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What We Read Today 14 May 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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Articles about events, conflicts and disease around the world

Global

  • How do you govern a disrupted world? (McKinsey)  Monumental change is being produced by the collision of four fundamental economic forces:  urbanization, technology, demographics, and globalization.  This book excerpt discusses how policy makers are challenged by this.
  • How rivers regulate global carbon cycle (R&D)  Don't get too excited - the cycle takes many millions of years.

U.S.

UK

  • Manchester set to become part of... Scotland (The Independent)  A Twitter campaign "Allow the north of England to secede from the UK and join Scotland." with the hashtag #TakeUsWithYouScotland is being used on social media, and a Change.org petition has already been signed by 17,000 people.  A recent poll found 72% of people in Manchester are in favor of secession.  Comments made by respondents suggest the sentiment is really a rejection of London as an appropriate part of the rest of the UK.

Thailand



Real Estate ETF Momentum Has Shifted Overseas (David Fabian, NASDAQ.com)  For the four months ending in late January the Vanguard Reit ETF (NYSE:VNG) was on fire, shooting up more than 25%.  In the 3 1/2 months since it has declined more than 10%.  See first chart below.  Vanguard also has a Global ex-US Real Estate ETF (VNQI:NYSE).  The second chart below shows the price ratio for VNQI/VNQ.  Last year when VNQ shot up VNQI traded in a relatively narrow range.  This year, as VNQ declined more than 10%, VNQI was advancing by a nearly identical amount.  The second chart displays the momentum transfer to US REITs late in 2014 and the reversal of momentum, with a transfer to overseas real estate ETFs in early 2015.

VNQ

VNQI.VNQ


Market Data Highlights (Moody's)  Some data highlights from Moody's latest Weekly Market Outlook released today:

  1. Debt issuance for 2015 is lagging for euro denominated securities and increasing (slightly) over previous years for dollar denominated borrowing.  Curious in that the eurozone is projected to have an improving economy while there is fear of a U.S. slowdown.
  2. Global high grade credit spreads are little changed so far in 2015 while high-yield spreads have narrowed appreciably (although still remain higher than for most of 2014).  The implication is that global credit risks are declining.
  3. Emerging market credit spreads have declined steeply in 2015, removing most of the increase seen in the second half of 2014.  Compared to the global picture, emerging markets are still viewed as having much greater credit risk than before the Great Financial Crisis (spreads up to 3x greater).

credit.issuance.euro.dollar

global.credit.spreads

emerging.market.credit.spreads


The chart that explains who Greece actually owes money to (The IndependentEconintersect:  Do you think that Greece owes money to creditors who would be able to benefit the global economy by have that money returned and available?  Well not quite.  Approximately 2/3 is owed to the eurozone and the ECB.  The eurozone (European Financial Stability Fund and Greek Loan Facility) is the biggest portion (60%) of the Greek debt.  That money will not go into the economy but back into the fund "vaults".  The 6% owed the ECB (the entity that creates the euro) will in effect be destroyed by repayment.  So the €214 billion Greece is supposed to repay (plus accompanying interest payments) is being removed from the Greek (and by association the eurozone) economy - nearly 90% of Greece's severely depressed GDP.  Note:  The Independent adds the IMF total (€23 billion) to this "useless" money category.

greece.owes.who


Other Economics and Business Items of Note and Miscellanea

Nomura and RBS Told a Few Mortgage Fibs (Bloomberg View)  This review of a 361-page judicial opinion in a lawsuit brought by the Federal Housing Finance Agency against Nomura and Royal Bank of Scotland reveals a criminal conspiracy in pretty clear detail.  The suit accused the two banks of knowing selling shoddy mortgage-backed securities and deliberately hiding essential details.  Econintersect:  Mafia bosses go to prison for a very long time but banksters don't.  When will this travesty end?  See also Judge’s Ruling Against 2 Banks Finds Misconduct in ’08 Crash (The New York Times) Recommended by Rob Carter.  These two banks were the only ones who went to trial on fraud charges (all others settled for billions of dollars),  Nomura and RBS presented the defense that "it was the housing crash, and not deceptive loan documents, that caused the bonds to collapse."  In the opinion Judge Denise L. Cote found:  “The magnitude of falsity, conservatively measured, is enormous.”

Almost half of retired boomers would work, but can’t (Benefits Pro)  A new study from Bankers Life Center for a Secure Retirement has found a range of reasons has kept 48% of retired boomers off the job, when they’d rather be working and earning.  Poor health and being fired are the two primary reasons for underemployment of boomers.  On the flip side, 28% of "retired" boomers are actually working, a majority (61%) because they want to.  But those who have not yet retired (still in their career job) 71% say they are still working only out of financial necessity.  Nearly half of the boomers say they will work past 70, health permitting.

Why multi-factor funds are smarter beta (Financial Times)  John Authers tackles the stiff challenge of expalining the variety of "smart beta " investment startegies and does a good job - but only if you clear your mind and focus.

Geologists fine-tune search for life on Mars (R&D)  Although no signsof life have yet been found on Mars, it does have a critical factor needed for life as we know it:  Water.  So even if no life exists there today it could have in earlier times so fossil hunting is one important research area.

Top 10 cities for small business (Benefits Pro)  Texas (3) and North Carolina (2) have half of the top ten.

Scientists have discovered the first fully warm-blooded fish (The Washington Post)  In a paper published today in Science, researchers from the National Oceanic and Atmospheric Administration (NOAA) describe the unique mechanism that enables the opah, a deepwater predatory fish, to keep its body warm. The secret lies in a specially designed set of blood vessels in the fish’s gills, which allows the fish to circulate warm blood throughout its entire body.  Econintersect:  We feel this is not so surprising - after all, aren't there some truly cold-blooded humans?



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