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.
Madoff trustee recoups nearly $500 million more for customers (Jonathan Stempel. Reuters) This brings the total recovered to $10.3 billion, 59% of the estimated $17.5 billion of principal (before any investment gains represented by Madoff to clients) that was lost. Of this, the article says that less than $6 billion has been distributed so far. Nor mentioned in the article is what has happened (or will happen) to the remaining $4.3+ billion? Will some of this ber going for court expense and attorney fees?
There are 14 articles discussed today 'behind the wall'.
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CHART OF THE DAY: The History Of 10% Stock Market Sell-Offs (Sam Ro, Business Insider) Sam Ro calls them "healthy 10% corrections". This article was written 11 months ago and at the time it had been 553 trading days (2.3 years) since the last 10% decline in the stock market. Now we are up to 773 trading days (3.2 years). The average interval is 357 days (1.5 years) but the longest was in the 1990s and lasted for approximately 7 years (more than 1,600 trading days).
Why the Next Stock Market Crash Will Happen Any Day Now (Christian Hill, Money News)A number of worrisome data sets are cited: (1) earnings estimates getting progressively more reductions each year; (2) PE ratio - including CAPE - is at high level; (3) investor sentiment is too optimistic; (4) VIX (volatility index is low; and (5) market is at historic highs. There are pretty charts but most as 1-2 years out of date. For more up to date charts and a more through review of cautionary data to follow see Lance Roberts' weekly article at GEI Investing.
Market Briefing: S&P 500 Bull & Bear Markets & Corrections (Edward Yardeni, Joe Abbott and Mali Quintana, Yardeni Research) Major corrections are declines of 20% or more (also called bear markets). Declines between 10% and 20% are commonly called corrections. There have been 12 major corrections since 1946, the last one was the biggest loser of the group, starting in the autumn of 2007 (-57% S&P 500). So that means there have been, on average, a major correction starting every 5.7 years (although bear markets were more common 1946-1980 - one starting on average every 4.6 years - and less common 1980-2014 - one starting on average every 11 years). So, referring back to preceding article, Carl Icahn's prediction that there will be a major correction within the next 3-5 years can be considered in context. It has been 5.7 years since the end of the last major correction (March 2009). There have only been 3 longer intervals before the start of the next major correction: 6.2 years (1980 start), 8.1 years (1957 start) and 9.6 years (2000 start). Icahn is merely observing that if the next major correction does not start within five years the interval will exceed the longest since WW II by more than a year; and if not with three years only one of twelve bear markets will have been preceded by a longer interval. Icahn may have other reasons for his prediction but he is certainly "playing it safe" by historical experience.
Yardeni and Associates present their data in 13 magnificent graphic charts, going back to 1929. Here is the first (chronologically):
China October home prices down 2.6 percent year-on-year, second straight monthly fall (Xiaoyi Shao and Kevin Yao, Reuters) The largest year-over-year price drop since Reuters started tracking nationwide house prices in China occurred in October. The decline was 2.6% and was the second month in a row that prices were down. The record price decline was not accompanied by a corresponding sales volume reduction. In October square footage sold declined only by 1.6% in October. The decline in September had been much larger, 10.3%. Analysts quoted by Reuters indicated the opinion that prices will continue to decline. For a different take, an article by Li Anne Wong at CNBC suggested that China's home price decline appears to be easing. Wong looks at the month-over-month declines and finds July to August was -1.1%, August to September was -1.0% and September to October -0.8%.
The Fed Needs Governors Who Aren’t Wall Street Insiders (Elizabeth Warren and Joe Manchin, The Wall Street Journal) Two U.S. senators (both Democrats) write an Op Ed urging President Obama to abandon the Federal Reserve - Wall Street connection for his next two appointments. The argument is basically that the Fed is not an effective supervisor of banks if the governors are members of the banking community. Econintersect: OMG! They can't be saying that self-regulation isn't the way to go?
Japan returns to 1997 – idiocy rules! (Bill Mitchell, billy blog) Mitchell says "Japan believes the IMF myths" that reducing fiscal deficits will lead to growth. He compares the GDP data of starting 2H 1997 to that starting 2H 2013. The last time Japan hiked the consumption tax was 01 April 1997 (from 3% to 5%). This year (01 April) they hiked the same tax from 5% to 8%. So far the results are the same. So what's this about a surprise recession? Mitchell says it is simple memory loss.
Peak Bullets: the Weirdest Shortage of them All (Thomas Lewis, Doomstead Diner) The shortage is for .22 caliber ammunition. It seems that they are in short supply and sell out in minutes whenever a shipment comes into a store. The author has no explanation (except for the far-out).
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