Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
Asia markets waver as yen strengthens and oil falls (CNBC) Asia markets wavered between gains and losses on Wednesday, as the yen nudged higher against the dollar and oil prices retreated. In Australia, the benchmark ASX 200 pared some of the early gains of more than 1.2% to trade up 0.66%, with advances in the financials sub-index, as well as the energy and materials sub-indexes.
Global Warming Cited as Wildfires Increase in Fragile Boreal Forest (The New York Times) Scientists have been warning for decades that climate change is a threat to the immense tracts of forest that ring the Northern Hemisphere, with rising temperatures, drying trees and earlier melting of snow contributing to a growing number of wildfires. The near-destruction of a Canadian city last week by a fire that sent almost 90,000 people fleeing for their lives is grim proof that the threat to these vast stands of spruce and other resinous trees, collectively known as the boreal forest, is real. And scientists say a large-scale loss of the forest could have profound consequences for efforts to limit the damage from climate change.
Riding the 'Solarcoaster' as Shares Plunge Even More Than Coal (Bloomberg) For all the upbeat forecasts about the growth of solar power, this is a punishing year for the industry. And it won't improve anytime soon. SunEdison Inc., the world's biggest clean-energy company, is bankrupt. Yingli Green Energy Holding Co., once the top panel maker, warned it may be inching toward default. A Bloomberg index of 20 major solar companies has plunged more than 30 percent this year, with every member in the down column. Solar shares are performing even worse than coal stocks. Econintersect: This is an example of how deflation (falling prices) can wreck businesses, especially those that are commodity and process cost intensive. Products built with 6 - 12 month ago costs, which were profitable at prices at the time, are losing money at current selling prices. If anybody asks what is wrong with deflation, this is one example. And then those that are wise enough to avoid this trap also add to the deflationary spiral by not investing because the future value of the investment is lower. Put another way, the dollar not invested today will be worth more tomorrow.
Big Oil Unexpectedly Backing Newest Non-Fossil Fuels (Bloomberg) Big oil is dipping a few more toes into clean energy. Exxon Mobil Corp. is partnering with a company to capture carbon-dioxide emissions from power plants. Total SA, the French oil supermajor, announced a $1.1 billion deal Monday to buy the battery maker Saft Groupe SA, complementing its 2011 purchase of a majority stake in the solar-panel maker SunPower Corp. And the Canadian pipeline company Enbridge Inc. announced Tuesday it will pay $218 million for stakes in offshore wind farms as it attempts to double its low-carbon generating capacity. While fossil fuel companies have been dabbling in clean energy for years, they typically stayed close to their roots by focusing on ethanol and other biofuels. This round of investments takes them into the heart of the clean-energy industry. As crude prices struggle to recover and growth projections for renewables soar, oil companies see a chance to diversify.
Sanders' West Virginia win makes up little ground on Clinton (Associated Press) White House dreams fading, Bernie Sanders added another state to his tally against Hillary Clinton with a win in West Virginia on Tuesday - a victory that will do little to slow the former secretary of state's steady march toward the Democratic presidential nomination. Meanwhile, Republican Donald Trump also won there and in Nebraska, a week after he cleared the field of his remaining rivals. They were not victories likely to heal the party's wounds, as some GOP leaders continue to hold off offering their endorsement of the party's presumptive nominee. Clinton remains far ahead of Sanders and so close to the nomination that she could lose all the states left to vote by a landslide and still emerge as the nominee, so long as all her supporters among the party insiders known as superdelegates continue to back her. Thus Sanders' 15 percentage point win in West Virginia has little impact on the eventual nomination but does increase his credentials for a voice on the party's platform. See also Bernie Sanders Bests Hillary Clinton in West Virginia Primary (Bloomberg) which also include details on Trump's Nebraska win.
This 65-year old lost most of his life's savings for failing to file a form (Sovereign Man) As a Swiss native, Bernhard Gubser, who became a naturalized American citizen in 1980, had a Swiss bank account. And as he was routinely spending a lot of time in Switzerland for business, and he felt that he might one day retire there, he kept the account open. But the federal government has a rule: US taxpayers must disclose their foreign bank accounts each year to the Treasury Department. Up until a few years ago, few people knew about this rule. Gubser maintains that as soon as he found out about the requirements, just like most people, he immediately began to file the offshore disclosures. The federal government took a different view, dinging him with a penalty of $1.35 million, roughly half of his life's savings. As they say, of course, ignorance of the law is not an excuse. And Gubser is paying a $1.35 million penalty because he didn't know. Neither did Tim Geithner, as it turned out. Several years ago the former Secretary of the Treasury was found to have "accidentally" underpaid his taxes. In this case, ignorance of the law was a perfectly valid excuse. Geithner was only required to pay back what he owed without additional consequence. Econintersect: As they say: "Different strokes for different folks." It now seem applicable to slaps on the wrist and 100-lash beatings.
Hillary Clinton Son-In-Law's Hedge Fund Shuts Down Greek Fund After 90% Loss (Zero Hedge) Despite having Goldman Sachs CEO Lloyd Blankfein as an investor and being Bill and Hillary Clinton's son-in-law, Marc Mezvinsky (and two former colleagues from Goldman Sachs who manage Eaglevale Partners hedge fund) told investors in a letter last February they had been "incorrect" on Greece, generating staggering losses for the firm's main Eaglevale Hellenic Opportunity, a/k/a the "Greek recovery" fund during most of its life. By 'incorrect' the Clinton heir apparent meant the $25 million Eaglevale Greek fund had lost a stunning 48% in 2014. By the time the fund closed this year the losses totaled 90%. Econintersect: The fund wasn't hedging anything - it was a straight up gamble on a Greek recovery. As readers of GEI reports over the past 5 plus years are well aware, there was not a Greek recovery and it was clear from the beginning there could never be a recovery under the austerity plan forced on Greece by the EU 'Troica'. For a review of this history, see the just posted Documentary Of The Week: Capitalism And Democracy.
Puerto Rico's Fiscal Fiasco Is Harbinger of Mainland Woes (The New York Times, MSN News) Puerto Rico may be about to default on $2 billion of debt (unless bailed out by the federal government). But mainland residents should not look smugly at Puerto Rico. Across America, dozens of cities, counties and states may be heading down the same financial rabbit hole. Illinois, New Jersey, Philadelphia, St. Louis and Jacksonville, Fla., to name just a few, are all facing their own slowly unspooling financial disasters.
What the new Muslim mayor of London has to say about Trump (The Washington Post) Muslim Sadiq Khan is the new mayor of London, elected by the largest landslide in British history. He has been outspoken against the politics of divisive rhetoric and actions based on race, religion and social class. So when Donald Trump, after Khan's election, said that Khan would be welcome in the U.S. because there would "always be exceptions" on who could be admitted to the country, the new mayor responded:
"This isn't just about me: It's about my friends, my family and everyone who comes from a background similar to mine, anywhere in the world."
Germany Appears to Cave on Greek Debt (Foreign Policy) Hours after Europe and Greece appeared far apart on the latest bailout payment to Athens, German Finance Minister Wolfgang Schäuble late Monday signaled a readiness to make some kind of deal on Greek debt. His acquiescence came after a meeting of European finance ministers in Brussels. It remains to be seen what Schäuble's admission means, and details are short ahead of a May 24 deadline to deliver Greek Prime Minister Alexis Tsipras the money he needs to make a $4 billion debt payment in July. Germany has ruled out a haircut for Greece, which would have allowed Athens to pay back less than what it owes its European creditors. However, Berlin is apparently willing to explore some nontraditional options that would give Greece leeway. This includes extending maturities on loans to Greece, limiting annual repayments, and capping interest rates on money lent to Athens. According to a report by the Wall Street Journal, under a European Union proposal, Greece won't have to pay back what it owes for more than 37 years. Interest on this money would be capped at 2% until 2050. The latest bailout totals 86 billion euros, or $98 billion.
Greece's debt crisis looks familiar, but consequences may be worse (Financial Times) Last summer's deal was less a cure-all for Greece's economic woes than a collective kicking of the can down the road. It avoided default by loaning Athens €13bn very quickly in exchange for a narrowly focused set of pension and tax reforms. Now the can has come to rest again. The players, the arguments and even the choreography have changed little since last year. But the consequences of failure may have. A year ago, EU leaders felt confident they had ringfenced Greece and that a Grexit, while severely damaging to the Greek economy, would have little impact on the rest of the eurozone. Now, however, they are deeply worried about the prospect of a failed EU member state with 50,000 Syrian, Iraqi and Afghan refugees stuck in deteriorating camps - a state the rest of the bloc is looking to as a front line against the influx of migrants into Europe. Add to that the chance that an ugly Greecian problem might push the UK to vote for Brexit and solving the Greek problem is becoming existential for the EU.
Saudi Aramco float could spark renewables boom (Climate Home) The imminent float of Saudi Aramco stock and projected renewables funding could send the sector soaring, Adnan Amin, head of the Abu Dhabi-based International Renewable Energy Agency (IRENA). Econintersect: Could Saudi Arabia become the "Saudi Arabia of renewable energy?"
Reality Check for Saudi Banks (Bloomberg) For anyone betting Saudi Arabia's banks are entering a resurgent phase after their earnings crushed analyst estimates in the first quarter, here's a reality check. Borrowing costs in the kingdom have risen to the highest in seven years, bad loans are forecast to jump after an increase in lending to companies hurt by payment delays, and economic growth is poised to slow by more than half this year. Little wonder, then, that analysts have turned the most skeptical since April 2015 on the outlook for Saudi banks, cutting their earnings projections for four successive months.
37,000 India files in new Panama papers released (The Hindu) The International Consortium of Investigative Journalists (ICIJ) late on Monday released 2.6 terabyte of Panama papers data on over 11.5 million financial and legal records, including about 37,000 files related to India. The India-related documents pertain to 22 offshore entities, 1,046 individuals, 42 intermediaries and 828 addresses. The ICIJ website carries a disclaimer that ...
"... there are legitimate uses for offshore companies and trusts. We do not intend to suggest or imply that any persons, companies or other entities included in the ICIJ Offshore Leaks Database have broken the law or otherwise acted improperly. Many people and entities have the same or similar names. We suggest you confirm the identities of any individuals or entities located in the database based on addresses or other identifiable information."
The World's Most Extreme Speculative Mania Unravels in China (Bloomberg) From the Dutch tulip craze of 1637 to America's dot-com bubble at the turn of the century, history is littered with speculative frenzies that ended badly for investors. But rarely has a mania escalated so rapidly, and spurred such fevered trading, as the great China commodities boom of 2016. Over the span of just two wild months, daily turnover on the nation's futures markets has jumped by the equivalent of $183 billion, outpacing the headiest days of last year's Chinese stock bubble and making volumes on the Nasdaq exchange in 2000 look tame.
AP Explains: Why Brazilian president faces impeachment (Associated Press) She is accused of breaking fiscal laws by shifting around government funds to plug budget holes. Opposition parties say sleight of hand accounting allowed her to boost public spending to shore up support. Rousseff denies any wrongdoing, saying she didn't do anything that was not common practice in all prior administrations. She further argues that she isn't being charged with a crime, which should be the basis for any impeachment. Government supporters call the impeachment push a coup because Rousseff has not been charged with any crime. They say Brazil's traditional ruling class has been unnerved by the social movement under Rousseff's Worker's Party over more than a decade in power and is seizing the opportunity to take back power. Opponents say the administration's maneuvering of funds was illegal and an attempt to mask problems in Latin America's largest economy, such as huge budget gaps that have surfaced over the last year. They say impeachment can't be considered a coup because it's allowed in the constitution. For the irony of the situation see 2 men in line for Brazilian presidency accused of corruption. So a non-criminal could be replaced by a criminal.
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