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What We Read Today 14 April 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.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).

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Every day most of this column ("What We Read Today") is available only to GEI members.

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The Chinese Economy Is Sputtering, So Why Are China's Stocks Soaring? (Bruce Einhorn, Bloomberg Business)  IPO prices are 'completely nonsensical,' says one observer—that is, way too low.  But exports are collapsing, the manufacturing sector is weak, real estate is falling in price and markets that have prospered by exporting commodities to China are contracting as China cuts imports.  So why is the Shanghai market up almost double?  This article says that the Chinese are under invested in equities compared to other top economies.  But there are other reasons as well, discussed today in the members only section.

Subscribe to our FREE daily newsletter to become a GEI Member and access What We Read Today with the newsletter every day at 6:06 pm New York time.


Articles about events, conflicts and disease around the world

Global

  • Oil-Rich Nations Are Selling Off Their Petrodollar Assets at Record Pace (Bloomberg Business)  Oil producers are sucking liquidity out of global markets as they sell off their foreign reserves to fund domestic consumption which has become accustomed to higher oil prices.  Similar problems will arise as other commodity producers face similar problems from falling prices.  Econintersect:  You've heard of virtuous cycles where expansion feeds further expansion?  How about we call this a "virtueless cycle"?
  • Supply or Demand? The IMF Breaks Down the Collapse of Oil Prices (The Wall Street Journal)  Hat tip to Roger Erickson who questions just how valuable the insight the article claims to provide that the decline in oil prices came more from drop in demand, especially in the first few months, than from a supply glut.  More discussion on this below.

U.S.

  • Bond market sees trouble where others see green shoots (CNBC)  Bonds keep showing a bias for lower interest, even when data is up as retail sales were today.
  • NavWeek: Ballistic Bombast (Aviation Week)  Hat tip to Gary.  China may be able to take out an American aircraft carrier with its feared DF-21 antiship ballistic missile (ASBM) without even taking a shot.  For years the U.S. Navy has been warning of the potential of the DF-21 to strike a carrier as part of the justification for updating the systems and networks of shielding carriers.  Now some powerful people in DC are looking to reduce the fleet by a carrier or two in the belief that the DF-21 will make it too dangerous for the ships even to get close to Chinese territorial waters.
  • Don’t Make the Same Tax Mistakes Twice (Bloomberg Business)  Don't miss out on the tax savings you dodn't get this year. Start next year's tax planning now.
  • Labor Department proposes controversial fiduciary rule (Investment News)  The Department of Labor proposed a highly anticipated and controversial rule Tuesday that would require brokers working with retirement accounts to act in the best interest of clients.  This is controversial?  It's long past time to start differentiating stock brokers from used car salesmen.
  • Chris Christie Pushes Means Test for Social Security in New Hampshire (Bloomberg PoliticsChristie wants to take $1 trillion out of the U.S. economy over the next ten years.  He proposes raising Medicare age from 65 to 67, Social Security age from 67 to 69, reducing Social Security for those making $80,000 a year and phasing it out for those making more than $200,000. (Econintersect note:  The bold statement above is ours, not mentioned by Bloomberg or any other mainstream media outlet we have seen.)
  • Atlanta Cheating Scandal: Three Ex-Educators Sentenced to Seven Years (NBC News)  Remind us again, how many banksters are in prison?

Finland

Israel

Russia

Cuba


Finding Value in Declining Commodity Prices (Frank Holmes, U.S. Global Investors)  Frank Holmes contributes to GEI.  Here is his summary of the breakout of the Shanghai stock market:

So what’s the deal with Chinese equities right now? After all, China’s economic growth for the first quarter of the year cooled to a six-year low of 7 percent.

The market surge is mostly attributable to monetary easing and government policy changes such as housing stimulus and modernization of the country’s financial structure. But there’s more at work.

Also contributing to the bull run is the plunge in commodity prices since last June, brought on by both the strong U.S. dollar and a slowing global economy.

shanghai.stocks.2015.apr


Supply or Demand? The IMF Breaks Down the Collapse of Oil Prices (Josh Zumbrun, The Wall Street Journal)

oil.prices.collapse.2014.July.2015.apr


Candlesticks, Candelaabra, and the Swiss Franc/Euro “Peg” (William Kurtz, Winvesting)  Bill Kurtz contributes to GEI.  This article reviews the history, the action as it unfolded in January and the value to investors and traders of reading the charts in the days and weeks before one of the biggest currency move shocks in history:  The "depegging" of the Swiss Franc and the euro.  The entire event was driven by the decline of the euro against the U.S. dollar.

EURUSD.2012.2015


Should You Invest in a Currency-Hedged International-Equity ETF? (Patricia Oey, Morningstar Advisor)  With the surge of the dollar in the past 12 months currency hedged ETFs have "delivered category-topping performance".  But for other time periods the performance has not been outstanding as the cost of hedging has limited returns.  The author concludes that "moving in and out of these products may not be a sustainable strategy for long-term investors".

currency.hedged.etfs



Other Economics and Business Items of Note and Miscellanea

Latest military expenditure data reveals the hypocrisy of austerity (Bill Mitchell - billy blog)  Hat tip to Roger Erickson.

Economists Still Think Economics Is the Best (The Atlantic)  Despite failing to foresee the largest financial crisis since the Great Depression, leaders in the field still fail to look for wisdom beyond its bounds.  We expect the same was true of sorcerers in the Dark Ages.

Get a Job? Most Welfare Recipients Already Have One (The Wall Street Journal)  We have noted articles on this before, but now even The WSJ is noticing.

Pragmatism works best in the reform of economics (Financial Times)  The subject is not like philosophy, where the value for students lies in the debate itself, according to the FTEconintersect:  Philosophy is where economists quickly migrate once they finish receiving their degrees.

The Economics Of a Carbon Tax Make Sense, But Not the Politics (Real Clear Markets)  The economic and environmental cases for a carbon tax are very strong. A carbon tax could help to raise productivity in key sectors, as well as helping to reduce emissions.

Avoid a Potential Minefield in the Oil Patch (Morningstar Advisor)  Vanguard Energy ETF VDE can be used by investors as a tactical satellite holding to achieve broad exposure to the energy sector. The fund offers diverse exposure to the various industries that constitute the sector, and it represents an inexpensive and efficient way to invest in the U.S. energy sector without assuming too much idiosyncratic risk.  The author suggests this may be one of the least risky ways to overweight the U.S. energy sector.

Couple married for 73 years die within five minutes of each other in separate care homes (The Independent)  She had said “I’m not going till Bill goes.”   She died five minutes after Bill but miles apart because they were cared for in separate nursing homes, suffering from Alzheimers.  See next article.

What were John Adams’ last words? (About)  In case you are thinking about extrasensory awareness of distant persons, remember the last words uttered by John Adams before he died 04 July 1826 in Quincy, MA:  "Thomas Jefferson still survives."  But his close friend and former bitter political rival had died earlier the same day in Virginia.



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