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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Articles about events, conflicts and disease around the world
The New Global Marketplace of Political Change (Foreign Policy) Western democratic powers are no longer the dominant external shapers of political transitions around the world. A new global marketplace of political change now exists, in which varied arrays of states, including numerous nondemocracies and non-Western democracies, are influencing transitional trajectories. Western policymakers and aid practitioners have been slow to come to grips with the realities and implications of this new situation.
Apple returns $200bn in cash to investors as iPhone sales boom (Financial Times) Apple once again beat Wall Street’s forecasts for revenues, earnings and iPhone sales with its results for the second quarter, as it said it would return another $70 billion to shareholders. The world’s most valuable company by market capitalisation posted revenue growth of 27% to $58 billion, ahead of analysts’ expectations of around $56 billion, thanks to stronger-than-anticipated iPhone sales, up 40% to 61.2 million units. Apple said that it would expand its dividends and buyback scheme to return a total of $200 billion to shareholders by the end of March 2017, up from the $130 billionn programme of a year ago. That includes a 11% dividend increase and a further $50 billion in share repurchases.
Pension funding deficits continue to increase (Employee Benefit Adviser) Record profits are not helping the 100 largest U.S. corporate pension plans which fell another $6 billion behind obligations in March. That brought the funded ratio down to 81%. The total deficit for the 100 plans is now $96 billion. The growing deficit is significantly impacted by reduced future actuarial earnings which are held down by the abnormally low interest rate.
Greece moves to sideline Varoufakis after reform talks fiasco (Reuters) Greek Prime Minister Alexis Tsipras on Monday reshuffled his team handling talks with European and IMF lenders, a move widely seen as an effort to relegate embattled Finance Minister Yanis Varoufakis to a less active role in negotiations. Econintersect: Greece, which has appeared to present a "good cop, bad cop" tag team of Varoufakis and Tsipras has apparently decided to shackle the bad cop.
Dear Ukraine: Please Don’t Shoot Yourself in the Foot (Foreign Policy) A controversial new law that honors dozens of nationalist organizations (including far-left socialists, monarchists, and neo-fascists) sends the wrong signals about the past and threatens free speech. The law states that those who “publicly exhibit a disrespectful attitude” toward these groups, or “deny the legitimacy” of Ukraine’s twentieth century struggle for independence, will be prosecuted. Two of the specified organizations are associated with the Holocaust.
Clash of values, war of words in Ukraine (Democracy Digest) Kiev and western countries remain concerned that Russian-backed forces could launch a new assault to cut off Ukrainian exports through Mariupol and as part of attempts to create a land bridge linking Russia to Crimea. Some think that Russia poses a majopr existential threat to the existence of Ukraine as an independent nation.
U.S. Housing Market Tracker (Renee Lightner, Andrew Van Dam and Nick Timiraos, The Wall Street Journal) Source for four comprehensive interactive graphics that characterize the U.S. housing market from before the Great Financial Crisis. One of them (without the interactive features actiive) is shown below.
If this is a head fake, it sure is an elaborate one (Josh Brown, Reformed Broker) It can’t possibly be. Companies are missing on revenue left and right. Economic data is coming in looking like ass. The Fed is hellbent on getting a rate hike in. And yet, a new record high for the NYSE Composite as the week closed out. A setup that could portend the next leg higher after 10 months of consolidation. How? Why? Is it a trick?
Josh doesn't think so. For one thing the NYSE Advance-Decline line has been trendinf higher for almost 7 months and another is the breakout last week was from a 10-month resistance limited consolidation.
China’s True Growth Is a Mystery; Economists Weigh the Clues (Mark Mangier, The Wall Street Journal) China is hardly alone among emerging countries in releasing questionable statistics. But Beijing has come under particular scrutiny because of the size and importance of its economy and the hunger that a growth-starved world has for genuine output. There also is suspicion the shortcomings involve willful doctoring rather than data-collection problems common to India and other developing countries. Here are how some other estimates of China's GDP compare with the official number:
China may join the unconventional monetary club (Gavyn Davies, Financial Times) Here is yet another estimate of China's GDP. This is calculated by something called the Fulcrum model (link in excerpt below) and estimated 1Q 2015 to be higher than any of the estimates in the previous article (latest estimate just above 6%).
[T]here are signs of trouble ahead.
Real interest rates and the real exchange rate have both been rising at a time when the domestic credit market is under stress. Deflation has taken hold in the real estate sector and in the over-supplied heavy manufacturing sector, where much of the troubled debt is to be found. And the most recent quarter has seen GDP growth dipping to its lowest level since the global financial shock. It is becoming apparent that a much larger easing in policy might be needed to head off a hard landing. Fortunately, this is now clearly underway.
The underlying growth rate in the economy has now been slowing for many years as economic rebalancing takes effect. In the Fulcrum model for economic activity, the long run growth rate is estimated to have slowed gradually from 11.5 per cent in 2007 to 6.5 per cent now. This decline has been both inevitable and, to a large extent, desirable.
Until recently, the model indicated that the actual growth rate in activity was tracking the underlying slowdown fairly closely. Although there has been much discussion about hard landing risks whenever quarterly GDP growth has dipped in recent years, this was never confirmed by our activity model. However, the very weak industrial production data for March 2015, alongside declines in survey data, retail sales and investment, has resulted in a drop in estimated activity growth to only 5.2 per cent.
Other Economics and Business Items of Note and Miscellanea
Widow of Home Shopping founder sues Morgan Stanley for $170M (Investment News) Lynda Speer names adviser, branch manager and firm in arbitration claim alleging excessive trading, negligent supervision and unjust enrichment, according to filing. Ms. Speer is asking for damages in excess of $78 million for violations of Florida Statute Chapter 517, which governs securities transactions. The claim also seeks portfolio damages of $55 million to $66 million and disgorgement and excess commission damages from $37 million to $44 million. A Morgan Stanley spokesperson said the claims are "without merit".
Could Machines Put Central Bankers Out of a Job? (The Wall Street Journal) The fast-changing technological infrastructure of financial transactions, including nonbank finance, digital currencies, peer-to-peer lending and crowd-funding present a challenge to the monetary policies of theFederal Reserve and other top central banks. The central bank is no longer "central" in this brave new monetary system and therefore has reduced control over economic activity. See paper by former Fed board governor Randall Kroszner, presented at February's annual conference at the Atlanta Fed.
Senate Democrats Push Back on DOL Fiduciary Plan (ThinkAdvisor) Key Senate Democrats met this week with Labor Secretary Tom Perez to argue that his plan -- which would force brokers handling retirement accounts to put their clients’ interests ahead of their own -- could backfire and make it harder for consumers to get investment advice. The Labor Department, which says biased advice and hidden fees cost investors as much as $17 billion a year, issued the proposal on April 14 for a 75-day public comment period. Econintersect: So it is better for investors to lose $17 billion a year in hidden fees than not to lose that money by not getting the advice that produced the unauthorized compensation (aka skimming)? If the defense is that it is not skimming then why isn't it clearly disclosed?
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