur growth. He’s often called the father of “supply-side economics” for his research on how cutting taxes can actually bring the government more revenue.

But Laffer’s theories have come under heavy criticism lately. Many point to Kansas, a state that cut taxes in 2012 and has since faced massive budget shortfalls and a floundering economy, as proof that Laffer is wrong.

Laffer says the real problem in Kansas is that Republican Governor Sam Brownback didn’t go far enough.

“The tax cut was too small. It was a rounding error,” Laffer told CNNMoney.
Published at Wed, 19 Apr 2017 16:59:15 +0000

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Trump rally challenged by rising global fears

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North Korea may be preparing 6th nuclear test
North Korea may be preparing 6th nuclear test

  @mattmegan5

The Trump rally was built on the president’s pledge to unleash the American economy. But now Wall Street is being forced to confront rising global tensions, the latest with an unpredictable North Korea.

Despite Monday’s market bounce, there are a growing number of signs that investors have become more worried about the increasingly-precarious geopolitical situation.

CNNMoney’s Fear & Greed Index is firmly in “fear” mode and even briefly tipped into “extreme fear” to start off the week. Gold, which typically does well when investors are worried, has popped 3% this month to the highest level since the election.

The closely-watched VIX(VIX) volatility index has spiked 24% so far in March, though it remains at relatively low levels.

Cash is fleeing to the safety of government bonds, driving down Treasury rates. The 10-year Treasury yield has slipped to 2.22%, a dramatic reversal from a month ago when it sat at 2.62%.

And even though the S&P 500 rose 0.5% on Monday, the market has retreated 2.5% below the record high set on March 1.

Wall Street veterans point the finger mostly at a growing list of geopolitical risks: North Korea, Syria, Russia and the elections in France, to name a few.

“Just in over a week, we bombed Syria, our relations have deteriorated with Russia, we dropped the largest non-nuclear bomb on ISIS in Afghanistan and tensions with North Korea have significantly escalated,” said Kristina Hooper, global market strategist at Invesco.

“It certainly heightens volatility and increases downside risk,” she said.

Investors are paying especially close attention to worsening rhetoric between Washington and Pyongyang over North Korea’s nuclear ambitions.

“Our hope is that we can resolve this issue peaceably,” Vice President Mike Pence told CNN on Monday from the Korean Demilitarized Zone.

But Pence also said the Trump administration is “going to abandon the failed policy of strategic patience” and “redouble” efforts to bring diplomatic and economic pressure on North Korea.

His comments come days after the Pentagon sent the USS Carl Vinson supercarrier along with a guided-missile cruiser and two destroyers to the region.

Wall Street fears a military conflict with North Korea, which has a massive army commanded by the notoriously-unpredictable leader Kim Jong Un.

“The building tensions with North Korea are frightening,” David Kelly, chief market strategist at JPMorgan Funds, wrote in a report to clients on Monday.

Kelly said these concerns about North Korea “would likely alarm investors more had the world not seen many similar episodes in the past.”

Wall Street had been anticipating the Trump administration would take an isolationist stance. Investors have understandably been caught off guard by how many global incidents Trump has been pulled into recently.

“Geopolitics regarding Syria and North Korea is still a big factor keeping bulls at bay,” Michael Block, chief market strategist at Rhino Trading, wrote in a report on Monday.

“The fear is palpable,” Block wrote.

There’s also the April 23 French presidential election. One of the leading candidates is Marine Le Pen, who wants France to dump the euro — a move that would deal a serious, if not fatal, blow to the currency.

Of course, Wall Street isn’t exactly freaking out about geopolitical risks. The Dow shrugged off the latest North Korean headlines to rally about 100 points on Monday.

And there are domestic obstacles that investors need to confront as well.

The Trump rally was underpinned by his promises of infrastructure spending and “massive” tax cuts that would lift corporate profits and potentially stimulate the domestic economy. But Republican infighting, first over health care and now taxes, has dashed those hopes.

If anything, Trump’s focus on global headaches could further stall the domestic agenda that had inspired Wall Street.

Hooper said the Trump administration’s goal of tax reform by August “seems highly unlikely” and the delay could force markets to tread water or even take a tumble.

“Clearly, the market has gotten ahead of itself,” she said.

Published at Mon, 17 Apr 2017 15:32:54 +0000

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Trump is dialing back his economic promises. Bigly

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Watch Trump's stunning U-turns on key issues
Watch Trump’s stunning U-turns on key issues

  @byHeatherLong

President Trump and his top advisers appear to have a new message for America: Lower your expectations.

Trump played up his image as a businessman and dealmaker who could rescue the U.S. economy. The day he was sworn in, he vowed to create 25 million new jobs — the most of any president in history — and double the growth of the Obama era (among other promises).

Wall Street has roared in anticipation, with the stock market hitting new heights. Over on Main Street, small business and consumer confidence hit multi-decade highs.

Now, reality is setting in for how much Trump can really get done (and how fast) on the economy.

The big tax reform that was supposed to be done by August? Don’t bet on it. White House Press Secretary Sean Spicer put it this way: “It still would be a great opportunity before they leave for August recess, but we’re going to make sure we do this right.”

Trump’s campaign promise to greatly reduce — or even eliminate — America’s federal debt? “That was hyperbole,” White House budget director Mick Mulvaney told CNBC Wednesday. “I’m not going to be able to pay off $20 trillion worth of debt in four years.”

Labeling China a currency manipulator on Day One? That’s not happening (not even on Day 100). “They’re not currency manipulators,” Trump told the Wall Street Journal Wednesday in a major U-turn. During the campaign, Trump had said China has the upper hand against American manufacturers because it keep its currency artificially low.

Repealing Obamacare and replacing it with something “something terrific”? That’s up in the air. His first attempt failed in March when he couldn’t gin up enough votes in Congress. Many business leaders hoped Trump would move on to tax cuts, but Trump surprised many by telling Fox Business on Tuesday, “I have to do healthcare first.” Now, confusion abounds on what the next priority is.

Fixing America’s “disastrous trade policies”? The White House has decided to study the issue. Commerce Secretary Wilbur Ross announced a 90-day comprehensive trade review at the end of March. Much of the “trade war” talk has been dialed back after Trump’s recent meeting with Chinese President Xi.

Spending $1 trillion on infrastructure? That’s unlikely. Mulvaney said he and top economic adviser Gary Cohn are “assuming a $200 billion number.”

“The Trump train appears to be coming off the tracks as the president backpedals on a number of issues,” says Mike O’Rourke, chief market strategist at Jones Trading.

Investors run to ‘safe haven’ assets again

There are also his flip flops on NATO (now he’s really for it), China’s trade surplus (he says he’ll give China more favorable trade terms if they help out on North Korea), Syria (now the White House wants regime change there) and Janet Yellen (he bashed her on the campaign trail for propping up the Obama economy. Now he says he “likes her” and that low interest rates are good).

All this dialing back of expectations is causing a reality check in the markets.

U.S. stocks have stalled — and even dipped — since the S&P 500 closed at an all-time high on March 1. Even more telling is how investors are stocking up on “safe haven” assets like gold and government bonds.

Gold has jumped 7% in the past month, and the 10-year U.S. Treasury bonds are now yielding a mere 2.26%, a significant decline from 2.58% a month ago. The yield goes down when more people are buying bonds.

The key might still be tax reform

Since the election, the consensus view has been that Trump would do a major tax cut/overhaul (the biggest since the 1986 reform under President Reagan), scale back regulations and spend more money on the military and infrastructure. All of this was supposed to juice the economy — and stocks.

But now that thesis is breaking down. Any action on taxes probably won’t happen until later this year — or even 2018. Infrastructure and the massive budget cuts Trump wants are in doubt, and Trump’s “get tough” foreign policy is causing some alarm that the U.S. could be headed for more war.

“The 30 Freedom Caucus members in the House have sent a chill through the Trump inner circle. It’s clear they can block much of the Trump agenda, and Democrats seem lukewarm, at best, about cooperating,” says Greg Valliere, chief strategist at Horizon Investments. “So Trump has to lower expectations.”

Valliere still believes the “pro-business” faction of the White House, led by Goldman Sachs alum Gary Cohn, will prevail.

Business owners from Wall Street to Main Street would probably forget (and forgive) a lot of Trump’s flip flopping and uncertainty if tax reform gets done. But all the indications are the White House and Congress are a long way from making that happen.

“We’re talking about revamping one of the most complicated tax systems in the developed world, which would understandably take time to draft and negotiate across party lines,” says Lindsey Piegza, chief economist at Stifel Fixed Income.
Published at Thu, 13 Apr 2017 19:02:46 +0000

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FCC Chairman Moves to Keep Ban on In-Flight Voice Calls

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FCC Chairman Moves to Keep Ban on In-Flight Voice Calls

By Mrinalini Krishna | April 11, 2017 — 2:36 PM EDT

The Federal Communications Commission (FCC) is moving to maintain a ban on use of cellular phones for mobile calls during flights. FCC Chairman Ajit Pai has set in motion a move to roll back the FCC’s earlier proposal to start allowing in-flight voice calls.

“I stand with airline pilots, flight attendants and America’s flying public against the FCC’s ill-conceived 2013 plan to allow people to make cellphone calls on planes. I do not believe that moving forward with this plan is in the public interest. Taking it off the table permanently will be a victory for Americans across the country who, like me, value a moment of quiet at 30,000 feet,” he said in a statement.

U.S. adopted the ban on cellular calls in 1991 fearing interference to the aircraft’s communication systems due to frequencies that cellular telephony would operate on. Technological advancements have overcome that obstacle.

In 2013, the then FCC Chairman, Tom Wheeler, had proposed allowing voice calls in flight based on that logic. “Modern technologies can deliver mobile services in the air safely and reliably, and the time is right to review our outdated and restrictive rules. I look forward to working closely with my colleagues, the FAA, and the airline industry on this review of new mobile opportunities for consumers,” Wheeler said in a press statement.

Not only did that make some airline customers uncomfortable, airlines and airline crews came out in opposition to the move. “Our customer research and direct feedback tell us that our frequent flyers believe voice calls in the cabin would be a disruption to the travel experience,” said Delta Airlines in a statement.

Some of Wheeler’s own colleagues in the government questioned his proposal.

“Over the past few weeks, we have heard of concerns raised by airlines, travelers, flight attendants, members of Congress and others who are all troubled over the idea of passengers talking on cellphones in flight – and I am concerned about this possibility as well,” said then Department of Transportation (DoT) Secretary Anthony Foxx in a statement the very next month.

In September 2015, DoT’s Advisory Committee for Aviation Consumer Protection recommended that “if safe and secure,” the department leave it to the airlines to decide on permitting in-flight voice calls. Eventually the DoT also began leaning in the direction of allowing voice calls. In December last year, however, it proposed requiring that airlines that choose to allow voice calls must disclose to passengers that they make this provision before the ticket is purchased.

“The Department is also seeking comment on whether disclosure is sufficient or whether it should simply ban voice calls on flights within, to, or from the United States,” said the DoT.

In its statement, the Transportation Department noted that as technology advances, the cost of in-flight calls will drop and the quality will improve – and that this communications ease could result in “leading to a higher prevalence of voice calls and a greater risk of passenger harm.”

Media reports suggest that every time a government agency has sought comments on rules pertaining to this subject, it has received negative feedback by the thousands. The most recent attempt according to this report by Wired, saw more than 8,000 people logging in and leaving comments for the DoT, mostly against permitting calls.

Airlines like Delta (DAL) and United Airlines (UAL) that allow passengers access to Wi-Fi continue to firmly stand their ground against voice calling.
Published at Tue, 11 Apr 2017 18:36:00 +0000

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Stocks spooked, safe assets jump after U.S. missile strike on Syria

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 Stocks spooked, safe assets jump after U.S. missile strike on Syria

By Nichola Saminather and Wayne Cole| SYDNEY

Bonds, gold and the yen jumped in Asia on Friday, while stocks retreated, as investors fled to safe assets after the United States launched cruise missiles against an airbase in Syria, raising the risk of confrontation with Russia and Iran.

The U.S. dollar dropped as much as 0.6 percent, while gold and oil prices rallied hard, though the early market panic ebbed when a U.S. official called the attack a “one-off”, with no plans for escalation.

“It was a knee-jerk reaction because markets are starting to come back a little, as it doesn’t seem like there will be further retaliation coming,” said Christoffer Moltke-Leth, head of institutional client trading at Saxo Capital Markets in Singapore.

European stocks were also poised for a negative start, with financial spreadbetters expecting Britain’s FTSE 100 and France’s CAC 40 to open down 0.2 percent, and Germany’s DAX to start the day 0.3 percent lower.

U.S. President Donald Trump ordered the strikes on Thursday against an airbase controlled by Syrian President Bashar al-Assad’s forces in retaliation for a chemical attack, launched from the base on Tuesday, that killed at least 70 people.

Facing his biggest foreign policy crisis since taking office in January, Trump took the toughest direct U.S. action yet in Syria’s six-year-old civil war.

A Syrian human rights monitor said the missile strike had almost completely destroyed the airbase near Homs, and the city’s governor said five had been killed and seven wounded.

While U.S. allies including Britain, Australia and Saudi Arabia, as well as Syria’s opposition group, welcomed the move, Russia and Iran condemned the attack.

A Russian lawmaker said the nation would call for an urgent meeting of the United Nations Security Council, adding the strikes could be viewed as an “act of aggression” against a U.N. member.

“The action adds a complexity to geopolitics that wasn’t there before, given Russia’s support for Syria and Trump’s pre-election pledges to try and repair relations with (Russian President Vladimir) Putin,” Michael Hewson, chief market analyst at CMC Markets in London, wrote in a note.

“The U.S. would now appear to be on a collision course with Russia.”

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4 percent after earlier sliding as much as 0.85 percent to a 2-1/2-week low. The index is set to end the week down about 0.2 percent.

E-mini S&P 500 futures lost 0.3 percent, having earlier tumbled as much as 0.7 percent, in unusually sharp moves for Asian hours.

But Japan’s Nikkei reversed course to close up 0.4 percent, narrowing losses for the week to 1.3 percent.

Secretary of State Rex Tillerson noted the attack was “proportionate”, suggesting no follow-up was planned.

“The unexpected and unequivocal nature of the U.S. response to the sarin-centric carnage in Syria by President Trump was very much in keeping with his promise not to telegraph his military options to the world in advance of taking action,” wrote Peter Kenney, senior strategist at Global Markets Advisory Group in New York.

Investors had already been on edge with Trump set to begin talks on Friday with Chinese leader Xi Jinping over flashpoints such as North Korea and China’s huge trade surplus with the United States.

Markets are also bracing for U.S. non-farm payroll data for March later in the session, with economists forecasting a significant drop in job gains from February.

HIGHS FOR OIL AND GOLD

The yen, a favored haven in times of stress, climbed across the board. The dollar moderated losses, last trading at 110.635 yen, after earlier touching 110.14, its lowest since March 28.

The dollar was otherwise steady against a basket of currencies at 100.63, as it benefited from flows into safe-haven U.S. Treasuries.

Yields on 10-year U.S. Treasuries fell as much as five basis points to 2.289 percent, its lowest level since November, briefly breaking a significant chart barrier at 2.30 percent for the first time this year. It was last at 2.3069 percent.

Spot gold added 1.2 percent to $1,262.46 an ounce after earlier hitting its highest point since Nov. 10.

Oil prices soared more than 2 percent on concerns the military intervention could affect supplies, but pulled back a little as that possibility receded.

U.S. crude added 1.6 percent to $52.50 a barrel, after touching its highest in a month, putting it on track for a 3.8 percent gain this week.

Global benchmark Brent climbed 1.4 percent to $55.66, set to end the week up 5.4 percent.

The euro was trading at $1.0651, just a hair above its close on Thursday following comments by the European Central Bank head Mario Draghi that he sees no need to deviate from the ECB’s stated policy path at least until the end of the year.

(Reporting by Nichola Saminather; Additional reporting by Charles Mikolajszak; Editing by Shri Navaratnam and Will Waterman)
Published at Fri, 07 Apr 2017 06:19:39 +0000

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Health Carriers Hanging Tough Despite D.C. Debacle

by DarkoStojanovic from Pixabay

 

Health Carriers Hanging Tough Despite D.C. Debacle

By Alan Farley | April 6, 2017 — 12:01 PM EDT

Health insurance carriers are holding intermediate support levels despite chaotic political swings that have generated massive opposition to Republican health care reform efforts. This resilient price action tells us investors and market players aren’t worried, at least yet, that industry profits will suffer when the smoke clears, and new legislation becomes the law of the land.

A number of major carriers have already pulled out of ACA coverage, lowering their exposure to legislative surprises, but that might not protect them because new laws are likely to impact the entire system from premium gathering to final payments. Also, taking insurance away from tens of millions of current policyholders could also have an adverse and chaotic effect because that entire premium base will be lost.

UNH

Dow component UnitedHealth Group, Inc. (UNH) broke out above the 2005 high at $64.61 in 2013 and entered a powerful trend advance that continued to post new highs into the first quarter of 2017. Rally momentum escalated after the November election, signaling optimism that new administration policies would underpin profitability. The company pulled out of ACA coverage in 2016.

It hit an all-time high at $172.14 on March 16th and turned lower, posting greater than average selling volume during Congressional negotiations that broke down near month’s end. The decline settled on the 50-day EMA about two weeks ago, with the stock holding like glue to that intermediate support level into April. The selloff had an adverse impact on institutional sponsorship, with On Balance Volume (OBV) falling to the lowest-low since January.

AET

Aetna, Inc.(AET) topped out at $60 in December 2007, following a 7-year uptrend, and sold off to the mid-teens during the 2008 economic collapse. It returned to the prior high in 2013 and broke out, entering an uptrend that peaked at $134.40 in June 2015, ahead of an intermediate correction that found support in the low-90s in the first quarter of 2016. The subsequent recovery wave reached resistance after the election, but the stock failed to break out, instead of turning lower into February.

A bounce at the 200-day EMA gathered momentum into mid-March but reversed about 2-points under the 2016 high, dropping back to the 50-day EMA during the health care debate. On Balance Volume (OBV) has been dropping like a rock since 2016, signaling a bearish divergence that opposes a bullish cup and handle breakout pattern. This marks a major bull-bear standoff that could last into the second half of 2017.

HUM

Humana, Inc.’s (HUM) pattern looks similar to rival AET because the companies were locked into a merger agreement until the Federal government nixed the deal in January 2017. HUM topped out in the upper-80s in January 2008 and sold off into the upper-teens in March 2009. It took more than two years for the subsequent bounce to reach resistance at the prior high, ahead of a 2014 breakout that stalled near $220 in May 2015.

The stock carved a long rounded base into the second half of 2016 and took off in a strong rally that reached the prior highs in December. It pulled back into January 2017, testing the 200-day EMA and returned to resistance once again, completing a cup and handle breakout pattern. The stock is also sitting on the 50-day EMA after the reform debacle but has attracted much strong buying interest than its former suitor.

The Bottom Line

Health insurance carriers have pulled back to their 50-day EMAs and entered holding patterns after the administration, and House of Representative failed to deliver health reform legislation to the U.S. Senate. While UnitedHealth Group has carved the strongest rally in recent years, Humana now shows the greatest upside potential, after completing a cup and handle pattern backed by strong buying volume.
Published at Thu, 06 Apr 2017 16:01:00 +0000

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The Case for Socialized Medicine

by DarkoStojanovic from Pixabay

The Case for Socialized Medicine

By: John Browne | Thu, Mar 30, 2017


Last week the American political establishment was shaken to its foundation
when the Republican Party leadership withdrew the American Health Care Act
(AHCA) just before the vote was to be taken on the floor of the House of Representatives.
Besides being a most unusual procedure, it exposed a fundamental split in the
country,reflected not merely in Congress but within the Republican Party. GOP
purists, represented by the House Freedom Caucus, demanded more significant
roll backs in socialized medicine that were contained in the Ryan plan. Their
refusal to back the plan, after years of promising complete repeal, doomed
the bill.

Given the political and popular landscape, the legislative fiasco should cast
serious doubt that Washington will ever be able to take any meaningful steps
to roll back government involvement in health care. Although widely considered
a failure of design and execution, Obamacare seems to have succeeded in one
important mission: It has created an even greater dependency on government
in the health care marketplace. Getting government out is now much more difficult
than it was just eight years ago. This may have been the democrats’ plan from
the start. As a result, the choice conservatives now face is to embrace an
increasingly complex, cumbersome, and inefficient public/private hybrid system,
or to acknowledge the political reality and make the most palatable lemonade
they can from the lemons that are available. Believe it or not, that may argue
for a deeper embrace of socialized medicine.

Contrary to the current rhetoric, Obamacare was not in fact America’s first
foray into socialized medicine and it did not represent the kind of crossed
Rubicon that Republicans like to accuse it of being. The door had first been
opened in the Second World War when government imposed wage controls that gave
incentives to employers to bundle health insurance into compensation packages.[1] When
the government then made employer-provided insurance tax deductible, such plans
became the norm. But the government really charged into the market in 1965
with the creation of Medicare and Medicaid. For many years, Republicans have
had to twist themselves into logical pretzels in order to argue that Obamacare
is socialism while Medicare is not.

In granting a brand new entitlement, Obamacare did nothing to address the
problems that have plagued the U.S. health care system for decades. It did
not encourage competition among insurers, it demanded a “one size fits all” approach
to coverage, and most egregiously did nothing to contain the rising medical
costs that threaten to bankrupt the nation. To add insult to injury, it required
that people buy insurance that they really didn’t want.

Although the Ryan plan removed the obligation of individuals to buy coverage,
it made many of Obamacare’s shortcomings worse. It left pre-existing condition
requirements in place, which would guarantee that premiums and deductibles
would continue to rise. It did not relax the state restrictions on insurance
competition, nor did it seek to contain medical costs. In other words, the
Ryan plan would have put Republicans on the same hook from which the Democrats
are now hanging. The alternative of a repeal without a replacement, so much
wished for by the hard right, would have created the kind of political chaos
that would virtually guarantee a Republican massacre in 2018 and 2020.

However, Republicans may still, for now, be able to lay claim as the party
of fiscal responsibility. And as a result, I would suggest a basic cost-benefit
analysis. It is clear from almost any standpoint that the socialized health
care available in other developed nations like the UK, Canada and the 34 developed
free market economies of the Organization for Economic Co-operation and Development
(OECD) delivers health care more efficiently than in the U.S.

In October 2012, PBS Newshour reported the U.S. as the world leader in cancer
treatment and health care research. Given our private wealth and the strength
of our university hospitals, this should come as no surprise. But what we have
gained in high end coverage, we have lost in everyday care. The same report
mentioned that there are only 2.4 practicing doctors and 2.6 hospital beds
per thousand people, which is far below the OECD averages of 3.1 and 3.4 respectively.
In addition, the American life expectancy is 78.7 years, in 2010, versus the
OECD average of 79.8 years. (Jason Kane, 10/22/12)

The World Bank reports that, in 2014, the U.S. spent 17.1% of GDP or $9,403
per person on health care. The UK spent 9.1% of GDP or $3,935 per head; Canada
10.4% or $5,292; the EU 10.0% or $3,613′. In 2000, despite spending approximately
twice the amount per head of any other nation, or group average of nations,
the World Health Organization rated the U.S. health system at only 37th, Canada
30th, and the UK 18th out of 191 nations. (WHO Global Health Expenditure Database)
Clearly, we are not getting what we think we are paying for.

Many OECD countries like the UK and Canada have what is termed a ‘single payer’
system sponsored by the state. In the UK, this means that the National Health
Service provides basic ‘bangers and mash’ coverage which includes provisions
for prior conditions and catastrophic illness. Yes, wait times to see a physician
for non-acute conditions are generally longer than in the U.S., but the bureaucratic
process of paying through insurance, with its never-ending forms, co-pays,
deductibles, and network providers, is largely absent.

In the UK, a thriving private health system that provides higher end ‘roast
grouse and soufflé’ services runs alongside the “bangers and mash” state system.
This means that wealthy people with access to greater resources can still seek
care above and beyond what is available through the state. But since the level
of base care is widely regarded as adequate, the two-tiered system does not
generate significant class resentment.

Furthermore, this system allows top specialists to continue serving in the
public system while supplementing their low state income with the higher fees
paid in their private practices. And while doctors in the UK generally make
less than their U.S. counterparts, they are also free of the crushing malpractice
insurance which tends to be a great equalizer.

I have lived for long periods of my life in the UK and the US, I have had
a good deal of exposure to the two health care systems. And while both offer
mixtures of public and private care, the UK’s is much closer to the type of
socialized medicine that has long been the goal of the American left. I have
always considered myself a conservative but the UK system seems preferable
to the monstrosity that has been created by Washington sausage making.

Of course any state system would involve rationing on some level. But if such
guidelines are developed democratically, public acceptance of such limits can
be achieved. By acquiescing to a move towards a single payer system, Republicans
would be in a strong position to ensure that cost containment would be a priority.
In that sense, conservatives could potentially strike at the root of the health
care problem: The inexorable rise in costs and the crushing burden that health
care currently places on the economy. Currently, the push for socialized medicine
has been the province of the Democrats, with the primary energy coming from
the extreme left figures such as Bernie Sanders and Elizabeth Warren. The worst
scenario for health care would be to allow such big spenders and class warriors
to set the agenda.

Given that many countries have succeeded in providing better overall health
care outcomes with universal coverage and at far less cost, it should not be
too much of a stretch for Congress to take the final step and accept an extension
of Medicare to all. Of course, taxes would have to increase to pay for it,
but citizens and businesses would no longer have to pay for insurance themselves.
If the cost of health care can be brought down, the net result is less money
for health care and more for everything else.

I have never been a fan of socialized anything. But in the modern world of
instantly diffused outrage and the increasing frustration with a health care
system that is clearly dysfunctional, Republicans should recognize the political
reality and seize the initiative. A soberly devised plan could vastly streamline
health care delivery, minimize waste, control costs, provide basic care for
all, and perhaps even deal a harsh blow to tort lawyers. Moderate Democrats
would jump on board in droves and President Trump and the Republican Congress
could emerge as winners.

Observers should not count President Trump as down. He has a reputation for
coming back. He may recognize a political winner when he sees it and look to
ditch the ideological baggage of his own party. Trump was not put into office
by card carrying conservatives but by middle class populists who would support
anything that makes their lives less anxious.

I believe that private enterprise always delivers higher quality and lower
prices than government. This is true for goods and services and it also would
be true for health care if the markets were allowed to function freely (which
they have not). But voters today do not perceive health care as a good or a
service, but as a right. Conservatives can argue this point, but they will
lose the emotional battle, which is where this fight will occur.


[1] – BERDINE, Gilbert.
Supply and Demand: Government Interference with the Unhampered Market in U.S.
Health Care. The Southwest Respiratory and Critical Care Chronicles, [S.l.],
v. 2, n. 7, p. 21-24, july 2014. ISSN 2325-9205. Available at: <http://pulmonarychronicles.com/index.php/pulmonarychronicles/article/view/143/353>.
Date accessed: 29 mar. 2017.

Read the original article at
Euro Pacific Capital


John Browne

John Browne, Senior Market Strategist
Euro Pacific Capital, Inc.

John Browne

John Browne is the Senior Economic Consultant for Euro Pacific
Capital, Inc. Mr. Brown is a distinguished former member of Britain’s Parliament
who served on the Treasury Select Committee, as Chairman of the Conservative
Small Business Committee, and as a close associate of then-Prime Minister Margaret
Thatcher. Among his many notable assignments, John served as a principal advisor
to Mrs. Thatcher’s government on issues related to the Soviet Union, and was
the first to convince Thatcher of the growing stature of then Agriculture Minister
Mikhail Gorbachev. As a partial result of Brown’s advocacy, Thatcher famously
pronounced that Gorbachev was a man the West “could do business with.” A graduate
of the Royal Military Academy Sandhurst, Britain’s version of West Point and
retired British army major, John served as a pilot, parachutist, and communications
specialist in the elite Grenadiers of the Royal Guard.

In addition to careers in British politics and the military,
John has a significant background, spanning some 37 years, in finance and business.
After graduating from the Harvard Business School, John joined the New York
firm of Morgan Stanley & Co as an investment banker. He has also worked
with such firms as Barclays Bank and Citigroup. During his career he has served
on the boards of numerous banks and international corporations, with a special
interest in venture capital. He is a frequent guest on CNBC’s Kudlow & Co.
and the former editor of NewsMax Media’s Financial Intelligence Report and
Moneynews.com. He holds FINRA series 7 & 63 licenses.

Copyright © 2008-2017 Euro Pacific
Capital, Inc.

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Published at Thu, 30 Mar 2017 09:16:16 +0000

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Investors yank $8.9 billion from U.S. stocks, most in 9 months

Photo

Growing concern over handling of GOP bill
Growing concern over handling of GOP bill

  @mattmegan5

Doubts about the future of President Trump’s agenda have put Wall Street on the defensive.

Investors have yanked $8.9 billion from U.S. stock funds during the week that ended March 22, according to research firm EPFR Global. That’s the biggest retreat since last June.

Some of the hardest-hit stocks were the ones that soared after the election. Investors pulled money from banks, manufacturers and small-cap stocks, which have the most exposure to the fluctuations of the American economy.

At the same time, the Dow has backed away from all-time highs, losing 250 points this week. The index is on track for its worst weekly performance since the week before Trump’s victory.

Analysts point the finger at Republicans’ struggles to pass a bill repeal and replace Obamacare. Investors fear that a failure on health care could delay or even derail Trump’s promise of “massive” tax cuts — a pledge that has underpinned the rally on Wall Street.

“The Trump trade was always going to have a ‘where’s the beef’ moment,” Bank of America Merrill Lynch strategists wrote in a report to clients.

BofA said failure to pass the health care bill is “unlikely to cause a ‘TARP moment,'” referring to the 9% crash in the S&P 500 after Congress initially rejected the Wall Street bailout package in September 2008.da

Still, BofA said health care failure could cause a “credibility hit” that “temporarily” pushes stocks and Treasury yields lower.

EPFR said the exodus from U.S. stocks is a sign that investors have taken a “turn towards the defensive” as they question whether the Trump administration “has the necessary focus and political skills to get its economic agenda through Congress.”

For instance, investors yanked $1.1 billion from small-cap stocks last week, the most in six months, according to EPFR. Small-cap stocks are typically based in the United States, and investors had hoped Trump’s America First agenda and promise of 4% economic growth would juice profits. But the Russell 2000, which measures small-cap stocks, has started to struggle and lost 2% of its value this week.

Likewise, industrial stocks, a group expected to benefit from Trump’s focus on trade, suffered their biggest outflows since mid-January.

Banks were another big winner after the election amid hopes of higher interest rates, which allow banks to make more money, and less regulation. But investors withdrew $600 million from financial stocks in the last week.

So where are investors putting their money instead?

Emerging markets and bonds benefited from the U.S. uncertainty, with both enjoying significant inflows in the past week.

Gold, which tends to do well during times of investor fear, is also going back into style. Investors poured $1.1 billion into gold funds in the last week.

Looking ahead, the key for Wall Street will be whether it looks like Trump and Republican leaders can quickly pivot from health care to tax reform.

Treasury Secretary Steven Mnuchin on Friday promised that Trump’s new tax reform plan is coming “very soon.” He expressed confidence that tax reform will happen this year, if not by August as he originally predicted then definitely by the fall.

But tax reform won’t be an easy deal, either.

The Trump rally is “dependent upon the delivery of tax reform,” David Kotok, chairman and chief investment officer of Cumberland Advisors, wrote in a note to clients.

“The longer that process takes and the more questionable the outcome, the higher the risk to stock prices,” Kotok wrote.
Published at Fri, 24 Mar 2017 18:20:44 +0000

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