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.
Leftist Rousseff narrowly wins second term in Brazil (Brian Winter and Alonso Soto, Reuters) Brazil's president narrowly defeated (51.6% to 48.4%) centrist candidate Aecio Neves Sunday, 26 October. She won despite a severe economic slowdown during her first term by arguing that over the last 12 years her party had lifted 40 million Brazilians out of poverty, according to Reuters.
Twenty-five European banks fail stress test (Al Jazeera) The European Central Bank (ECB) has found that 25 out of 130 banks have failed to pass the stress tests for the current year. The 25 were found to need €25 billion ($31.5 billion) to "heal" their balance sheets. Of the total 12 have already made up their shortfall since the preliminary results were revealed to the banks and 13 are still deficient by a total of €12.5 billion ($15.7 billion). Econintersect finds the results quite marvelous, unless they happen to be too good to be true. When reading the words, what we notice is the word "confidence". We do see the word "sound". In 2010 and 2011 the EU carried out stress tests which passed banks that afterwards needed to be bailed out. Perhaps the ECB can do better?
This Comet Stinks (Jessica Orwig, Business Insider) The University of Bern has been sampling with a mass spectrometer the fumes surrounding comet Churyumov-Gerasimenko. The comet, which is scheduled to receive a landing craft from the European Space Agency Rosetta spacecraft next month, has had the space craft orbiting it for several months - and sampling its "bad breath". The fact that the icy exterior of the comet, which is outgassing as it speeds toward the sun, contains a rich mixture of carbon and sulfur compounds that are some of the building block chemicals for life, is very important information for scientists. These first in situ samples of a comet's outgassing "atmosphere" will be compared to data obtained from other comets by remote sensing techniques. Two days ago other spacecraft reported that the Comet Siding Spring Was Bleeding Hydrogen As It Sped By Mars (Elizabeth Howell, Universe Today). See also the media release from the University of Bern: The Perfume of a Comet (Prof. Kathrin Altwegg)
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The Bailout Created the Debt, Not Vice-Versa (The Polemicist) Hat tip to Roger Erickson. The point here is that the rise in national debts came after the bailouts, not before. But the problem with this graph is that the denominator, GDP, declined significantly from 2007 to 2010. For the UK the decline was 18%, from $2.8 trillion to $2.3 trillion. To illustrate his point the author should have used debt numbers directly. Another point is that the evidence here does not prove causation without further analysis. The evidence is "circumstantial", to use a legal term.
On The Coming Collapse Of Copper (Tyler Durden, Zero Hedge) Copper has some catching up to do to match declines in other construction commodities. From the graph provided by Zero Hedge one can estimate another 20% to 25% drop for copper - and more if other commodities keep falling. That would put copper at $2.25 to $2.35 (or lower)
Gold nugget found in California finds secret buyer (Associated Press, Bloomberg Businessweek) The largest gold nugget found in several decades, weighing in at 6.07 pounds, has reportedly been sold by the lucky prospector to a secret buyer, a "prominent Bat Area collector", for a reported $400,000. At current prices that is about $8,600 an ounce, approximately 3.7 times the current spot price for gold. You might say provenance has its price.
Mortgage rates enticing, but impact may be limited (Dallas News) Mortgage rates have fallen for five straight weeks, creating a boomlet in refinancing applications and home purchases. This article says it remains to be seen if this "will turn into an extended boom". Well the date on the article was Saturday so the author should have checked the 10-year Treasury bond rate, a benchmark for mortgages. The last several days saw the biggest increase in rate in some time; from 2.15% on 15 October to 2.29% 24 October. That was about a 1/3 retracement of the sharp interest rate dip since late September. Unless the bounce reverses you can kiss the boomlet goodbye.
Goldman’s new improved view on the oil sell-off (Izabella Kaminska, FT Alphaville) Goldman Sachs now sees oil going to $75 a barrel in 1Q and 1H 2015 and ultimately getting as low as $70 before rising again in 2016 to $80. (All prices WTI.) At $75 and below Goldman sees U.S. shale production slowing to a rate that "doesn't undermine the wider long-term contracted oil producing network, and which doesn't put off long-term reinvestment". A few hours ago GEI News posted an article that suggested about half of U.S. shale production has costs above $76 to $77, so a first order approximation is that Goldman thinks about half of U.S. shale oil production is glut.
We should welcome China’s infrastructure bank (Peter Cai, China Spectator) Cai says that the infrastructure bank for Asia is needed and should be welcomed by all. He thinks Australia should become a member in spite of U.S. opposition.
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