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Will I pay taxes on my Social Security payouts?


Will I pay taxes on my Social Security payouts?

By Jean Folger | Updated June 9, 2017 — 5:30 PM EDT


Some people have to pay federal income taxes on the Social Security benefit they receive. Typically, this occurs only when individuals receive benefits and have other substantial sources of income from wages, self-employment, interest, dividends and/or other taxable income that must be reported on your tax return.

In accordance with Internal Revenue Service (IRS) rules, you won’t pay federal income tax on more than 85% of your Social Security benefits. The percentage of benefits for which you will owe income tax is dependent upon your filing status and combined income. If you:

  • File a federal tax return as an “individual” and your combined income is
    • Between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits
    • More than $34,000, up to 85% of your benefits may be taxable.
  • File a joint return, and you and your spouse have a combined income that is
    • Between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits
    • More than $44,000, up to 85% of your benefits may be taxable.
  • Are married and file a separate tax return, you will probably owe taxes on your benefits.

Note: the IRS defines combined income as your adjusted gross income, plus tax-exempt interest, plus half of your Social Security benefits. You will receive a Social Security Benefit Statement (From SSA-1099) each January detailing the amount of benefits you received during the previous tax year. You can use this when you complete your federal income tax return to determine if you owe income tax on your benefits. If you do owe taxes on your Social Security benefits, you can make quarterly estimated tax payments to the IRS or choose to have federal taxes withheld from your benefits.

Published at Fri, 09 Jun 2017 21:30:00 +0000

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What is ‘Brexit’

Brexit is an abbreviation for “British exit,” referring to the UK’s decision in a June 23, 2016 referendum to leave the European Union (EU). The vote’s result surprised pollsters and roiled global markets, causing the British pound to fall to its lowest level against the dollar in 30 years. Prime Minister David Cameron, who called the referendum and campaigned for Britain to remain in the EU, resigned the following month. Home Secretary Theresa May replaced Cameron as leader of the Conservative party and as Prime Minister. Following a snap election (skip to section) on June 8, 2017 she remains Prime Minister, but the Conservatives have lost their outright majority in Parliament.

“Leave” won the referendum with 51.9% of the ballot, or 17.4 million votes; “Remain” received 48.1%, or 16.1 million. Turnout was 72.2%. The results were tallied across the UK, but the overall result conceals stark regional differences: 53.4% of English voters supported Brexit, compared to just 38.0% of Scottish voters. Because England accounts for the vast majority of the UK’s population, support there swayed the result in Brexit’s favor. If the vote had only been conducted in Wales (where “Leave” also won), Scotland and Northern Ireland, Brexit would have received just 43.6% of the vote.

The process of leaving the EU formally began on March 29, 2017, when May triggered Article 50 of the Lisbon Treaty. The UK has two years from that date to negotiate a new relationship with the EU. Questions have swirled around the process, in part because Britain’s constitution is unwritten and in part because no country has left the EU using Article 50 before (Algeria left the EU’s predecessor through its independence from France in 1962, and Greenland – a self-governing Danish territory – left through a special treaty in 1985). (See also, Countdown to Brexit: What Is Article 50?)


“Leave” voters base their support for Brexit on a variety of factors, including the European debt crisis, immigration, terrorism and the perceived drag of Brussels’ bureaucracy on the British economy. Britain has long been wary of the European Union’s projects, which Leavers feel threatens the UK’s sovereignty: the country never opted into the European Union’s monetary union, meaning that it uses the pound instead of the euro. It also remained outside the Schengen Area, meaning that it does not share open borders with a number of other European nations.

Opponents of Brexit also cite a number of rationales for their position. One is the risk involved in pulling out of the EU’s decision-making process, given that it is by far the largest destination for British exports. Another is the economic and societal benefits of the EU’s “four freedoms”: the free movement of goods, services, capital and people across borders. A common thread in both arguments is that leaving the EU would destabilize the British economy in the short term and make the country poorer in the long term.

British exports by destination, 2015 (total = $428 billion)

Source: MIT Observatory of Economic Complexity

Some state institutions backed the Remainers’ economic arguments: Bank of England governor Mark Carney called Brexit “the biggest domestic risk to financial stability” in March 2016 and the following month the Treasury projected lasting damage to the economy under any of three possible post-Brexit scenarios: European Economic Area (EEA) membership such as Norway has; a negotiated trade deal such as the one signed between the EU and Canada in October 2016; and World Trade Organization (WTO) membership.

Annual impact of leaving the EU on the UK after 15 years (difference from being in the EU)
EEA Negotiated bilateral agreement WTO
GDP level – central -3.8% -6.2% -7.5%
GDP level -3.4% to -4.3% -4.6% to -7.8% -5.4% to -9.5%
GDP per capita – central* -£1,100 -£1,800 -£2,100
GDP per capita* -£1,000 to -£1,200 -£1,300 to -£2,200 -£1,500 to -£2,700
GPD per household – central* -£2,600 -£4,300 -£5,200
GDP per household* -£2,400 to -£2,900 -£3,200 to -£5,400 -£3,700 to -£6,600
Net impact on receipts -£20 billion -£36 billion -£45 billion
Adapted from HM Treasury analysis: the long-term economic impact of EU membership and the alternatives, April 2016; *expressed in terms of 2015 GDP in 2015 prices, rounded to the nearest £100.

Leave supporters tended to discount such economic projections under the label “Project Fear.” A pro-Brexit outfit associated with the UK Independence Party (UKIP), which was founded to oppose EU membership, responded by saying that the Treasury’s “worst-case scenario of £4,300 per household is a bargain basement price for the restoration of national independence and safe, secure borders” (the worst-case scenario was in fact £6,600).

Leavers tended to stress issues of national pride, safety and sovereignty, but they would also muster economic arguments. For example Boris Johnson, who was mayor of London until May 2016 and became Foreign Secretary when May took office, said on the eve of the vote, “EU politicians would be banging down the door for a trade deal” the day after the vote in light of their “commercial interests.”

Vote Leave, the official pro-Brexit campaign, topped the “Why Vote Leave” page on its website with the claim that the UK could save £350 million per week: “we can spend our money on our priorities like the NHS [National Health Service], schools, and housing.” In May 2016 the UK Statistics Authority, an independent public body, said the figure is gross rather than net, “is misleading and undermines trust in official statistics.” A mid-June poll by Ipsos MORI, however, found that 47% of the country believed the claim. The day after the referendum Nigel Farage, who co-founded UKIP and led it until that November, disavowed the figure and said that he was not closely associated with Vote Leave. May has also declined to confirm Vote Leave’s NHS promises since taking office.

Market Reactions

The referendum’s result severely impacted markets worldwide, though in some cases the effects were short-lived. The British pound crashed by 11.1% against the dollar – its biggest-ever one-day fall – before paring its losses to 8.1%. It has since fallen farther, and at the end of May it was down 12.8% from its June 23 close to $1.2905.

The euro also fell against the dollar on the referendum’s result, dropping 4.2%. It recovered before close, but continued to slide in response to Brexit as well as other challenges: Italy’s rejection by referendum of constitutional reforms, fears that the euroskeptic Marine Le Pen could win the French election and continuing anxiety over the Greek bailouts.

Equities also fell as a result of the vote, but in contrast to the pound and euro, the damage reversed itself fairly quickly. London’s FTSE 100 fell 8.7% and closed down 3.1% on June 24. Germany’s DAX fell 10.1% and closed down 6.8%. The S&P 500 fell 3.8% and closed down 3.6%. Shares in British, German, Irish, Italian and Greek banks took double-digit hits. American banks also swooned, though less intensely. As of the end of May, however, the FTSE, DAX and S&P are all up by more than 14%. American banks have more than recovered due to optimism about a Trump-era cull of financial regulation.

The End of Britain? Scotland’s Independence Referendum

Politicians in Scotland have pushed for a second independence referendum in the wake of the Brexit vote, but the results of the June 8 election have cast a pall over their efforts. Not one Scottish local area voted to leave the EU, according to the UK’s Electoral Commission, though Moray came close at 49.9%. The country as a whole rejected the referendum by 62.0% to 38.0%. Because Scotland only contains 8.4% of the UK’s population, however, its vote to Remain – along with that of Northern Ireland, which accounts for just 2.9% of the UK’s population – was vastly outweighed by support for Brexit in England and Wales.

Scotland joined England and Wales to form Great Britain in 1707, and the relationship has been tumultuous at times. Founded in the 1930s, the Scottish National Party (SNP) did not win a seat in Westminster until 1970. By 2010 it had just 6 seats, but the following year it formed a majority government in the devolved Scottish Parliament at Holyrood, partly owing to its the promise to hold a referendum on Scottish independence.

That referendum, held in 2014, saw the pro-independence side lose with 44.7% of the vote; turnout was 84.6%. Far from putting the independence issue to rest, though, the vote fired up support for the nationalists. The SNP won 56 of 59 Scottish seats at Westminster the following year. Once-dominant Scottish Labour’s seat count plummeted from 41 to one (the Liberal Democrats and Scottish Conservatives also took one seat each). The SNP overtook the Lib Dems to become the third-largest party in the UK overall, and Britain’s electoral map suddenly showed a glaring divide between England and Wales, dominated by Tory blue with the occasional patch of Labour red, and all-yellow Scotland.

When Britain voted to leave the EU, Scotland fulminated. A combination of rising nationalism and strong support for Europe led almost immediately to calls for a new independence referendum. When the Supreme Court ruled on November 3 that devolved national assemblies such as Scotland’s parliament cannot veto Brexit, the demands grew louder. On March 13 SNP leader Nicola Sturgeon called for a second referendum, to be held in the autumn of 2018 or spring of 2019. Holyrood backed her by a vote of 69 to 59 on March 28, the day before May’s government triggered Article 50.

Sturgeon’s preferred timing is significant, since the two-year countdown initiated by Article 50 will end in the spring of 2019, when the politics surrounding Brexit could be particularly volatile. May’s government is likely to try to push the vote to a later date, if it allows it to be held at all.

The snap election on June 8 threw a wrench into the SNP’s independence push, however. The party won only 35 seats; the anti-independence Scottish Tories, which won 13 seats, accounted for most of the SNP’s lost representation.

What Would Independence Look Like?

Even independence, however, might not allow Scotland to avoid “being dragged out of the EU against its will,” as the SNP’s website describes Brexit. According to the Press Association’s Arj Singh, EU Commission spokesman Margaritis Schinas responded to Sturgeon’s mid-March announcement by saying that Scotland would have to apply to join the EU, rather than remaining a member. Scotland’s bid would face the threat of a veto from Spain, which wants to avoid sending pro-independence messages to the restive autonomous region of Catalonia.

Scotland’s economic situation also raises questions about its hypothetical future as an independent country. The crash in the oil price has dealt a blow to government finances. In May 2014 it forecast 2015-2016 tax receipts from North Sea drilling of £3.4 billion to £9 billion, but collected £60 million, less than 1.0% of the forecasts’ midpoint. In reality these figures are hypothetical, since Scotland’s finances are not fully devolved, but the estimates are based on the country’s geographical share of North Sea drilling, so they illustrate what it might expect as an independent nation.

The debate over what currency an independent Scotland would use has been revived. Former SNP leader Alex Salmond, who was Scotland’s first minister until November 2014, told the Financial Times on March 17 that the country could abandon the pound and introduce its own currency, allowing it to float freely or pegging it to sterling. He ruled out joining the euro, but others contend that it would be required for Scotland to join the EU. Another possibility would be to use the pound, which would mean forfeiting control over monetary policy.

June 2017 General Election

On April 18 May called for a snap election to be held on June 8, despite previous promises not to hold one until 2020. Polling at the time suggested May would expand on her on her slim Parliamentary majority of 330 seats (there are 650 seats in the Commons, so 326 seats are needed to form a majority). Labour gained rapidly in the polls, however, aided by an embarrassing Tory flip-flop on a proposal for estates to fund end-of-life care.

As of June 9 the Conservatives have lost their majority, winning 318 seats to Labour’s 261. The Scottish National Party won 35, with other parties taking 35. The resulting hung Parliament has cast doubts on May’s mandate to negotiate Brexit and led the leaders of Labour and the Liberal Democrats to call on May to resign.

Speaking in front of the Prime Minister’s residence at 10 Downing Street, May batted away calls for her to leave her post, saying, “It is clear that only the Conservative and Unionist Party” – the Tories’ official name – “has the legitimacy and ability to provide that certainty by commanding a majority in the House of Commons.” Reports on June 9 indicated that the Conservatives had struck a deal with the Democratic Unionist Party of Northern Ireland, which won 10 seats, to form a coalition.

Implications for Brexit

May presented the election as a chance for the Conservatives to solidify their mandate and strengthen their negotiating position with Brussels. Having lost their majority, that position appears weaker. It remains uncertain whether the new government will be able to stick to the Brexit goals it laid out in its manifesto: cutting annual net immigration to the tens of thousands – from 248,000 in 2016 – and pursuing a “hard Brexit,” that is, leaving the EU’s single market and customs union. The Tories have promised to walk away from negotiations, arguing that “no deal” is better than a bad one. They have also proposed a “Great Repeal Bill” which, despite the name, would write all applicable EU law into British law while ending the EU’s ability to effect British law through the European Communities Act.

Labour, which according to Corbyn “won this election,” has criticized the Conservatives’ immigration targets and argued that “‘no deal’ is not a viable option.” The party has opposed the Great Repeal Bill – apparently treating as though its name matched its function – and promised instead to pass “an EU Rights and Protections Bill that will ensure there is no detrimental change to workers’ rights, equality law, consumer rights or environmental protections as a result of Brexit.”

Following the election, the government’s Brexit position may soften. Some interested parties see an opening: the day after the election, the Freight Transportation Association said the government should consider staying in the EU’s customs union, given the “lack of a clear mandate from British voters.”

European leaders deliver muted, if mixed reactions to the election’s results. The British government’s weaker position could benefit them, but it could also gum up the process by intensifying British domestic squabbles. The focus appears to be on timing: “We are ready to start negotiations,” European Commission president Jean-Claude Juncker told Politico after the election. “I hope that the British will be able to form as soon as possible a stable government. I don’t think that things now have become easier but we are ready.”

Michel Barnier, Europe’s chief Brexit negotiator, tweeted a slightly less hurried message, but made it clear that timing was on his mind: ““#Brexit negotiations should start when UK is ready; timetable and EU positions are clear. Let’s put our minds together on striking a deal.”

Article 50 sets out an extremely narrow two-year window to negotiate an exit agreement and an agreement governing the UK and Europe’s future relationship. CETA, a trade pact between Canada and the EU, is not yet in force after nearly nine years. Its signing was held up for weeks in 2016 when the Walloon regional parliament in Belgium threatened to veto it. Fear is rife that any of Europe’s 38 regional and national parliaments could similarly delay or torpedo a Brexit deal. If a deal cannot be reached by the spring of 2019, the 27 EU member states must decide unanimously to extend the two-year Article 50 deadline, or Britain will depart on WTO terms (see below).

Longer-Term Effects

Because the exit process could stretch for two years, predictions about Brexit’s future impact on British citizens are mostly speculation; however, experts suggest that Brexit is likely to mean slower economic growth for the country. A slowdown in investments may also lead to fewer jobs, lower pay and higher unemployment rates. Britain relies on the EU as an export market far more than the EU relies on Britain. The absence of seamless access to European markets may also mean fewer exports and foreign investments. Additionally, consumers and employers reacting to “doom and gloom” news about Brexit’s potential fallout alone may contribute to an economic slowdown as companies hire fewer people and consumers spend less money.

In particular, slowed growth in Britain would translate to contraction in Ireland, since exports of goods to the United Kingdom account for nearly one-third of Ireland’s total output. The flow of Irish labor to the United Kingdom might be curbed, which would in turn exert pressure on Irish wages as more people compete for fewer jobs.

Michael Bloomberg, former mayor of New York City and founder of Bloomberg News, pointed out the EU could penalize Britain, imposing harsh limitations, to deter other member states from following its example.

Capital Economics, a research consultancy, stated that Britain’s exit could result in “looser monetary conditions” around the world. According to the firm, Britain’s exit could prolong the European Central Bank’s (ECB) bond-buying program and even increase its size. Similar easing could occur in Britain: “The Bank of England is likely to keep interest rates low for longer and, if necessary, may even announce further policy easing,” an analyst at the firm wrote in a note.

Sterling could continue to take a pounding. If Britain can no longer rely on continental Europe for barrier-free trade and mobility, there is a strong chance that capital will leave the country to avoid getting stuck there. In other words, investors may sell pounds (or pound-denominated assets) to purchase those denominated in dollars, euros, or francs. A sharp fall could last for longer than anticipated as politicians and deal makers try to establish new trade agreements and economic pacts that can take many months or even years to ratify.

Furthermore, if the domestic economy of the UK does slip into recession, it will keep the Bank of England from raising interest rates to protect the currency, further compounding the problem.

Upsides for Some

On the other hand, a weak currency that floats on global markets can be a boon to UK producers who export goods. Industries that rely heavily on exports could actually see some benefit. In 2015, the top 10 exports from the UK were (in USD):

  1. Machines, engines, pumps: US$63.9 billion (13.9% of total exports)
  2. Gems, precious metals: $53 billion (11.5%)
  3. Vehicles: $50.7 billion (11%)
  4. Pharmaceuticals: $36 billion (7.8%)
  5. Oil: $33.2 billion (7.2%)
  6. Electronic equipment: $29 billion (6.3%)
  7. Aircraft, spacecraft: $18.9 billion (4.1%)
  8. Medical, technical equipment: $18.4 billion (4%)
  9. Organic chemicals: $14 billion (3%)
  10. Plastics: $11.8 billion (2.6%)

Some sectors are prepared to benefit from an exit. Multinationals listed on the FTSE 100 are likely to see earnings rise as a result of a soft pound. A weak currency may also benefit tourism, energy and the service industry.

In May 2016, the State Bank of India (SBIN.NS), India’s largest commercial bank, suggested that the Brexit will benefit India economically. While leaving the Eurozone will mean that the UK will no longer have unfettered access to Europe’s single market, it will allow for more focus on trade with India. India will also have more room for maneuvering if the UK is no longer abiding by European trade rules and regulations.

Britain’s Next Moves

The June 2016 referendum itself was touted as a way to give the British people a say in the matter and the House of Commons voted to conduct it. Once Article 50 is invoked, it sets a two-year process starting in March 2017 for the UK to negotiate the conditions of leaving with the remaining 27 countries in the EU, each of which then needs to obtain approval from its parliament. Trade agreements will also be negotiated.

The latest data has the EU accounting for 48% of UK exports and 51% of its imports. What are the options the UK will have when finalizing its potential divorce with the EU?

The Norway Model: Join the EEA

The first option would be for the UK to join the European Economic Area (EEA). The EEA promotes free trade and the movement of goods via the EU “Single Market.” On the face of it the cost to the UK to join the EEA may be small; however, there are problems. Joining the EEA would require the UK to pay into the EU, but it would relinquish any say in the laws and regulations set because it would be giving up voting rights in the European Council and the European Parliament. The British Treasury sees a Norway-style agreement as causing the least economic harm, but this also conflicts with the Brexiters’ demand of “dealing on our own terms.”

Pro-Brexit politician Nigel Farage of the UK Independent Party believes the Norway model would be a step back for Britain. “We are a country of 65 million people. If Norway, Iceland and Switzerland can get deals that suit them, we can do something far, far better than that,” Farage said in an interview with BBC.

Lastly, and maybe most importantly, joining the EEA would mean the UK would have to accept the free movement of people, which would conflict with Brexiters stance on immigration.

The Swiss Model: Bilateral Trade Agreements

Switzerland’s model is similar to the Norway model in that Britain would retain certain economic ties with the EU but with little say in negotiations and laws. The difference is that under the Swiss model, the UK would have to sign bilateral trade agreements with every other country individually, which becomes clunky as each trade agreement usually requires renegotiating every few years.

The size of the Switzerland economy makes this model a little easier for the Swiss. Switzerland’s GDP is around $700 billion compared to the UK’s, which is just shy of $3 trillion.

The Canada Model: Bilateral Trade Agreements with Strict Rules

A third option is to copy the Canadian model. Together, Canada and the EU are in the midst of negotiating the Comprehensive Economic and Trade Agreement (CETA), but it is yet to be signed into law. If the UK leaves itself just two years to sign trade agreements, the Canada approach may not be as feasible as many people think. CETA agreement negotiations have lasted seven years already.

What Brexiters are overlooking is what Canada is giving up, or more importantly what Canada can afford to give up. Canada already enjoys free trade with the United States via the North American Free Trade Agreement (NAFTA). So with NAFTA already in place the importance of a trade agreement with the EU is not as important for Canada as it would be for the UK. Moreover, CETA does not include financial services, which is a substantial part of the UK’s trade with the EU.

WTO: Go It Alone

You want out? You’re out. A full break from the EU and the UK relying solely on the World Trade Organization (WTO) in dealing with the EU would be the most conclusive split with the EU and access to the EU’s “Single Market.” It would be a true go-it-alone approach. The UK would have no requirements for the movement of people in the EU (the pro-Brexit main argument); they would have no obligations to pay money into the EU budget, and the UK would have to renegotiate its co-operation on crime and terrorism with the rest of the EU.

Not only would the UK be giving up its trade agreement with the EU, but it would also surrender trade agreements with 53 other countries it is entitled to via the EU’s Free Trade Agreement.

While the WTO has frameworks to ensure there is no discrimination between countries when organizing trade deals, there is a danger that, if after two years the UK hasn’t negotiated individual agreements and there is no extension under Article 50, then the UK would fall back on the basic WTO agreements the EU has with its other trading partners. One part of the standard agreement is a common tariff the EU has on all countries with no prior agreement. The 10% tariff on all imported cars to the EU would be a financial disaster for Britain.

Impact on the U.S.

Companies in the U.S. across a wide variety of sectors have made large investments in the UK over many years. American corporations have derived 9% of global foreign affiliate profit from the United Kingdom since 2000. In 2014 alone, U.S. companies invested a total of $588 billion into Britain. The U.S. also hires a lot of Brits. In fact, U.S. companies are one of the UK’s largest job markets. Output of U.S. affiliates in the United Kingdom was $153 billion in 2013. The United Kingdom plays a vital role in corporate America’s global infrastructure from assets under management, international sales and research and development (R&D) advancements. American companies have viewed Britain as a strategic gateway to other countries in the European Union. Brexit will jeopardize the affiliate earnings and stock prices of many companies strategically aligned with the United Kingdom, which may see them reconsider their operations with British and European Union members.

American companies and investors that have exposure to European banks and credit markets may be affected by credit risk. European banks may have to replace $123 billion in securities depending on how the exit unfolds. Furthermore, UK debt may not be included in European banks’ emergency cash reserves, creating liquidity problems. European asset-backed securities have been in decline since 2007. This decline is likely to intensify now that Britain has chosen to leave.

The day after the vote, the British pound dropped to historic 30-year lows against the dollar. Moreover, weakness in the pound could be contagious and affect the euro as well. A weaker British pound and euro will likely hurt the bottom line of U.S. export companies doing business with customers in the United Kingdom and European Union, as the cost for American products and services would increase, tempering demand.

Jim O’Sullivan, chief economist at High Frequency Economics, said Brexit would not have major impact for the U.S. public outside of financial markets. “But a significant impact on Wall Street would negatively affect confidence on Main Street,” he wrote shortly after the vote, adding that the firm had not “seen anything thus far to suggest a major impact on the U.S. banking system, especially given the starting point of high capital ratios, as was evident in the annual stress test results released yesterday.”

Who Will Be Next to Leave the EU?

In 2013, former Prime Minister David Cameron promised an in-out referendum on EU membership if his Conservative party won the 2015 election. He said the referendum would be held by the end of 2017, following a renegotiation of the terms of Britain’s relationship with the bloc. At the time, the promise was widely seen as a bid to outflank the UK Independence Party (UKIP), an outfit that was focused almost entirely on ending Britain’s EU membership. A BBC report at the time quoted former Labour leader Ed Miliband, who accused Cameron of “running scared” from UKIP.

Cameron won the battle. The Tories earned a resounding victory in the 2015 general elections, holding UKIP to just one seat, practically banishing their erstwhile coalition partners the Lib Dems from Parliament and shaving Labour’s representation by around 10%. But Cameron – and to an extent the Tories – lost the war. After wrenching the euroskeptic issue from UKIP he found himself forced to put on a tough façade in negotiations with Europe, declare victory after extracting a few concessions, then campaign to stay in the EU based on this “new settlement.” The process struck voters on both sides of the Brexit debate as political theater. When the UK voted to leave, Cameron resigned. His party, now led by Theresa May, called an election based on the impression that Labour did not offer effective opposition. Instead of gaining, however, the Tories lost seats and have been forced to enter into a coalition.

Electoral wrangling over Europe is familiar in several other European countries. Most EU members have strong euroskeptic movements that, while they have so far struggled to win power at the national level, heavily influence the tenor of national politics. In a few countries, there is a chance that such movements could secure referendums on EU membership.

In May 2016, global research firm IPSOS released a report showing that a majority of respondents in Italy and France believe their country should hold a referendum on EU membership.


Matteo Salvini, the head of Italy’s Northern League, called for a referendum on EU membership hours after the vote, saying, “This vote was a slap in the face for all those who say that Europe is their own business and Italians don’t have to meddle with that.” The Northern League has an ally in the populist Five Star Movement (M5S), whose founder, former comedian Beppe Grillo, has called for a referendum on Italy’s membership in the euro – though not the EU. The fragile Italian banking sector has driven a wedge between the EU and the Italian government, which has provided bail out funds in order to save mom-and-pop bondholders from being “bailed-in,” as EU rules stipulate.


Marine Le Pen, the leader of France’s euroskeptic National Front (FN), hailed the Brexit vote as win for nationalism and sovereignty across Europe: “Like a lot of French people, I’m very happy that the British people held on and made the right choice. What we thought was impossible yesterday has now become possible.” She lost the French presidential election to Emmanuel Macron in May 2017, gaining just 33.9% of votes in the second round. (See also, What the French Election Means for Europe.)


Published at Fri, 09 Jun 2017 16:46:00 +0000

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Exclusive: Trump administration concerned about U.S. firms giving financial ‘lifeline’ to Venezuela


Exclusive: Trump administration concerned about U.S. firms giving financial ‘lifeline’ to Venezuela

By Matt Spetalnick and Girish Gupta| WASHINGTON


The Trump administration is concerned about any action by U.S. companies that provides a financial lifeline to Venezuela’s government, senior White House officials told Reuters, after Goldman Sachs Group Inc came under fire for purchasing $2.8 billion of state oil company bonds at a steep discount.


Venezuela’s political opposition and some U.S. lawmakers have condemned the purchase of so-called “hunger bonds” as a way to prop up President Nicolas Maduro’s cash-strapped government, accused of being behind food shortages affecting millions of Venezuelans in a worsening crisis.


The New York-based investment bank said last week that it never transacted directly with Venezuelan authorities when it bought the bonds of oil firm PDVSA for pennies on the dollar.


“We’re concerned by anything that provides a lifeline for the status quo,” one U.S. official, speaking on condition of anonymity, told Reuters. “I would prefer them not to.”


A second administration official said U.S. companies making Venezuela investments should “think morally about what they’re doing.”


The officials said they did not know whether the Trump administration had made its case directly to Goldman Sachs.


Goldman Sachs did not respond to a request for comment.


Julio Borges, head of Venezuela’s opposition-led Congress, accused Goldman Sachs on Monday of “aiding and abetting the country’s dictatorial regime.”


In a letter to Goldman Sachs President Lloyd Blankfein, Borges said Congress would open an investigation into the transaction and he would recommend “to any future democratic government of Venezuela not to recognize or pay these bonds.”


Eliot Engel, the senior Democrat on the House of Representatives Foreign Affairs Committee, urged President Donald Trump on Friday to condemn Goldman Sachs for the bond purchase.


The Trump administration, which has several former Goldman Sachs executives in senior roles, has yet to officially comment on the issue.


Engel said the bond purchase allowed Maduro and his associates to “regularly abuse the human rights of Venezuelan citizens while at the same time blocking their access to much-needed food and medicine.”


Venezuela’s opposition won control of the legislature in a 2015 election, but the pro-government Supreme Court has annulled all its measures and essentially stripped its powers. The country has been engulfed in two months of anti-government unrest, which has left more than 60 people dead on both sides.


Maduro’s government says the United States and Venezuela’s opposition are seeking to oust him from power.


With Venezuela’s inefficient state-led economic model struggling under lower oil prices, Maduro’s unpopular government has become ever more dependent on financial deals or asset sales to bring in coveted foreign exchange. Venezuela’s international reserves rose by $749 million on Thursday and Friday, reaching around $10.86 billion, according to the central bank.


(Reporting by Matt Spetalnick and Girish Gupta; Editing by Yara Bayoumy and Mary Milliken)

Published at Sun, 04 Jun 2017 05:13:30 +0000

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Fed signals June rate hike likely


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

Fed signals June rate hike likely


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


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


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


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


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


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


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

Billionaire joins Twitter to fight media


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


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


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.


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.


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


NAFTA explained
NAFTA explained


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


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

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 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

All Images, XHTML Renderings, and Source Code Copyright ©
Published at Mon, 24 Apr 2017 08:06:32 +0000

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Trump to American steelworkers: I’ve got your back


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


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


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.



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


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


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


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


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.


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

Trump is dialing back his economic promises.


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


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


 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.


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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