News You Can Use From Phil’s Stock World

Financial Markets and Economy

Ending the Minimum-Wage Subsidy (Barry Ritholtz, BloombergView)

This week, Los Angeles became the third major West Coast city and the biggest in the U.S. to agree to raise the minimum wage to $15 an hour, an increase that will go into effect by 2020. Los Angeles follows Seattle, which will require employers with 500 workers or more to pay $15  by 2017. San Francisco will require the $15 hourly minimum by 2018. 

The Seattle increase in particular has caused all sorts of analytical errors from people who should know better. Seattle Magazine ran one article with the headline “Why Are So Many Restaurants Closing Lately?,” which cited the wage increase as among the reasons. This was quite surprising, given the lack of any notable rise in restaurant closings, which are running at about the same pace as before the minimum wage increase. Even more telling, permits for new restaurants are rising. The data overwhelmingly disproves the assertion that the minimum wage increase is leading to restaurant closings — or is discouraging people from opening new ones.

Housing Starts Rise 20%…Still Well Below Normal (Value Walk)

The NAHB HMI(Housing Market Index) and Single Family Starts were reported the past two days. The HMI ($XHB) at 54 and Starts at 733,000 indicate that a  positive trend remains in place. Many appeared to have been surprised by this and talk of a 20% rise in Housing Starts. But, if you look at the chart below, you will see an uptrend created by choppy monthly reports.  That the uptrend from early 2013 simply continues is all that one can say at the moment.

Greek Conundrum Puts ECB in Tight Spot as Bailout Talks Progress (Bloomberg)

European Central Bank policy makers will discuss Greek bank aid on Wednesday in a chore that is getting more uncomfortable every week.

The Governing Council will meet in Frankfurt to debate whether to tighten rules on Greek access to Emergency Liquidity Assistance as the country veers toward default. At the same time, officials are well aware their decision could worsen the political crisis just as bailout talks show signs of progress.

Japanese Economy Grows at Fastest Pace in a Year (NY Times)

 Japan’s climb out of recession accelerated unexpectedly in the first quarter of the year, the government said on Wednesday, as the economy grew at its fastest pace since the beginning of 2014.

The country’s statistics agency said the economy expanded at an annualized rate of 2.4 percent in the three months through March. It was thesecond consecutive quarter of growth after anabrupt but short-lived downturn in the middle of last year.

Even the Bears May Be Too Bullish on China (Bloomberg)

As China's economy slows, economists are proving too bullish.

The median forecasts in Bloomberg surveys for industrial production, fixed-assets investment and retail sales have all overshot the reality so far in 2015.

What Might Go Right in the Economy (Barry Ritholtz, Bloomberg)

The preoccupation with all of the things that could possibly go wrong has been a persistent characteristic of this economic recovery. It was termed recession porn in 2009. It has been a focus of websites, pundits and, of course, goldbugs. When an economist picks up the nickname “Dr. Doom,” it suggests an obsession with the negative.

Berkshire Hathaway Leads Bond Market Risk Ranking Of Financial Firms (Donald van Deventer at Seeking Alpha)

On March 13, 2014, we pointed out the many reasons why the Federal Reserve-mandated stress testing process will be a less accurate measure of financial institutions' risk than the market's price on those institutions' promise to pay a dollar in the future. We confirmed on March 10, 2015 that the results of the Fed's 2015 Comprehensive Capital Analysis and Review process added almost no additional explanatory power in explaining financial institutions' credit spreads. This is because the marketplace considers all scenarios, not just three as in the Fed's CCAR stress tests.

Crude oil is getting smoked (Business Insider)

And now crude oil is tumbling.

On Tuesday morning, West Texas Intermediate crude oil was down about 2.4% to $58.80 a barrel amid a sell-off in bonds, a rally in the US dollar, and US stocks going nowhere.

Crude oil has traded near $60 a barrel for the past several weeks, as WTI rallied off its March low of $43, which is starting to look like the bottom.

Japan Stocks Rise as Dollar Steady Before Fed Minutes; Oil Gains (Bloomberg)

Japanese shares climbed as the dollar traded near a two-month high versus the yen before the Federal Reserve releases minutes of its last meeting. Nickle slumped a third day and oil rallied.

Lower Oil Prices To Benefit Indian Downstream Companies: Goldman Sachs (Value Walk)

Downstream companies, particularly oil marketing companies in India, are better placed to benefit from structurally lower oil prices and from a growing ability to charge higher marketing margins, notes Goldman Sachs Group Inc (NYSE:GS).

Nilesh Banerjee and team at Goldman Sachs in their May 18, 2015 research report titled: “India: Energy: Oil” predicts long-term Brent at US$55/barrel by CY20E.

Stocks and Trading

Lumber Liquidators: Cantor Capitulates (Barron's)

We are downgrading shares of Lumber Liquidators to HOLD and lowering our price target to $26 from $42 as we believe there are too many regulatory and legal risks at this juncture to justify a BUY rating. Our price target is based on a 2016 P/E multiple of 15x, which we view as a fair valuation given the current risk/reward scenario. 

Yahoo Collapses (Business Insider)

Yahoo shares got crushed into the close.

The stock fell 7.6% on Tuesday, with most all of this happening in just a few minutes before the 4 p.m. ET market close and appears comments at a D.C. Bar Association event was the culprit.

Politics

Broad Coalition Rallies to Defeat Obama on Trade Deal (Bloomberg)

Twenty years ago, when President Bill Clinton was urging Congress to enact sweeping trade legislation over objections of important constituents in his own party, the face of the opposition were the middle-aged (and beyond) white, male leaders of  the AFL-CIO.

For President Barack Obama, the dynamic may feel the same—trying to find enough Democrats to help Republicans pass a trade deal—but the coalition is a lot broader. In addition to labor, the president is being opposed by teachers, seniors, Internet freedom groups, and Sister Simone Campbell. 

Senator doesn’t know who he trusts more on Iran deal: Obama or Ayatollah Khamenei (Salon)

In a town hall meeting in Wisconsin, chairman of the Senate’s Homeland Security Committee Sen. Ron Johnson said that he doesn’t know who he trusts more regarding the Iran nuclear deal framework: Barack Obama or Iran’s Supreme Leader Ayatollah Ali Khamenei.

He noted that there are numerous discrepancies between Obama’s explanation of the deal and Khameini’s explanation of the deal, and doesn’t know who to listen to.

The story of how a close Hillary Clinton ally became her rival in 2016 (Business Insider)

More than a decade ago, Bill Clinton spotted a political star in the making, someone he predicted would go from a big-city mayor to a national leader — maybe even to the White House. "I won't be surprised if you go all the way," Clinton wrote in a 2002 letter to Baltimore's mayor, Martin O'Malley.

Technology

Apple just unveiled a faster 15-inch MacBook Pro with a sharper screen and the Force Touch trackpad (Business Insider)

Apple announced on Tuesday that it would be updating its 15-inch MacBook Pro with a Retina display, faster graphics and flash storage, and Apple's new Force Touch trackpad — which simulates the sensation of clicking without the trackpad actually moving.

Apple also claims this updated MacBook will come with longer battery life.  You can buy it starting today $1,999 for the basic configuration, which gets you 256GB of flash storage, 16GB of memory, and a 2.2GHz Intel Core i7 processor.

Health and Life Sciences

Iron levels in brain predict when people will get Alzheimer's (New Scientist)

Does this qualify as irony? Our bodies need iron to be healthy – but too much could harm our brains by bringing on Alzheimer's disease.

If that's the case, measuring people's brain iron levels could help identify those at risk of developing the disease. And since we already have drugs that lower iron, we may be able to put the brakes on.

Genes may influence leadership in the workplace (Science Daily)

Wendong Li, assistant professor of psychological sciences, and collaborators have found a "mixed blessing" for workers who hold workplace leadership positions, from the formal leader of a CEO to an informal group leader. Their study focused on the dopamine transporter gene DAT1, which can influence leadership and is important for reward and motivation systems in humans.

Life on the Home Planet 

Lifelong Republican Turns On His Party, Embraces Obamacare (Think Progress)

Luis Lang, who is currently crowdfunding for medical expenses that he can’t afford because he didn’t sign up for insurance under Obamacare, has become a viral sensation. However, the 49-year-old South Carolina resident says he doesn’t want to be the poster child for the Republican Party’s opposition to health care reform anymore.

At the end of last week, the Charlotte Observer reported that Lang, a lifelong Republican who’s previously prided himself on covering his own medical bills, can’t afford to pay thousands of dollars to treat an issue stemming from his chronic diabetes. Lang is suffering form bleeding in his eyes and a partially detached retina, which will cause him to go blind if left untreated. So he set up a GoFundMe page to solicit $30,000 in donations to cover a costly surgery that will save his vision.

Cancer charities allegedly misused $187 million in donations, bought luxury cruises and cars (Business Insider)

The U.S. government has charged four cancer charities with misusing more than $187 million in donations, with two agreeing to be dissolved and two fighting the allegations, the Federal Trade Commission said on Tuesday.

The FTC, 50 states and the District of Columbia charged the Cancer Fund of America, Cancer Support Services Inc., the Children's Cancer Fund of America and the Breast Cancer Society Inc. with collecting millions of dollars in donations but doing little to help patients.

Bioluminescence turns Australia's shores fluorescent blue (CNN)

The shores of Hobart, Tasmania, have been twinkling a bright, neon blue the past few days, turning the water's surface into a scene that looks out of this world.  Jo Malcomson, owner of Blackpaw Photography, splashed in the water Monday while capturing the bright display at South Arm, a town on the outskirts of Hobart.

Here's One Way the Developing World Totally Has America Beat (Mother Jones)

China is by far the world's biggest investor in clean energy technologies like solar and wind. Last year, its clean energy spending hit a record $83 billion, a 39 percent jump from the year before, and more than twice what is spent in the United States.