by ilene - May 26th, 2015 8:17 pm
Financial Markets and Economy
The dollar is going crazy right now (Business Insider)
Traders are piling in to the dollar after long weekends in both the US and the UK.
The dollar index rate, which measures the currency against most major peers, is up over 1% today.
Euro Tumbles to One-Month Low Against Dollar (Wall Street Journal)
The euro tumbled to a one-month low against the dollar as doubts over Greece’s ability to repay its debts intensified, while Greek bonds came under renewed pressure.
The common currency fell 0.9% to $1.0885, extending the previous day’s declines as markets fully reopened following the long holiday weekend.
Global Trade Dives Most since the Financial Crisis (Wolf Street)
How great was the global economy in the first quarter?
We know the US economy was crummy. The revised GDP estimate will likely sink into red mire. Hence the heated proposals these days, including at the Fed, to apply “a second round of seasonal adjustment” that would “correct” the first-quarter GDP estimate, no matter how bad, into positive territory. An elegant way of covering up an unsightly sore.
IMF: China's yuan currency is 'no longer undervalued' (Business Insider)
China's yuan currency, which Washington has long alleged was manipulated, is "no longer undervalued", the International Monetary Fund said Tuesday.
"Our assessment now is that the substantial real effective appreciation over the past year has brought the exchange rate to a level that is no longer undervalued," the IMF said in a statement after a consultation mission to China.
South Africa’s economy, the continent’s second-largest, grew at a slower pace in the first quarter as power outages curbed manufacturing output and farming output contracted.
Gross domestic product rose an annualized 1.3 percent from the previous quarter, when it expanded 4.1 percent, the statistics office said in a report released in Cape Town on Tuesday. The median estimate
by ilene - May 26th, 2015 11:24 am
Financial Markets and Economy
Iraq is taking OPEC's strategy to defend its share of the global oil market to a new level.
The nation plans to boost crude exports by about 26 percent to a record 3.75 million barrels a day next month, according to shipping programs, signaling an escalation of OPEC strategy to undercut U.S. shale drillers in the current market rout. The additional Iraqi oil is equal to about 800,000 barrels a day, or more than comes from OPEC member Qatar. The rest of the Organization of Petroleum Exporting Countries is expected to rubber stamp its policy to maintain output levels at a meeting on June 5.
Through a quirk in state term limits combined with a terrible midterm election, the Nevada legislature has been taken over by amateurs and extremists. The legislature is now debating whether to dismantle the Nevada public employee pension system (PERS), a system that has gotten consistently high marks for transparency, responsibility and stewardship.
This attack on retirement benefits follows a very familiar pattern of fabricating data to destroy retirements that work and that people really like. It’s the same nonsense and lies used to destroy private pensions two decades ago, but this time it’s being done as part of a partisan wet dream of “limited government.” It’s a strategy as American as fast food and crumbling infrastructure.
After 17 months of civil war spanning a swathe of South Sudan bigger than Syria, President Salva Kiir’s survival may hinge on the fate of a single oil field.
Paloch in Upper Nile state, the only region still pumping crude in a nation with sub-Saharan Africa’s third-largest reserves, has re-emerged as the rebels’ prime target.
by ilene - May 25th, 2015 3:12 pm
Financial Markets and Economy
There’s no denying the effect that fees have on investments. While the difference between a fee of 0.5% and 0.25% looks tiny on paper, apply it to an index fund over a quarter-century or more of investing and let the effects of compounding work on it and you can easily see a worker winding up with tens of thousands of dollars less on account at retirement.
So it’s easy to see how and why the case protects workers and retirement savers.
The potential problems from the ruling are much harder to see, but they’re just beneath the surface now and likely to surface as the effects of the ruling play out.
7 Lies Investors Tell Themselves (Market Watch)
After six years of rising U.S. stock prices, investors are no doubt richer. But they may be thinking a little less clearly.
“In a bull market, there’s a tendency for investors to think they’re brilliant,” says Brad Barber, a finance professor at the University of California, Davis, and an expert in behavioral finance. Indeed, as share prices climb, investors’ confidence grows and they start making all kinds of dubious claims.
Here are seven comments you have probably heard from friends—and that may have escaped your own lips.
Here's your complete preview of this week's big economic events (Business Insider)
It's a short week in America as everyone takes Monday off to celebrate Memorial Day and enjoy some barbecue with their friends and family.
Surely, they'll also be
by ilene - May 24th, 2015 12:20 pm
If the S&P 500 does not have a 5% correction this year, it will be the first time in 20 years. And it's been 3.6 years since the last 10% correction. And trailing and forward PEs are relatively high. In the low interest rate environment, higher-than-normal stock prices are the new normal, but how much higher? And should we expect a reset with the Fed's plans to ease the interest rate higher?
Courtesy of Joshua M Brown
Deutsche Bank is out with a piece of research this weekend mentioning the fact that the S&P 500 has just broken a record high thanks to a median trailing PE ratio of over 18 – the highest we’ve seen since 2010. They note that this PE ratio is 12% above the long-term average going back to 1960. The forward PE of 17.3 times earnings expectations over the coming four quarters is 22% above the historical median. David Bianco attributes this, as almost all of us do, to the incredibly low yields on bonds and their effect on the equity risk premium.
More interestingly, Bianco includes an acknowledgement that it has now been 916 days since the last 10% correction for the index, or 3.6 years (last October’s Ebola /ISIS sell-off was 9-and-change percent intra-day). We’ve not had even a 5% correction so far in 2015 despite a spate of elevated volatility earlier in the year.
Here’s David Bianco and Ju Wang:
We believe the probability of a 5%+ dip is high this summer and our tactical call remains Down given the S&P now at an even higher PE than a year ago, heightened uncertainty in 10yr yields, weak earnings growth and continued soft economic data. We haven’t had a 5%+ dip this year. Historically 5%+ dips are common and happen at least once a year since 1960, except 1964, 1993 & 1995. It has been 916 trading days (3.6 years) since a 10% correction. Selloff triggers could be a further rise in 10yr yields especially if UE keeps falling amidst slow economic growth and Fed remains unclear on first hike timing, or a jump in the dollar upon the Fed expressing firm intentions to hike in Sept.
S&P hits record high on 18 trailing PE, PE will be sensitive to Treasury yields
Deutsche Bank – May 22nd, 2015
Picture by Geralt at Pixabay.
by ilene - May 22nd, 2015 11:22 pm
Financial Markets and Economy
"It would be difficult to overstate the recent downside surprise in global consumer spending," writes JPMorgan Senior Global Economist Joseph Lupton.
Though retail sales in the U.S. have missed expectations for five consecutive months, disappointing consumer spending is far from just a made-in-the-USA story, he observes.
Japan’s foreign investments and assets climbed to a record in 2014, keeping it in front of China and Germany as the world’s top creditor nation.
The reading stretches Japan’s lead as No.1 creditor country to 24 years, with 71 percent more in net assets than China, even after its Asian neighbor surpassed it to become the world’s second-largest economy in 2010.
French telecommunications group Altice SA is talking to several banks about raising debt for a potential bid for Time Warner Cable Inc, the second-largest U.S. cable operator, according to people familiar with the matter.
The talks are an important step for Altice in putting together a bid for Time Warner Cable, which is also being courted by Charter Communications Inc after Comcast Corp abandoned its $45.2 billion offer for Time Warner Cable last month over U.S. antitrust concerns.
Deutsche Lufthansa AG scrapped its dividend this year partly because of charges tied to its pension fund. Investors have been shunning the shares — and those of peers that are likely to follow suit.
An unintended consequence of Mario Draghi’s bond-buying campaign has been an increase in the estimated cost of providing for retired workers. According to an index designed by Citigroup Inc., companies with the biggest pension deficits that have been forced to reduce profit forecasts are trailing the rest of the market by the most since 2013.
by ilene - May 22nd, 2015 12:36 pm
To be "fiscally conservative/socially liberal" means overlooking many of the facts that make it impossible to separate social and fiscal issues. The following article discusses why the social and fiscal aspects of any political theory are so tangled that one is often just an unfortunate side of the other and why the relatively innocuous "fiscally conservative/socially liberal" position is inconsistent — a mix of ideas that do not hold up well together.
For a "top down" approach to sorting out the inconsistencies of your economic and political theories (forgetting the "liberal" and "conservative" labels for a moment), explore how the laws define our economic playing field. (E.g. read Stiglitz on Inequality, Wealth, and Growth: Why Capitalism is Failing.)
Thoughts? Please give us yours in the comment section.
It's a popular refrain among "centrists." The truth is that social and fiscal issues are inextricably bound
By Greta Christina, originally published at Alternet (via Salon)
Well, I’m conservative — but I’m not one of those racist, homophobic, dripping-with-hate Tea Party bigots! I’m pro-choice! I’m pro-same-sex-marriage! I’m not a racist! I just want lower taxes, and smaller government, and less government regulation of business. I’m fiscally conservative, and socially liberal.”
How many liberals and progressives have heard this? It’s ridiculously common. Hell, even David Koch of the Koch Brothers has said, “I’m a conservative on economic matters and I’m a social liberal.”
And it’s wrong. W-R-O-N-G Wrong.
You can’t separate fiscal issues from social issues. They’re deeply intertwined. They affect each other. Economic issues often are social issues. And conservative fiscal policies do enormous social harm. That’s true even for the mildest, most generous version of “fiscal conservatism” — low taxes, small government, reduced regulation, a free market. These policies perpetuate human rights abuses. They make life harder for people who already have hard lives. Even if the people supporting these policies don’t intend this, the policies are racist, sexist, classist (obviously), ableist, homophobic, transphobic, and otherwise socially retrograde. In many ways, they do more harm than so-called “social policies” that are supposedly separate from economic ones. Here are seven…
by ilene - May 21st, 2015 8:20 pm
Michael Santoli Interviews Ian Bremmer on Yahoo Finance.
By John Mauldin
Ian Bremmer’s new book on the future of the US and geopolitics, Superpower, just hit the streets yesterday, and it’s already creating quite a buzz. It draws on Bremmer’s remarkable understanding of politics, America, and the world. I first ran into Ian at a conference about four years ago, where he was the after-dinner keynote speaker. It was one of those dinners where I had to go (I had spoken earlier), and I had no knowledge of Ian other than his official bio. A professor of geopolitics. From New Yawk. So this Texas boy settled in while Ian walked on stage … and in three seconds I realized that this was an uber-nerd. Total geek. Seriously, when Hollywood wants to type cast a brilliant super-nerd, they should use Ian as the model. He hit all my stereotype buttons, and I of all people should know better.
Within five minutes, this nebbish professor was blowing me away. I was totally captivated. He took me on a trip through the geopolitical landscape as profound as any I had ever been on.
Ian gave one of the most compelling presentations at our most recent Strategic Investment Conference. No fancy Powerpoint, just one machine-gun idea after another, strung together in what I now realize is his own carefully crafted style.
As I shared with you in Thoughts from the Frontline last week, Ian’s summary of the geopolitical situation and America’s role in managing it can be expressed in two words: it’s bad.
The US is not in decline, he asserts in today’s Outside the Box, citing “the strength of the dollar, US equity markets, employment levels and the economic rebound, the energy and food revolutions, and generation after generation of technological innovation.” But America’s foreign policy and international influence are most certainly in decline. Nevertheless, no other country can even come close to claiming superpower status, so the role the US chooses to play in the world remains of paramount importance.
by ilene - May 21st, 2015 4:30 pm
Financial Markets and Economy
Here they're doing that grumbling in letters to clients the day after their guilty pleas. There is no promise of reform here: The Justice Department caught the banks doing things that it didn't like and fined them billions of dollars, but won't stop them from doing most of those things. As long as there are no more ambiguities or misunderstandings about what they are. It's a weird stalemate. The Justice Department doesn't like these practices, the banks like them fine, and they've agreed to disagree. These practices have been singled out, in the context of criminal plea agreements (a bad context!), as things that happened. But not quite as crimes. And the banks are careful to make clear: They're going to keep happening.
The Senate Has a $66 Billion Gift for U.S. Banks (Bloomberg)
A U.S. Senate proposal to raise the level at which banks are deemed systemically important could help free up as much as $66 billion in capital at 11 lenders and allow for increased shareholder payouts.
The jitters were so intense that it took a clear message from European Central Bank policy makers that the central bank stands firmly behind its aggressive stimulus program, for the market to calm and resume some bullish momentum.
The first road-legal autonomous truck made a splashy debut earlier this month. The Freightliner Inspiration Truck is shiny and new, but it will not be good for everyone. Autonomous trucks will destroy
by ilene - May 21st, 2015 3:23 am
Financial Markets and Economy
Janet Yellen’s Federal Reserve is “reasonably confident” it can drive up consumer prices. Mario Draghi says his European Central Bank’s stimulus has already “proven so far to be potent.” The Bank of England reckons inflation is “likely to return” to its target within two years.
While not quite declarations of victory, such statements show policy makers’ optimism that record-low interest rates and bond-buying will be enough to return inflation to the 2 percent range most of them eye.
At a time when 8.5 million Americans still don't have jobs, some 40 percent have given up even looking.
The revelation, contained in a new survey Wednesday showing how much work needs to be done yet in the U.S. labor market, comes as the labor force participation rate remains mired near 37-year lows.
Record spending by foreign tourists is providing a timely boost to the world’s third-largest economy.
Spending by visitors jumped to the highest level in at least 20 years, adding about 0.1 percentage points to Japan's gross domestic product, data showed. That’s no small change for a country that’s trying to claw itself out of decades of economic stagnation.
Unless the name is Ben Bernanke or Alan Greenspan, ex-Fed guys don’t always grab your attention.
But Lawrence Lindsey, who was at the Fed in the 1990s, made a few people sit up and take notice after firing off some spicy comments at a panel discussion yesterday. He blasted away at the current Fed, saying it’s pushing its luck when it comes to normalizing interest rates. And rates at zero, with unemployment at 5.4%? Madness!
Bank of Communications, China’s fifth-largest commercial
by ilene - May 20th, 2015 2:28 pm
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.
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