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.
Platinum Fixing Under the Microscope (Dimitri Speck, Seasonax, The Hedgefund Journal) Over a period of 16 years (December 1997 to April 2014) the price of platinum (Pt) increased from $376 an ounce to $1,440. During that time there was systematic price suppression at the two daily reference price fixings in the London Platinum and Palladium Market. There is now a class action suit for restitution and damages by those who traded physical platinum and palladium during the specified time period. (Palladium (Pd) increased from $203 at the end of December 1997 to $802 at the end of April 2014.)
Speck provides the following chart which includes data for 4,189 trading days. Manipulation is alleged because there has been a greater tendency for price declines before the fixing times. In a market that has risen several fold there would be the expectation that the average for the fixing prices would be no less than the average for each day and most probably higher. The graph below shows that the average price increase for each of the 4,189 trading days was 0.03%. The average decline to the am fixing was 0.02% and to the pm fixing 0.06%. Manipulators could have averaged a gain of 0.09% per day over the 4,189 days by buying at the pm fix and selling at the close. That may seem like a tiny amount, but if a trader can skim 0.09% a day from $1 million daily trades that is more than $200,000 a year into the skimmer's pocket and out of the other non-manipulating traders' pockets. That is a 20% annual gain just from the skim on a trading account, extracted from all the other market participants. With more than $5 billion of platinum produced each year, large traders can make millions a year in net skims.
For more about the class action suit filed for recovery of losses and damages from alleged manipulators, see GEI News.
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Alibaba Would Be The 12th Biggest Company In The S&P 500 (Sam Ro, Business Insider) Alibaba (NYSE:BABA), the Chinese internet company, went public yesterday in New York. The offering was priced at $68, first secondary market trade was $92.70 and the stock closed at $93.89. This put the market cap at $231.44 billion. The graph below was drawn when the price of BABA was $92.70. At the end of the day BABA had added enough value that it moved up a notch to a market cap larger than JP Morgan Chase. That means the headline should be changed to Alibaba would be the 11th largest company.
Home prices decline in more cities in China (Xinhua, Want China Times) Hat tip to Ian R. Campbell, GEI Discussion Group, LinkedIn. In August 68 of 70 Chinese metro real estate markets saw month-over-month price declines for new homes. In July it was 64. The data for existing homes was similar, declines in 67 markets in August, compared to 65 in July. Although the cooling real estate market continues to broaden into all corners of the country, the size of price declines diminished in 21 of the markets, up from only 8 in July. However, market examples in this article mentioned monthly declines of 1% and 2%, which is a very high rate if annualized.
Deeper shade to first-time homebuyers' blues (Michelle Jamrisko and Alexis Leondis, The Seattle Times) One of those interviewed for this article was Susan Wachter who has contributed to GEI. Already beset by stagnant wages, student debt and competition from investors who are snapping up listings, those looking to purchase moderately priced houses must also provide more cash up front. Younger adults, who would normally be making initial forays into real estate, are among those most affected, weakening the foundations of the housing market and limiting its contribution to economic growth.
A test of will (The Economist) When everything is "headed south" it's time for more wind from "the north" (Beijing), aka stimulus.
U.S. Health System Among Least Efficient Before Obamacare (Anna Edney, Bloomberg) America's health-care system ranked 44th of 51 nations in terms of per person spending, life expectancy and health-care cost as a percentage of the economy. It's an improvement from 46th of 48 last year. The data is from 2012 so it is the next to last benchmark for the U.S. before Obamacare implementation.
Median Household Income by State: A Look at the Latest Data (Doug Short, Advisor Perspectives dshort.com) Doug Short is a regular contributor to GEI. In the 21st century U.S. real median income has declined 8.7%. Yet six states have had gains in real median income greater than the national loss; and 22 states overall have seen gains. Surprisingly, perhaps, 42 states have experienced better change numbers than the national -8.7%. So the losses in the other 8 states are particularly draconian.
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