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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.
World Bank Wednesday – Global GDP Outlook Cut By 10% (Phil Davis, Phil's Stock World) The World bank just downgraded the estimate for global GDP for 2015 to 3%, down from the previous estimate of 3.4% seven months ago. This new report dampens any enthusiasm for an output boost from lower oil prices. Rather than a stimulus, lower oil prices seem rather to be a reflection of lack of economic activity. Risks to the global recovery are significantly "tilted to the downside".
Phil has a number of investment strategy suggestions (with specific tickers).
BlackBerry bats away Samsung purchase report (Reuters - with CNBC video) Hat tip to Marvin Clark. It is reported that Samsung (OTC:SSNLF) has approached Blackberry (NASDAQ:BBRY) with an offer as high as $7.5 billion. Blackberry refused to comment on the reports while the market was still open. Blackberry stock traded up almost 30% to $12.60 at the market close and continued briefly to reach $13 in early after-hours trading. Passions have cooled since as Blackberry eventually did issues a statement denying negotiations were underway. At 5:45 pm the after-hours price was down to $10.80 and by 6:20 pm to $10.52.
Tomgram: Ann Jones, Answering for America (Ann Jones, Tom Dispatch) Hat tip to Chuck Spinney who writes:
Food for thought. Since 9-11, the United States has been violating all five criteria for a sensible grand strategy. Left unchecked, it will eventually generate the mother of blow backs. Ann Jones has written a personal vignette to goes to the heart of our growing grand strategic crisis on a deeply personal level — most of it has to do with dysfunction at home.
Ann Jones describes how she, as an American living abroad, is constantly asked to explain and justify the "behavior of our rebranded “homeland,” now conspicuously in decline and increasingly out of step with the rest of the world". This is a troubling expose of how the rest of the world sees America, told by an American who has to interact with those perceptions on a daily basis. Her summary:
Europeans understand, as it seems Americans do not, the intimate connection between a country’s domestic and foreign policies. They often trace America’s reckless conduct abroad to its refusal to put its own house in order. They’ve watched the United States unravel its flimsy safety net, fail to replace its decaying infrastructure, disempower most of its organized labor, diminish its schools, bring its national legislature to a standstill, and create the greatest degree of economic and social inequality in almost a century. They understand why Americans, who have ever less personal security and next to no social welfare system, are becoming more anxious and fearful. They understand as well why so many Americans have lost trust in a government that has done so little new for them over the past three decades or more, except for Obama’s endlessly embattled health care effort, which seems to most Europeans a pathetically modest proposal.
Articles about events, conflicts and disease around the world
AirAsia Flight 8501
Today will be the Jeffrey Gundlach review day.
DoubleLine Funds Prospectus (Updated to October 1, 2014) Jeffrey Gundlach is not called a bond guru for nothing. Below is the performance data from the latest prospectus for his flagship find, the DoubleLine Total Return Bond Fund, DBLTX. This is an institutional fund (minimum $100,000, IRA $5,000); the retail fund is DBLNX (minimum $2,000, IRA $500). This fund has more than doubled the return of its benchmark since it was introduced almost five years ago.
The following chart is from Morningstar:
Gundlach: Low Oil Prices Mean ‘Collapse’ in Hiring, Spending (Janet Levaux, ThinkAdvisor) Jeffrey Gundlach says the effects of low oil prices will “ripple through the U.S. economy” in 2015 and could have a “sinister” impact on jobs and spending. Here are some of the points he makes for what he expects if oil stays around $45 a barrel (current level two days ago, WTC jumped up to almost $50 yesterday before dropping back toward $48):
Jeffrey Gundlach: A Bold Prediction on U.S. Interest Rates and Deflation (Pam Martens, Wall Street on Parade)
xOn December 9 of last year, Gundlach told Reuters’ Jennifer Ablan that the yield on the benchmark 10-year U.S. Treasury note could fall to 1 percent this year. Gundlach is quoted as follows in the article: “I still believe that there is a danger of repeat of a Treasury meltup that 2014 did end up bringing, particularly into the crescendo of October 15. If something can’t go up, it has to go down. Yields can’t seem to go up. They might go down. And if they go down any amount again, if the 10-year goes below 2 percent, even below 2.20 percent, that’s the line in the sand I am talking about.”
Yesterday (14 January 2015) the 10-year traded with a yield of 1.86%. On 09 December 2014 the yield was 2.22% (U.S. Treasury. Daily Yield Curve Rates)
Gundlach: Total Return Fund May Close to New Investors (Janet Levaux, ThinkAdvisor) Also made some forward looking statements in a webinar besides the one about possibly closing DoubleLine Total Return Bond Fund (DLTNX) to new investors. He said the Fed's "push for raising rates is worth questioning". He expected the dollar to keep on strengthening (U.S.Dollar Index was 88.94 on 10 December 2015 when this article was posted and is 92.39 as this is being written). He also said that he expected oil to go lower, possibly to $40 ($XX then, $48 now). And the final line is a direct quote:
"I hope it is not going to $40 ... because the global geopolitical consequences could be terrifying ... If the 10-year Treasury yield gets to 1% with oil at $40 per barrel, all hell breaks loose.”
Gundlach said investors should avoid “bottom-fishing,” or buying oil assets in expectations that prices may not fall further, because oil may not go up any time soon. Being a contrarian in commodities is “dangerous,” he said.
Gundlach: Inflation Worries ‘5 Years Too Early’ Janet Leveux, ThinkAdvisor) Gundlach says 2020 is the time to possibly start worrying about inflation and higher bond rates. This was written 17 September when the 10-year Treasury was yielding 2.62% compared to 1.86% at present. See also from 10 September: Gundlach: Don’t ‘Fight This Rally’ in Bonds.
Gundlach: 3 things should scare investors (Matt Krantz, USA Today Money)
1. Never seven years up and only once before six years (1898-2003).
2. Margin debt is exploding - it has never before been up this high.
3. The Federal Reserve’s balance sheet isn’t likely to be expanding like it has in past years.
Other Economics and Business Items of Note and Miscellanea
Obama administration aims to cut methane leaks (The Washington Post)
Why The Case Against The Man Accused Of Running Silk Road Is Unprecedented (Business Insider)
QP, Shell abandon plans for Al Karaana petrochemicals complex (Oil & Gas Journal) Billions of dollars of capex and development fall victim to oil crash.
Oil projects worth billions put on hold (Financial Times) Several other multi-billion dollar projects canceled in addition to the one in Qatar.
What China Gets About Renewable Energies That The West Doesn't (Business Insider)
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