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What We Read Today 22 August 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 (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.

  • Now’s the Time to Buy Iron Ore (Cina Coren, Daily Forex) Iron ore is down more than 30% in 2014, from $135 a ton to the low 90's. Coren thinks it is time to start fishing for a bottom.


  • Articles about Ferguson:

Missouri Gov. Jay Nixon withdraws National Guard from Ferguson, as clashes subside (Carol D. Leonnig, David Nakamura and William Branigin, The Washington Post)

Calm largely holds in Missouri after grand jury opens shooting investigation (Scott Malone and Carey Gillam, Reuters, MSN News)

From Ferguson Cop Embroiled in a Brutality Suit to City Councilwoman (Michael Daly, The Daily Beast)

  • Articles about wars elsewhere:

Israel-Gaza conflict: Airstrike kills 3 Hamas leaders (Associated Press, CBC News)

US signals escalation in Isis fight (Richard MacGregor, Financial Times)

James Foley's final months: Mock executions, failed rescue attempt (Chelsea J. Carter, Barbara Starr and Ashley Fantz, CNN)

The logic of not paying ransoms (Adam Taylor, The Washington Post)

Europe: All change on Iraq (Gavin Hewitt, BBC News)

As Ukraine Presses Military Offensive, The Facts Are Fuzzy (Sioraya Sarhaddi Nelson, NPR)

There are 14 articles discussed today 'behind the wall'.

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  • Mob boss calls a stock bubble (Leslie Shaffer, CNBC, MSN Money) Formerly one of the top 50 mob bosses in America, Michael Franzese says that "Wall Street traders can be shady" and should not be trusted with your money. He also says the stock market is in a bubble and investors should avoid it.
  • GCZ14 – December Gold (Last:1278.40) (Rick Ackerman, Rick's Picks) As the stock market pushes into record territory, interest in gold diminished. Ackerman sees little other than a further decline for the yellow metal towards a 1257.70 target.

Click on chart for large image at Rick's Picks.

  • Citigroup Earning Less From Tokyo Than CEO Salary (Finbarr Flynn, Shingo Kawamoto and Takako Taniguchi, Bloomberg) Abenomics is pushing interest rates toward zero and Citigroup is getting crushed by low interest income. The bank is considering selling its operations in the country with the third largest economy in the world.
  • The Common Enemy (George Packer, The New Yorker) This is a movement that captures and controls territory. That aspect of ISIS will be easy for the armed might of NATO and others to curtail. But the terrorist aspect of the movement will be as difficult to contain as others have been. But failure to confront the territorial aspects of the group now will cause bigger problems down the road. "It's hard to believe that the ambitions of ISIS will remain confined to the boundaries of the Tigris and Euphrates."
  • CEOs are dumb when it comes to this (Simon Constable, MarketWatch) Compensation for executives often has a significant component composed of stock options. Constable reviews a study by two professors showing an astounding amount of mismanagement of stock options by these top executives. Read the research report: Growth through Rigidity: An Explanation for the Rise in CEO Pay (Kelly Shue and Richard Townsend, University of Chicago and Dartmouth College). The inflation adjusted base salary for executives has remained fairly constant over the past 20 years; increases have been in the areas of performance bonuses, option grants and stock grants.


"The world's largest banks have only grown bigger since the 2007-2009 financial crisis, and now contain even more separate entities involved in a dizzying web of credit obligations and trading positions".
"Banks ..... are struggling to get a handle on the full scope of their trading activities and asset quality".
"The result is that six years after the financial crisis, regulators and the industry they oversee cannot confidently assess big-picture threats to the U.S. financial system".

Put together, and recognizing that big banks are international in scope and not restricted to banks headquartered in the United States, such comments need to be considered in the context of

"how meaningful and accurate are bank stress tests that have been completed to date - and how accurate will the Eurozone bank stress tests that currently are ongoing be when they are reported in November?".


  • 5 Fastest Growing ETFs Of 2014 By Flows (Dennis Hudachek, This is a ranking based on relative flows (increase divided by previous AUM - assets under management) so smaller ETFs are favored. The five are: (5) NYSE:BBRC; (4) NYSE:PGAL; (3) (3) NYSE:TRSK; (2) NYSE:DBEU; and (1) NASDAQ:FTGC. Note of caution: All of these are small (BBRC is the largest with $265 million AUM) but (3) and (4) are tiny and very thinly traded.
  • Visa wants to make it even harder for thieves to buy gas with your credit card (Danielle Douglas, The Washington Post) According to Nilson Reports, six cents of every $100 in credit card transactions is tied to fraud and gas stations are high on the list of outlets experiencing fraudulent use of plastic. Visa is implementing a new software package that will evaluate the probability that a card presented might be fraudulent use . If such is indicated of sufficient probability the customer will be directed to see the cashier. Criminals will usually just drive away and card owners will simply present identification.
  • Americans' Satisfaction With Job Security at New High (Rebecca Rifkin, Gallup Economy) American employees are more satisfied with job security than ever. Other job satisfaction areas that ranked even higher than job security were physical safety conditions, relations with coworkers and supervisors, flexibility of hours and amount of vacation time. Well below half are satisfied with chances for promotion, health insurance and retirement plans, amount of money earned and on-the-job stress.


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