Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.
Japan Inflation Slows in Blow to Abe (Tatsuo Ito and Kosaku Narioka, The Wall Street Journal) Inflation has been slowing across the world and a massive monetary easing (QE) program in Japan has been unable to overcome that tide. The Japanese CPI registered its lowest increase in 14 months with an annual rate of only 0.7% in November 2014. This is down from 0.9% in October and far below the government's target rate of 2%.
Econintersect: Week 51 of 2014 shows same week total rail traffic (from same week one year ago) improved according to the Association of American Railroads (AAR) traffic data. The rate of growth continues to be trong in all of the rolling averages reported below.
The shale revolution has vastly boosted supplies of the ultralight crude oil known as condensate, particularly in the Eagle Ford Shale region of South Texas. Condensate is used to produce a variety of products, often by combining it with heavier types of oil. Supplies have overwhelmed U.S. firms’ capacity to put the condensate to use.
The swift rise in the stock of student loan debt in recent years - even during the Great Recession when other types of consumer debt contracted - has received much attention among researchers, politicians, and the media. Indeed, student loan debt has now surpassed credit card debt to become the second largest amount of household debt outstanding after mortgage debt. Unlike credit card debt and other household liabilities, however, student debt cannot be discharged in bankruptcy. It therefore represents a long-term financial burden for many individuals and/or households that must be repaid. A key question is how student loan debt may impact individuals’ economic outcomes. For example, it could hinder an individual’s or household’s ability to obtain a mortgage and purchase a home.
Econintersect: Assets invested in ETFs (electronically traded funds) and other ETPs (electronically traded products) in the United States have exceeded $2 trillion for the first time according to a press release from ETFGI, an independent research and consultancy firm to leading global individual and institutional investors, the global exchange traded fund and exchange traded product ecosystem, its regulators and its advisers.
The financial intermediation industry has experienced two major developments in recent decades. First, a system that had commercial banks as central brokers providing all the services needed for the intermediation of funds has been progressively replaced by a much more complex, assembly-line system, with a multiplicity of entity types jointly involved in the completion of the intermediation process. This is what has become known as the system of shadow banking (e.g., Pozsar, Adrian, Ashcraft and Boesky, 2010, Financial Stability Board, 2011).
by Zheng Liu, Mark M. Spiegel, and Bing Wang - FRBSF Economic Letter, Federal Reserve Bank of San Francisco
The retirement of the baby boomers is expected to severely cut U.S. stock values in the near future. Since population aging is widespread across the world’s largest countries, this raises the question of whether global aging could adversely affect the U.S. equity market even further. However, the strong relationship between demographics and equity values in this country do not hold true in other industrial countries. This suggests that global aging is unlikely to create additional headwinds for U.S. equities.
Additive manufacturing – or 3D printing – is 30 years old this year. Today, it’s found not just in industry but in households, as the price of 3D printers has fallen below US$1,000. Knowing you can print almost anything, not just marks on paper, opens up unlimited opportunities for us to manufacture toys, household appliances and tools in our living rooms.
The market was expecting the weekly initial unemployment claims at 280,000 to 294,000 (consensus 290,000) vs the 280,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 298,750 (reported last week as 298,750) to 290,250. Rolling averages under 300,000 are excellent.
I highly recommend a movie to be released next year (that is, the year that begins next week). Terry Jones, of Monty Python fame, is one of the key developers of the film. It is on the Global Financial Crisis, but also provides a quick history of bubbles and crashes. It is highly entertaining and as good as any that I’ve seen on the crisis.
According to new data derived from the monthly Current Population Survey (CPS), median annual household income in November 2014 was $53,880, not significantly different from the October 2014 median of $53,575. (The apparent increase of $305 was not statistically significant.)
The Securities and Exchange Commission today charged a stock promoter based in Santa Barbara, Calif., with fraudulently raising nearly $3.5 million from investors purportedly to purchase Facebook and Twitter shares prior to their initial public offerings (IPOs).
Action in Washington Necessary to Stimulate Middle-Market Public Capital Formation
from Cohn Reznick LLP
NEW YORK (December 22, 2014) - Despite year over year gains and historic returns, middle market initial public offering (IPO) activity in 2014 remained behind the level necessary to stimulate large scale economic growth, according to new research released today by CohnReznick LLP, a top ten accounting, tax, and advisory firm specializing in middle-market companies.
The European Space Agency’s Rosetta mission to land on comet 67P was one of the most audacious in space history. The idea of landing on a small chunk of icy rock 300m kilometres away from Earth and hurtling towards the sun at speeds approaching 135,000km/hour is incredible – made more so by the fact they actually achieved it.
Since it was completed 100 years ago, the Panama Canal has been the only shipping route through the land mass of the Americas. Controlled by the US for most of its history, it allows ships to navigate between Pacific and Atlantic oceans without having to sail all the way to the tip of South America, through the infamous Magellan Strait. This makes it one of the world’s most important economic arteries.
Of the four regional Federal Reserve surveys released to date, only three show manufacturing expanding. A complete summary follows. The market expected this survey index at 5 to 11 (consensus 7.0) versus the 7.0 actual [note that values above zero represent expansion].
The Chemical Activity Barometer (CAB), dipped 0.1 percent this month, following a 0.4 percent gain in November, as measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB remains up 3.7 percent over this time last year.
The Seasonal Outlooks were released on December 18. They are not very different from the November 20 release. However the complexity has not been reduced as one might have anticipated. NOAA is still struggling with how to integrate a "near El Nino" and an at least short-term change to PDO Positive into their Seasonal Outlook and at least this time they have acknowledged that the El Nino activity is more of a Central Pacific nature and shifts weather patterns to the west. Also the anomalous reappearance of the high pressure ridge off the West Coast makes short-term forecasting difficult both for the meteorologists and their computer models.
Econintersect: Average gasoline prices fell 14.7 cents per gallon nationwide (lowest since May 2009) this past week following the previous week's 12.4 cent fall from the week before. Since 06 January 2014, gas prices have fallen 91.5 cents a gallon.
Average prices by region and a breakdown by grade follow after "Read more >>".
At the end of the article is a Gas Buddy graphic with access to local gasoline prices anywhere in the country.
There’s more data and analysis below, but in honor of the occasion I wrote new lyrics for that great old Temptations classic, What Becomes of The North Dakotans. Here’s to the Temps lead singer Jimmy Ruffin, who passed away in Las Vegas in November.
In their third estimate of the US GDP for the third quarter of 2014, the Bureau of Economic Analysis (BEA) reported that the economy was growing at an astounding +4.96% annualized rate, up an additional +1.07% from their prior estimate for the 3rd quarter and now up +0.37% from the already very healthy 4.59% annualized growth rate registered during the second quarter.
The Final University of Michigan Consumer Sentiment for November came in at 93.6, a strong surge from last month's final but slightly below the 93.8 of the preliminary report, which was a post-recession high and the highest level since January 2007, almost eight years ago. Today's sentiment level came in above the Investing.com forecast of 93.1.
The headlines say new home sales are down from last month. Econintersect also sees the new home sales data soft again this month - with the unadjusted 3 month rolling averages continuing to decline. As the data is noisy, the 3 month rolling average is the way to look at this data.
Last week, U.S. President Barack Obama and Cuban President Raul Castro agreed to an exchange of prisoners being held on espionage charges. In addition, Washington and Havana agreed to hold discussions with the goal of establishing diplomatic relations between the two countries. No agreement was reached on ending the U.S. embargo on Cuba, a step that requires congressional approval.
The headlines for existing home sales say that sales lost momentum - with sales declining year-over-year (seasonally adjusted data). Our analysis of the unadjusted data shows similar deceleration - but the unadjusted three month rolling averages for sales are positive this month after being in contraction all of 2014 and are accelerating. Bottom line - this was a bad month in a generally improving trend.
Although less prevalently talked about today many economists assume that while the central bank has control over the short-term rate of interest, the long-term rate of interest is set by the market. When Post-Keynesians make the case that when a country issues its own sovereign currency the rate of interest is controlled by the central bank and that the government never faces a financing constraint some economists deny this and point to the long-term rate of interest which they claim is under the control of the market. They say that if market participants decide to put the squeeze on the government they can raise the long-term rate of interest.
Don’t believe everything you read in the mainstream media. Especially don’t believe anything in the financial news media until you’ve looked at the data yourself. It’s no wonder investors are so often caught flatfooted in the markets. Financial “journalists” feed their readers and viewers a constant stream of misinformation and bad data. Financial reporters are so atrocious at serving their audience I have to believe that they are, wittingly or unwittingly, part of a deliberate and elaborate campaign of disinformation… unless you believe in Coincidence Theory.
I just came across a very interesting bit of research, A Guide to Paradigmatic Self-Marginalization: Lessons for Post-Keynesian Economists by Leonhard Dobusch and Jakob Kapeller; you can find it here.
I realize this is not going to be of interest to many of our readers, as it is a sort of “inside the halls of academia” analysis. What the authors do is to look at the strategies of editors running the top orthodox and the top heterodox journals in economics. Actually it might be a bit unfair to label these strategies, as the authors do not mean to imply that editorial policy knowingly pursues the strategies. Instead, the article looks at the ex post results.
When I first went to work for ConocoPhillips (NYSE: COP), I worked on technology development. I had spent the previous seven years working in the chemical industry, and didn’t know all that much about the oil industry. My first job at ConocoPhillips was helping with a gas-to-liquids process in which we took natural gas and converted it into diesel, in a process very similar to that in Shell’s (NYSE: RDS-A) Pearl GTL plant in Qatar.
The United States and Cuba on Dec. 17 took their most assertive step in several decades toward normalizing relations. The most important announcements concerned the resumption of high-level political discussions focused on renewing formal diplomatic ties between the countries, which have been nonexistent since 1961. Cuban and U.S. officials will hold high-level meetings in the coming months, and the two countries will work toward establishing embassies in Havana and Washington. The United States will also immediately relax some sanctions on trade and travel to Cuba.
“No More Tantrums.” “They’re creepy and they’re cookey. The Statements are quite spooky. Their policy is flukey. Yel – lens F-O-M-C.” (Age of Wisdom, Age of Foolishness (52) “Deathly Hallows”)
Following on, from the October FOMC meeting, the Fed smoothly eased into tightening mode. Janet Yellen formally confirmed that tightening mode has been entered, at the Bank of France conference in Paris a few weeks later; and also warned that this period would involve considerable volatility.
Export container counts continue to weaken, which is a warning that the global economy is slowing. Export three month rolling averages continue to decelerate - being in negative territory year-over-year. This is a headwind for 4Q2014 GDP. Container counts are a good metric to gauge the economy.
Foreign investors in China should not have any high hopes for
the near future. Two years into the leadership of President Xi
Jinping, there’s scant indication that the country is opening
investment opportunities or rebalancing the economy as foreigners
China’s stocks rebounded from the biggest two-day loss in 18
months as construction companies and banks gained amid speculation
the government is taking steps to boost lending and provide
financial support for companies to develop their overseas
Below, technical overviews and analysis for key stock indices, commodities and currency pairs, based on market activity at the close of the 18 December 2014 U.S. session. This information is a comprehensive summary derived from simple and exponential moving averages along with key technical indicators shown for specific time intervals.
With Canadian oil and gas producers cutting dividends and slashing budgets, it may be a surprise to some investors that analysts believe the country’s exploration and production (E&P) companies are better positioned to endure crude’s downturn than their U.S. counterparts.
Oil has experienced a true market crash, declining 47 percent following the peak in June. However, the downtrend is declining at an unsustainable rate and the market has become extremely oversold across intermediate-term and short-term time frames. As a result, the decline will almost certainly be followed by a violent oversold reaction, and the large intraweek rebound that occurred last week suggests that the reaction may be imminent.
Below, technical overviews and analysis for key stock indices, commodities and currency pairs, based on market activity at the close of the 16 December 2014 U.S. session. This information is a comprehensive summary derived from simple and exponential moving averages along with key technical indicators shown for specific time intervals.
On Tuesday last week, we noted the development of a potential cyclical trend sell signal and indicated that the latest short-term cycle low (STCL) would need to form before the sell signal could be fully defined. As expected, the latest STCL formed on December 16 as confirmed by the cycle low signal that was generated today.
The introduction of the euro brought the citizens of Europe many advantages, including uniformity. It would be nice if that uniformity also applied to the comparison of the various stock exchanges. An index point is not a fixed unit in time and does not have any historical significance, so the European citizen may therefore not attach any significance for the future. Comparing index points to their history and also comparing the various stock exchanges makes no sense. The time is ripe to reindex European stock exchanges to 100 points.
"Predictions Are Difficult...Especially When They Are About The Future" - Niels Bohr
We can't predict the future - if it were possible fortune tellers would all win the lottery. They don't, we can't and we aren't going to try to. However, we can analyze what has happened in the past, weed through the noise of the present and try to discern the possible outcomes of the future.
The prolific buying by insiders of energy companies lost some steam last week even as oil and energy stocks rebounded sharply along with the rest of the market. With the S&P 500 closing less than 5 points off its all-time high, insider buying also picked up with insiders buying $256.35 million of stock compared to $190.94 million in the week prior. Selling along increased sharply with insiders selling $2.59 billion of stock last week compared to $1.34 billion in the week prior.
We saw both Carl Icahn and Mark Rachesky add to their positions in diesel engine and truck manufacturer Navistar International (NAV) and we also saw Carl Icahn add to his stake in car rental company Hertz Global Holdings (HTZ).
Markets closed early in accordance to Holiday schedules. During the last several minuted the averages suffered a -0.4% drop that recovered 0.2% at the close. Holiday market traffic is hard to judge what is the 'real flavor' of the investors thinking. But it was obvious that some investors decided to jump ship at least for the duration of the Xmas Holidays.
By 1 pm the averages closed below the session highs to mixed or flat status.
Sung by The Drifters. Cartoon by Joshua Held.
Featuring Bill Pinkney on lead bass and Clyde McPhatter on tenor.
An animated Christmas Card, and a homage to a great song, a great band, and a great Holiday.
Yet, many Americans still refer to China as “communist China”. Maybe communism isn’t that bad, then? Maybe China is not communist? What’s the truth? Here it is: today, China is more capitalistic than America in many ways, even per Steve Wynn!
The German government had announced that it would balance a budget and get a black zero, and it seems like it is sticking to its strategy. The employers are celebrating this, with their Institut der deutschen Wirtschaft writing:
Of course, economically there is no reason to reach exactly zero financial deficit. Black Zero is not a theoretical concept but a number, a symbolic figure. Nevertheless, this figure represents the reliability of fiscal policy in Germany. It goes one step further than the debt brake rules which even allow for 'cyclical breathing'. This means that while a cyclical deficit is within the rules during an economic downturn, the debt needs to be paid back as soon as the economy recovers.
On December 11, 2014, the US House passed a bill repealing the Dodd-Frank requirement that risky derivatives be pushed into big-bank subsidiaries, leaving our deposits and pensions exposed to massive derivatives losses. The bill was vigorously challenged by Senator Elizabeth Warren; but the tide turned when Jamie Dimon, CEO of JPMorganChase, stepped into the ring. Perhaps what prompted his intervention was the unanticipated $40 drop in the price of oil.
The United States is living through an economic depression that began in 2007. It's part of a larger global depression, the first since the 1930s. This New Depression will continue indefinitely unless policy changes are made in the years ahead.