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What We Read Today 07 February 2014

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 of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number accepted.

  • A 'smoking gun' on Ice Age megafauna extinctions (University of Copenhagen, Science Daily) Hat tip to Naked Capitalism. Climate change killed the mammoths, wooly rhinos, northern region horses and other large grazing animals because the former rich grazing flora was replaced by low nutrient, woody plants 15,000 to 25,000 years ago.

Today 'Behind the Wall' features mortgage markets and real estate plus articles on macro economic models, gold/gold miners and several other topics.

  • The Anatomy of Mortgage Stress (Martin North, Digital Finance Analytics) Hat tip to Macro Business. Housing prices are rising smartly and employment has held fairly steady, resulting in the lowest mortgage stress in Australia in a decade. (See graph below.) What could possibly go wrong? Martin North says rising unemployment and higher interest rates could put pressure on housing prices and drive mortgage stress back up.

Click on graph for larger image at Digital Finance Analytics.
australia-mortgage-stress-600px

unemployment-us-men-25-54-wsj-2014-feb-06-annotated
Annotations by John Lounsbury 06 February 2014.

  • EU Said to Weigh Extending Greek Loans to 50 Years (Nikos Chrysoloras and Rebecca Christie, Bloomberg) Extend and pretend? Why not extend to 100 years. Or perpetual securities? Question: Can Greece even pay the interest? maybe the solution would be perpetual debt at zero interest. Now there's a thought.
  • The Coming Mortgage Delinquency Disaster (Keith Jurow, Advisor Perspectives dshort.com) Keuth Jurow contributes to Global Economic Intersection. A very small percentage of underwater homes complete foreclosure and are taken over by the bank. Even if short sales are taken into account, the conclusion is that many home owners are who are not making mortgage payments are still living in their house.

mortgagedelinquencies-worst-markets-keith

  • IBM eyes sale of semiconductor arm (Ed Hammond and Richard Waters, Financial Times) A few weeks after Big Blue sold its low-end server business to Lenovo there is a report that they want to unload the world's most advanced semiconductor research, development and production business. Econintersect suggests that the next announcement will be a change in corporate name: International Business Services Corp.

flipping-2011-2013

zell-bloomberg-tv

The general macro supply and demand method suffers from its application to define economic equilibrium, the existence of which is much debated today, although not as widely as Econintersect would prefer.

So why is this paper on the reading list? For those who want to increase their understanding of the traditional equilibrium modeling of the past nearly 80 years this is perhaps the most easily understandable discussions yet written, especially for non-economists or those with only "ancient" undergraduate exposure to the subject.

goods--money-supply-demand-ap-mueller-2014-jan

  • The Next Big Trade to Unwind (Justin Smythe, The Next Big Trade) Gold miners have been outperformed by gold itself for the past eight years. Will this trend start to "unwind" the downtrend for $HUI:$GOLD ? Note that the last time the ratio got down to the 0.15 level (late 2000) the 12-year bull market for gold was about to start. Even though gold was in the start of a bull market, gold miners outperformed bullion for the next three years (2002-2004). A repeat performance would see both bullion and miners start a new multi-year bull run within the next year (or so) and the miners would be outperforming for the first few years.

gold-miners-vs-gold-1998-2014


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