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What We Read Today 10 March 2015

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.

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Helicopter Collision Latest in Reality TV Deaths (Associated Press, abc News)  The deaths of 10 people in a collision of two helicopters in Argentina (see next article) is the latest in a long list of fatalities involving reality TV shows around the world.  The danger present in some of the reality TV fare is often obvious, but did you know just how many people have died trying to participate in adventure TV?  There have been a lot and some of then are detailed in this news report.


France mourns sports stars killed in Argentina helicopter crash (Angelique Chrisafis in Paris and Uki Goñi, The Guardian)  Olympic gold-medal swimmer Camille Muffat, Olympic boxer Alexis Vastine and champion sailor Florence Arthaud are among those killed as reality TV show filming ends in disaster.


Articles about events, conflicts and disease around the world

U.S.

EU

  • How low can the euro go? (CMC Markets)  Will it go to par with the U.S. dollar?  How low will EU yields go?  The two are related.  See discussions below on EU onterest rates.

Syria

  • The Metamorphosis of an Islamic State Warrior (Foreign Policy)  Meet Abdelaziz Kuwan, a nice young man from Bahrain who went to Syria to fight Assad. Before long he was raping girls and beheading men.
  • America Is Losing the War in Syria (Foreign Policy)  Moderate rebel groups are suffering. The Islamic State and Nusra are gaining ground. And Washington’s piecemeal efforts are worthless. Here’s a grand plan worth paying for.

Israel

Iraq

Iran

Ukraine

Russia

Venezuela

Mexico



History Suggests OPEC's Days Could Be Numbered (Bloomberg)  Lower oil prices may produce cartel breakup.  The precedence for such an outcome is the breakup of the tin cartel in the 1980s when aluminum displaced that metal as the material of choice for food containers and foil wrap.  The first graph below shows the history of tin prices and the second is the comparable graph for oil.

tin.price.history

oil.price.history

Another cartel which controlled global rubber markets also succumbed to low prices in 1999 but that was after 30 years of low prices relentlessly grinding lower.  Would such a long drawn out process occur for OPEC?  It is possible because the replacements for OPEC oil (shale oil and gas plus renewables) will be competing at the margins for some time to come.  So Econintersect suggests the rumors of OPEC's demise may be premature but it is likely to happen eventually even if the cartel survives the next couple of years.


Stock Market Indicators:  Fundamental, Sentiment, & Technical (Yardini Research) After four months in the middle of 2011 where stocks and commodities followed the usual correlated action and both turned down, stocks then reversed upward.  Commodities continued in a downtrend and are still there today.  This is an unprecedented decoupling of the two types of assets, one financial and the other physical, which may not move the same direction for shorter time periods but have always come back into correlation in less than the more than 3 1/2 years they have diverged in this instance.

Yardini.indicator.stocks.commodities.2015.mar.08.600x380.annotated


30-Year Bund Yield Hits Record Low As Curve Flattens (Tyler Durden, Zero Hedge)  ZH has predicted that the German yield curve will flatten at minus 0.20%.  It's moving in that direction as bunds up to four years are now at or below minus 0.20% yields.  Four weeks ago that was true only out to two years.  Looking out the curve to 30 years, the farther you go the greater the yield decline over the four weeks.  That is a clear flattening process:  longer yields declining faster than shorter-term.  See also next article.

germany.yield.curves.2015.feb.mar.10


Euro Area Central Bank Buying Crushes Yield Curves (Lucy Meakin and Eshe Nelson, Bloomberg Business)  The start of the securities purchases by the European Central Bank (ECB) in their quantitative easing program (QE) is driving yields down across the Eurozone.  The purchases include securities with negative yield, the article mentioning "German 5-year notes" as well as "Belgian and Italian securities".  Econintersect:  Let's review the stated purpose of QE:  to inject liquidity into the financial system and inflate financial asset values.  But what good is accomplished if the inflation is to levels guaranteed to be higher now than in the future?  That's what exists when a government bond is purchased with negative yield.  A five-year note with negative 0.2% yield will return approximately €99 at maturity for every €100 "invested" now.  How much are you willing to pay your government for "safe" storage of your money?


The Incredible Shrinking Bund Yield (Walter Kurtz, The Daily Shot)  This graph shows how far the 30-year bund has moved in the past 12 months.  Note:  The chart is after yesterday's close.  Today (10 March) the close put the yield 15 basis points lower, at 0.714%.  For comparison, the U.S. 30-year is at 2.71%.

german.bund.30.year.2015.mar.09


Other Economics and Business Items of Note and Miscellanea

The Death of Textbooks? (The Atlantic)  Artificially intelligent software is reshaping traditional teaching materials.  Econintersect:  The next step is replacing the instructors.  The final step will be eliminating the studnte.

‘By separating nature from economics, we have walked blindly into tragedy’ (Jeffrey Sachs, The Guardian)  Economic policy must be combined with climate and technology if we are to stand any chance of saving ourselves, argues the prominent American economist.

The Apple Watch is Insanely Great Economics (Wired)  The most compelling case you can make for the Apple Watch is that it frees us from our phones: the ones Apple sold us.

Why Economists Cling to Discredited Ideas (American Prospect)  Free-market theory may be at odds with reality, but it fits the needs of the rich and the powerful.

Chinese economics may not favor export sales boom for U.S. corn (Farm Futures)  Farmers hoping for a surge in corn export sales to China may be disappointed again.

Towards a global currency war? (American Enterprise Institute)  There is a seeming lack of rules to restrict the degree to which a country’s central bank can manipulate its currency for competitive advantage.

Can Commodity Prices Resist Further Dollar Strength? – Capital Economics  (KitCo News)  Gold has recently not declined as much as the dollar has strengthened.



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