econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



>> Click Here for Historical Wall Post Listing <<

What We Read Today 24 November 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.

  • FACT CHECK: Obama's Claims On Illegal Immigration (Alicia A. Caldwell, Associated Press, Business Insider) Obama's generalizations continue to be misleading as to specifics. He needs more analysts on his staff and fewer public relations people.

  • The Week That Shook the Fed (Gretchen Morgenstern, The New York Times) Morgenstern highlights two events from last week that have been very troubling for the Federal Reserve: Congressional hearings on quashing dissent within the Fed and an academic paper that accuses the Fed of partiality. The first of these saw a very uncomfortable New York Fed president, William Dudley answering questions about the ties between Goldman Sachs and its supposed regulator (the New York Fed) revealed by whistleblower Carmen Segarra. See GEI News today for the latest on this. The second is a paper by University of Texas Austin professor Henry Hu which details how the Federal Reserve operates to preserve the well-being of member banks and not the goals of "investor protection and market efficiency". Prof. Hu says a "a conflict is emerging". Hu is referring to disclosure conflicts between the SEC and the Fed, as well as Fed internal conflicts of interest between carrying out congressional mandates on employment and inflation vs. protecting the member banks. (Econintersect: Well, duh!!!) See Disclosure Universes and Modes of Information: Banks, Innovation, and Divergent Regulatory Quests (Henry Hu, Yale Journal on Regulation).
  • Articles about events, conflicts and disease around the world

Ferguson

“Down Outright MurderR”: A Complete Guide to the Shooting of Michael Brown by Darren Wilson (The Intercept)

Ferguson in Context on the Eve of the Grand Jury Decsion (Naked Capitalism)

Court: Judge hasn't agreed to release Ferguson grand jury evidence if no indictment (St. Louis Post Dispatch)

Ebola

Report: New York City awarded Ebola clean-up contract to con man (Fox News)

U.S. looking past Ebola to prepare for next outbreak (R&D)

Ivory Coast

The cocoa crisis: why the world’s stash of chocolate is melting away (The Guardian)

Middle East

Five Bedrock Washington Assumptions That Perpetuate Our Middle East Policy Train Wreck (Naked Capitalism)

Rand Paul Declares War on ISIS—and Allows Boots on the Ground (The Daily Beast)

Iraq

What's Wrong With This Picture? For U.S. Fight Against ISIS, Everything (Huffington Post)

Ukraine

Away from the front line, Ukraine protest sparked civic revolution (The Conversation)

Russia

Is Vladimir Putin pushing for conflict? (The Daily Journalist) Steven Hansen is 1 of 12 panelists.

Finland

Finland feeling vulnerable amid Russian provocations (The Washington Post)

Afghanistan

Suicide bomber kills 45 at Afghanistan volleyball game (CNN)



There are 11 articles discussed today 'behind the wall'.

Do not miss "Other Economics and Business Items of Note", the final section every day.

Please support all that we do at Global Economic Intersection with a subscription to our premium content 'behind the wall'.

There are between 75 and 100 articles reviewed most weeks. That is in addition to the 140-160 articles of free content we provide.

You get a full year for only $25.


  • 7 charts that explain the undocumented immigrant population (Nia-Malika Henderson, The Washington Post) One interesting aspect of the data is that the number of illegal immigrants has declined by about 200,000 between 2010 and 2012 (first graphic) but the number from Mexico has declined by about 1 million between 2007 and 2012 (second graphic). About 2/3 of the Mexican decline occurred during the Great recession (2007-2010).

global-illegal-2010-and-2012

mexican-illegal-1995-2012

  • Yellen Gets That Sinking Feeling Greenspan Once Knew (Matthew Boesler, Bloomberg) Boesler suggests that Janet Yellen may have no better luck raising interest rates that did Alan Greenspan a decade ago. When Greenspan raised benchmark overnight rates 2004-2006 he was trying to drive long-term interest rates higher to slow down the growth of excesses in credit markets. But the initial response was not forthcoming. See Explore Analytics article, third below. In 2007 the yield curve inverted (long-term rates fell below short-term rates, a condition that is usually followed by recession) and then all rates fell to historic lows over the next couple of years as a reaction to the credit crisis, The Great Recession and the debt deleveraging period that followed. Econintersect: The Fed has a tool for forcing long-term interest rates higher. With over a $1 trillion in Treasury securities on the balance sheet they could sell long-term treasuries through FOMC (Fed Open Market Committee) actions. This would likely drive bond prices down and interest rates higher. However, this tool is more like a sledgehammer than a scalpel and implementing such a strategy in a relatively weak economy could quickly precipitate a recession (it would be taking money directly out of the real economy, reducing aggregate demand). See next three articles for factors on the Fed radar screen regarding interest rates.
  • Wages to Rise on Signs of Improving U.S. Job Market (Richard Clough, Victoria Stilwell and Jennifer Kaplan, Bloomberg) This article discusses the prospects for wage-driven inflation to finally arrive more generally as it has already in the energy sector and the states of North Dakota and Texas. But the component of wage growth related to energy may relax with lower oil prices and there still may be lagging wage pressures as a result. See next article.
  • Fed's Two Jobs Collide as Drop in Unemployment Vies With Inflation (Michelle Jamrisko and Catarina Saraiva, Bloomberg) By June of next year projections have the unemployment rate at levels the Fed has said they consider to represent full employment (low 5% area). But will this be enough to push wages higher and give inflation to boost sought by the Fed of 2% (core rate)? That question is difficult because of the lowered labor force participation rate. If slack does disappear from the labor market, how many of the millions of working age no longer in the labor force would return? Aggregate demand could well see significant increase without much wage inflation - and that would be what is called a "sweet spot".
  • US Treasury Historical Yield Curve 1990 – 2013 (Gadi Yedwab, Explore Analytics) Here is a particularly clever way to display the entire yield curve on a timeline. Yedweb displays yields for all Treasury maturities on the same timeline. (Note: The version of this graphic at the source is interactive, displaying all interest rates for any date selected by cursor.) Here is a summary of how to read his graphic:
  • The larger the vertical displacement, the steeper the yield curve. (Steepest: 1993-1994, 2003-2004, 2009-2011, 2013 and (not shown) 2014)
  • The smaller the vertical displacement the flatter the yield curve. (Flattest: 1996, 1999, 2000-2001, 2006-2007)
  • When long-term rates are lower than short-term rates, the curve is inverted. This easily seen by following the bright red 30-year rate line, but there are also times when only part of the curve is inverted (such as 1998 when the 5-year rate was lower than any other).
  • (Inversion vs. 30-years: 2000-2001, 2007;
  • Inversion vs. 10-year: 2006-2007;
  • Inversion vs. 7-year: 1996-1998;
  • Inversion vs. 5-year: 1998; and
  • Inverson vs. 3-year: 1996.

treasury-yields-1990-2013-explore-analytics

  • Why Larry Summers sees danger ahead for the economy (Lori Montgomery, The Washington Post) Hat tip to Rob Carter. The short summary is that Summers sees the global economy sliding back into (or, in some cases, towards) recession and his recommendation is that the U.S. should increase expenditures on infrastructure to avoid the 'rip tide' (Econintersect term, not Summers). Summers calls the U.S. 'the healthiest patient in the global economic sick ward'.

  • Finance and the jelly bean problem (Tim Harford, The Undercover Economist) Hat tip to Rob Carter. Harford reports on the work of three mainstream economists who have studied the factors involved in portfolio performance. Their conclusion is not that it is impossible to 'beat the market' (the common summary of Modern Portfolio Theory) but that the complexity of the problem is beyond the tools that have been applied. They find research has identified 316 variables with a demonstrated impact on stock market pricing. To be tractable, a Portfolio optimization effort would have to dismiss most of these (the authors suggest 296 would be thrown out). Then what is the reliability of the result obtained from the remaining 20 variables? That is the question the authors leave us with. Econintersect: This is another of the certeris paribus issues in finance and economics. To go even further what if the factors determining portfolio performance are dominated by 'cross terms' rather than linear combinations of the variables included in the model? This discussion explains why successful traders are, in general, those who are reactive to market changes as they happen rather than those with a set-it-and-leave-it model. Of course, many who are reactive also fail so the message may be: "Don't trade". (Unless you are that 1-in-a-thousand brilliant trader.)
  • A Major Long-Term Change In The Labor Market Is Bad News For The US Economy (Shane Ferro, Business Insider) Hat tip to Marvin Clark, GEI Discussion Group, LinkedIn. Churn (rate of changing jobs) is considered a healthy factor in the economy (up to a point, of course). It leads to improved productivity and better wages in many cases. Churn rates for men with less than high school education are 1/3 lower than at the turn of the century; churn rates decline with increasing education. College graduate men had a churn rate around 21% in 1999 and about 15% in 2012, nearly the same percentage drop as other educational cohorts. College graduate women have a higher churn rate than men but other educational levels have less or the same. Women have experienced a noticeably bigger decline in churn rates in this century compared to men.

job-change-churn-rates-1999-2012

  • IRS Clarifies Key Rollover Question (Ed Slott, Financial Planning) Retirement accounts with both before-tax and after-tax contributions have always created headaches for owners and planners. Now the IRS has clarified one aspect that was in conclusion: As far as the IRS is concerned portions of an IRA may be transferred to more than one new account and, in addition, the after-tax allocation may be transferred to a Roth IRA while the before-tax portion goes to a traditional IRA. The 401(k) plan itself may complicate this. If the plan allows only one direct rollover per year then the process can be to do the rollover to the new traditional IRA, followed by a distribution (60-day) to the owner who can then transfer the money to the Roth IRA. Slott cautions: the direct rollover must be done first.
  • From Value Creation To Value Extraction (Shareholders Unite, Seeking Alpha) Hat tip to Bob Millman. The author argues that corporate stocks have become vehicles for "massive extraction" rather than a means of funding of corporate development. He cites stock buyback programs as the penultimate vehicle for the extraction operation. He refers to a Harvard Business review article which we have discussed previously: Profits without Prosperity by William Lazonick. The financial engineers have found a way to extract most of (and in 2007 more than) the total net income of U.S. corporations. Any wonder little investment is taking place?

Click for larger graphic image at Harvard Business Review.
buybacks-dividends-since-1980-lazonick-600x500

  • Other Economics and Business Items of Note and Miscellanea

Tightly Coupled European Banks May be Harder to Bail In than the ECB Thinks (Naked Capitalism)

Trading places – with a rat (The Undercover Economist)

Raising Minimum Wage Is Not The Answer (Forbes)

The Pros and Cons of Keystone XL (National Journal) Jon Stewart video.

Today’s 13-year-olds are not as bad as we’re led to believe (James Williams, The Conversation)


Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.






Econintersect Behind the Wall



search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Empty Rhetoric: On the Work of Deirdre McCloskey
Men Without Work
News Blog
Early Headlines: Asia Stocks Down, Dollar Up, Gold, Oil Steady, Senate Takes Russia Probe, Income - Tale Of 2 Countries, London Off. Values Face Big Drop, Russia Cuts Oil, Border Wall In Mexico?, And More
Documentary Of The Week: America Before Columbus
American Doctors: The Prognosis Isn't Good
Brexit: 'Leave' Voters Showing Most Signs Of Doubt
Crumbling Comet? The Great Debate About Whether Rosetta Rock 67P Is Breaking Apart
ISIS: Income Has More Than Halved Since 2014
What We Read Today 29 March 2017
The Best Hilarious Prank Ideas For April Fools' Day
February 2017 Pending Home Sales Index Improves?
The Need For Very Low Interest Rates In An Era Of Subdued Investment Spending
America's Missing Workers Are Primarily Middle Educated
The Share Of American Women In The Labor Force Is Slipping Even As It Rises In The Rest Of The Developed World
Infographic Of The Day: Which Countries Are Going In The Right Direction
Investing Blog
Where In The World To Invest? A Search Of The Globe
Boom Or Bust: Tech IPOs Can Go Either Way
Opinion Blog
Scarborough Shoal: Will America Help The Philippines?
Why Did Preet Bharara Refuse To Drain The Wall Street Swamp?
Precious Metals Blog
Following The Yellow Brick Road
Live Markets
29Mar2017 Market Close: DOW Closes Down 42 Points, SP 500 Up At Close, Nasdaq Clearly The Winner Closing Up 0.4 Percent, Wall Street Investors Happy
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government































 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved