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.
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The Greek election tomorrow (January 25) is the most important in recent memory. If the pollsters are proven correct, Syriza is poised to win by a large margin and this victory will end four decades of two-party rule in Greece.
The falling price of oil, now at under $50 a barrel for the first time since 2009, has caused a spate of layoff announcements impacting thousands of workers in oil-related industries. Since June 2014, Challenger has tracked 21,917 US job cuts by oil and oil-related industries. Most recently, oil field services giant Schlumberger announced 9,000 job cuts and Baker Hughes reported 7,000.
Falling gasoline prices: the influence of crude oil prices and other factors
by U.S. Energy Information Agency
On a national level, the main reason cited for movements in gasoline prices is often changing crude oil prices. Crude oil acquisition is the main cost in producing gasoline, and changes in crude oil prices, along with changes in gasoline market conditions, drive changes in spot and retail gasoline prices. EIA estimates that at current prices, about 55% of the retail price of gasoline is attributable to the cost of crude oil. However, at the regional level, several factors other than falling crude prices are influencing regional wholesale gasoline spot prices and retail gasoline prices.
While the number of overall job cuts declined in 2014 to the lowest level since 1997, planned workforce reductions in the technology sector trended in the opposite direction, rising to the largest year-end total since 2009.
Temporary Assistance for Needy Families (TANF) is a federal program that provides cash assistance, work support, and other services to some low-income families. The cash assistance is generally limited to families with income well below the poverty threshold and few assets; it goes to roughly 2 million families per month, most of them headed by single mothers. The work support (such as subsidized child care) and the other services (such as initiatives to reduce out-of-wedlock pregnancies and promote marriage) are usually available to families with income up to twice the poverty threshold.
By tempering financial losses, the insurance industry lends resilience to the economy and helps homeowners and businesses recover from natural disasters and other catastrophes. In order to do this, however, the insurance industry must itself be resilient.
It’s confirmed: 2014 produced the highest global temperatures since records began in the 1880s. As if that’s not cause enough for concern, this year threatens to see the return of El Niño, which like some enraged climate-driven Godzilla, could emerge from the depths of the South Pacific and lay waste to entire regions.
The Securities and Exchange Commission today announced a series of federal securities law violations by Standard & Poor's Ratings Services involving fraudulent misconduct in its ratings of certain commercial mortgage-backed securities (CMBS).
Analysts and the financial press have scrutinized the buildup of private sector borrowing in China over the past few years. Debt accumulation seems eerily familiar to what occurred in past credit booms, most notably in the euro zone periphery in the mid-2000s and in East Asia a decade earlier.
Pancreatic cancer is a devastating disease. With a ten-year survival rate of just 1%, it has the poorest prognosis of all solid tumours. The main reason for this is that tumours of the pancreas largely develop without symptoms. Therefore, by the time many patients are diagnosed, the disease has advanced to a metastatic and incurable stage.
The White House has apologized for the absence of a senior American leader at the recent unity march in Paris, blaming short notice and a lack of time for implementing security measures, especially for a presidential visit.
Econintersect: Not since China sent tanks into Tiananmen Square to quell student protests has China's GDP growth been as low as the 7.3% recorded for 2014. The last time growth was at this level was 1990. The result for the year missed the government target of 7.5% but was higher than the consensus expectation of 7.2% reported by Bloomberg. The service sector grew faster than manufacturing, especially e-commerce (+49.7%) which aligns with the rebalancing strategy of the government.
Econintersect: PBS's FrontLine reviewed the career of Russian President Vladimir Putin last week (13 February 2015). It is a story rife with charges of massive corruption and possible massive murder by the government in order to frame "undesirable elements" such as Chechen separatists. The cover-ups of apparent government crimes were relentless with investigators of the government activities dead or imprisoned. This is a dark documentary.
Ebola virus disease was first discovered in the Democratic Republic of the Congo in 1976, and by 2013 had caused about 20 recorded outbreaks across East and Central Africa. These had been restricted to rural areas and confined to small clusters of villages. In each case containment was achieved within a few months and after fewer than 500 confirmed cases. The world assumed that Ebola was too efficient at killing its hosts, doomed to quickly burn out wherever it arose.
ECRI's WLI Growth Index was unchanged but has remained in negative territory for 14 weeks. This index is forecasting a slight business cycle contraction in 1H2015. Obviously the markets do not share ECRI's view the business cycle is taking a downturn. ECRI also released their coincident index which is discussed below.
The headlines for existing home sales say that sales picked up - with sales improving for a change. Our analysis of the unadjusted data shows the unadjusted three month rolling averages for sales gaining more ground in positive territory after being in contraction most of 2014.
Econintersect: Week 2of 2015 shows same week total rail traffic (from same week one year ago) slightly declined according to the Association of American Railroads (AAR) traffic data. This was a good start to the new year.
Fed'sBalance Sheet week ending balance sheet was $4.473 trillion - down from the record $4.476 trillion for week ending 14 January 2015and up from the $4.476 trillion for last week. Note that on the 29 October 2014, the Federal Reserves governing board (FOMC) stated that .....
The market was expecting the weekly initial unemployment claims at 289,000 to 305,000 (consensus 300,000) vs the 307,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving averagemoved from 300,000 (reported last week as 298,000) to 306,500. The rolling averages had been equal or under 300,000 for the previous 18 weeks.
Residential building permits were soft but not as bad as last month. Construction completions continue to outnumberpermits (showing that the future likely will be worse than today). As the data is noisy and with backward revisions, the rolling averages are the best metric to view this series - and the growth continues to decelerate.
Export container counts continue to weaken, which is usually a warning that the global economy is slowing. Export three month rolling averages continue to decelerate - being in negative territory year-over-year. However, there are serious labor issues at all West Coast ports, and it is hard to understand the effect on the container counts. One should also consider that exports have been decelerating most of 2014 - well before the labor disputes.
Econintersect: The American Trucking Associations' (ATA) trucking index was unchangedfollowing an increase of 3.5% in November. From ATA Chief Economist Bob Costello:
Economic data was mixed in December, with retail sales down 0.9% and factory output up 0.3%, so tonnage was in-between those two readings, which are two large drivers of truck freight.Overall, 2014 was a good year for truck tonnage with significant gains throughout the year after falling 4.5% in January alone. In December, tonnage was 10.2% above January.Freight volumes look good going into 2015. Expectan accelerationin consumer spending and factory output to offset the weakness in hydraulicfrackingthis year.
Econintersect: Average gasoline prices fell 7.5 cents per gallon nationwide (Lowest since May 2009) this past week following the previous week's 7.6 cent fall from the week before. In the last year, gas prices have fallen 1.22cents a gallon.
Average prices by region and a breakdown by grade follow after "Read more >>".
The NOAA Seasonal Outlook is a retraction of sorts as far as their ImagiNino is concerned. But surprisingly, some computer models are showing more confidence in the ImagiNino. It could that the major problem with these models is that they have the wrong year in mind and next year may be the El Nino Year. Or it could be the models are confused by the Positive PDO. Or perhaps they are correct. The biggest news perhaps is the strength of the Pacific Decadal Oscillation (PDO). A few months of high values of this index do not signify a climate shift but if this really is a change in sign of the PDO, which measures the spacial distribution of surface temperatures in the Pacific not the surface temperature of the Pacific, the pattern of our weather in the U.S. and around the World could be impacted for a number of decades. So this is potentially far more significant than the fate of one warm event. The Ridiculously Resilient Ridge (RRR) demonstrates its resilience.
Reports of heavy rocket artillery firing on the eastern parts of the city of Mariupol, Ukraine, as well as a statement made by a separatist leader, indicate the potential preparation of an offensive on the city. While this would be a significant escalation and an indicator of Russian intent to push further into Ukraine, potentially forming a much-rumored land connection to the northern border of Crimea, there are also several indicators required for such an offensive that are currently still missing.
Social safety nets are government or non-government (NGO) social programs to assist those in society who cannot work (or cannot work to full capacity). Many worry that such programs are incentives for people not to work IF they can get covered by a social safety net.
On Tuesday the National Bureau of Statistics released China’s 2014 GDP growth numbers and reported growth consistent with what the government has been widely promoting as the “new normal”.
According to the preliminary estimation, the gross domestic product (GDP) of China was 63,646.3 billion yuan in 2014, an increase of 7.4 percent at comparable prices. Specifically, the year-on-year growth of the first quarter was 7.4 percent, the second quarter 7.5 percent, the third quarter 7.3 percent, and the fourth quarter 7.3 percent.
Summary: To learn if 2014 was the warmest year let’s read the annual reports of NOAA and NASA. They give clear answers (different from the headlines). It might have been the warmest, but if so, only by a insignificant amount. The hysteria of activists about this is absurd. The data shows that the pause continues.
Although the crisis in Ukraine continues to focus attention on Russia's western border, Moscow is seeking to exploit a more lucrative prize along its vast northern frontage: the Arctic Circle. Melting ice has opened up new transit routes and revealed previously inaccessible oil and mineral deposits. Facing a year of harsh economic constraints, securing exploitable energy reserves remains a top priority for Moscow. The planned militarization of the Arctic is already underway, and funding is secured through 2015 (the Ministry of Defense was the only Kremlin ministry not to be curtailed in the most recent budget.)
Last week, I wrote about the crisis of Islamic radicalism and the problem of European nationalism. This week's events give me the opportunity to address the question of European nationalism again, this time from the standpoint of the European Union and the European Central Bank, using a term that only an economist could invent: "quantitative easing."
Markets top out when the news is good. Good news gives central banks the excuse they need to pull the punchbowl. In that respect, yesterday’s “bad news” on retail sales was bad news for stock market bears.
It is the time of the year for forecasts; but rather than do an annual forecast, which is as much a guessing game as anything else (and I am bad at guessing games), I’m going to do a five-year forecast to take us to the end of the decade, which I think may be useful for longer-term investors.
Many blame executive compensation for encouraging shortsighted risk-taking. This column argues that compensation should be structured so as to provide incentives consistent with the firm’s position and long-term interest. It proposes “incentive accounts” that it says would be superior to existing compensation schemes.
The headline, fictional, seasonally adjusted finagled for initial unemployment claims came in at 316,000, which was significantly more than the Wall Street conomist crowd consensus guess of 290,000. Media pundits immediately blamed the miss on a bad seasonal adjustment factor. Apparently they heard my barrage of complaints yesterday about how they mishandled the retail sales number. The problem is that the actual, unmanipulated data really does hint at possible trouble in the employment trend.
“No stock-market crash announced bad times. The depression rather made its presence felt with the serial crashes of dozens of commodity markets. To the affected producers and consumers, the declines were immediate and newsworthy, but they failed to seize the national attention. Certainly, they made no deep impression at the Federal Reserve.” -Thus wrote author James Grant in his latest thoroughly researched and well-penned book, The Forgotten Depression (1921: The Crash That Cured Itself).
A reader asked me to comment on the subjects of pinning and max pain in the option market. Although it may sound like it, these are not terms from professional wrestling. They are option-related terms that describe the behavior, or alleged behavior, of stock prices on option expiration day.
Below, technical overviews and analysis for key stock indices, commodities and currency pairs, based on market activity at what would have been the close (absent the holiday) of the 22 January 2015 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.
High oil prices have led to a surge of drilling for oil and gas in the U.S. in recent years. The Baker Hughes Rig Count shows a sharp rise in natural gas drilling activity that corresponded with the very high natural gas prices of 2005-2008, followed by a surge of oil drilling activity that took place as oil prices bounced around $100 per barrel (bbl):
My previous article examined the dangers of widespread euphoria and optimism. In this article, I will focus on an important question few analysts are raising: Is the so-called recovery in commercial office markets real or a mirage?
Below, technical overviews and analysis for key stock indices, commodities and currency pairs, based on market activity at the close of the 20 January 2015 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.
A common theme in most of last year's missives was the extreme level of complacency in the markets due to extremely low volatility. That has now changed as over the last couple of months market movements have expanded rather dramatically. The previous complacency that markets will only go up is now being questioned and the very issues that I repeatedly warned about last year, are now coming home to roost.
No one-and I mean no one-wants anything to do with this base metal anymore. Stinks for anyone playing copper on the long side. But it also gives you a shot at fast, double-digit gains on another metals play... if you know where to look.
Afternoon markets melted down off their 2 pm highs to test the 10:45 morning lows on low volume - where are the BTFDers when you need them? DOW off triple digits, small caps in the green but flat and WTI oil is testing the morning lows (45.35).
By 4 pm the SP500 slipped below the morning lows and closed on a low note leaving investors, again, wondering what Mr. Market has in store for them tomorrow.
Greece faces a decisive moment on January 25 in a snap election that could see major gains for the extreme left and right. But anyone worried about how Syriza on one side, or Golden Dawn on the other, might handle power, should consider a far more sinister force that has conspired to keep Greece away from recovery for years – the international markets.
It is well-known that Hungarian households financed their homes via loans in Swiss Francs, which led to big problems when during the crisis the Hungarian forint depreciated against the Swiss Franc. Probably debtors where delighted by the decision of the Swiss National Bank to stop the rise of the CHF, and now have been surprised by a decision to let the exchange rate be determined on the markets again.
One of the most striking things about the testimony in the AIG bailout trial is the degree to which Fed officials play fast and loose with the truth. And I don't mean the normal CEO version of having no memory of events that are inconvenient and very detailed recollections of things that boost their case. I mean statements that are flat out false.
The law of consent to medical procedures is (to paraphrase legal philosopher HLA Hart) “tantalisingly obscure”. Narrowly interpreted, the law sets out a professional standard regarding the risks a medical professional must disclose to a patient when carrying out a procedure. Astonishingly, the idea of what is considered informed consent primarily comes from case law, defined by decisions made in specific court challenges. It doesn’t really focus on the patient, but on the medical profession – something that is out of step with how most of us likely see the idea of consent.
Last night, President Obama gave a great speech. He almost always does. And to that ever-shrinking group of die-hards who continue to insist that somehow, and in someway, President Obama will validate the hope kindled by his 2008 presidential campaign, it was a moment of triumph. Yes, they are saying, in his heart - very deep down, perhaps - Obama does in fact share our values and concerns, etc., he just has a hard time finding ways to express it, etc.
What on earth is going on in the oil market? Does the recent 60% collapse in oil prices in six months really reflect shifts in underlying supply and demand for crude oil? I’m afraid not, as I have been predicting for more than three years. Here’s what has really been happening.
In my January 18, 2015 column, I explained that German Prime Minister Angela Merkel's sweetest triumph was successfully extorting George Papandreou, Greece's Prime Minister, head of the Greek Socialist Movement (PASOK), and President of the Socialist International, to inflict austerity and a war on workers' wages on the Greek people. I quoted a passage from the Papandreou administration's May 3, 2010, "Memorandum of Economic and Financial Policies" (the Papandreou Plan) agreeing to the European Commission's (EC) austerity and anti-worker demands that was made part of The EC's Occasional Papers No. 61 "The Economic Adjustment Programme for Greece" (May 2010).
A horrible tragedy occurred in Paris recently: three gunmen dashed into a magazine office and killed several editors and journalists. I unequivocally condemn the attack and feel sorry for the victims and their families.