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
How the Hell Did Sepp Blatter Win? (The Daily Beast) Reporter Nico Hines: "Easy: bribes. Just ask the people who took them." According to the article FIFA president Sepp Blatter is a "human ATM", running "the most extraordinary system of patronage since the court of Elizabeth I".
Just when you thought the US regulators may have finally become less tone deaf to the shame of the revolving door, especially following last year's latest scandalconfirming Goldman runs the New York Fed (and every other central bank), here comes the SEC with an absolute shocker, not only proving once and for all that when it comes to regulatory capture, there is nobody in charge quite like Lloyd Blankfein, but unveiling what may have been the first ever double revolving door in SEC history,after the SEC announced it had hired as its new chief of staff a former Goldman worker who had previously worked at... the SEC. And with that the we have gone not only full circle but full retard as well.
Monopoly power tightens grip on US economy (Al Jazeera) This week, Charter Communications announced plans to buy Time Warner Cable as well as the much smaller Bright House Networks. These actions illustrate the increasingly sclerotic condition of the American economy.
US-China tensions rise over Beijing's 'Great Wall of Sand' (BBC News) You often hear politicians and strategic thinkers talk about establishing "facts on the ground" - the need to take account of what actually exists when framing policy. Well in the South China Sea, the Chinese government is going one step further. In a number of locations in the Spratly Islands, Chinese dredgers are spewing up torrents of sand from the sea bed, turning reefs into new islands.
Using the 30% of income for housing guideline and minimum wage for each state, the number of hours of work needed each week to be able to afford a 1-bedroom apartment is shown in the next graphic.
Chinese Stock Market's Wile E. Coyote Moment (Bloomberg View) Thursday 28 May 2015 saw Chinese stocks drop an average of 6.5%. What caused this? Most believe the specific triggers were liquidity draining actions by the PBoC (People's Bank of China) and margin credit tightening by brokerages. The extraordinary rise in China's stocks over the last 12 months has been substantially fueled by a five-fold expansion of official margin credit and probably much greater credit creation in China's shadow banking system. The decline yesterday was the largest since 19 January 2015 when the Shanghai Compoaite lost 7.7% in one day. What happened on January 19? China's stock market regulators froze margin accounts, not allowing any more to be opened for three months. See next two articles.
Just one day after the item below in Early Bird for Wednesday, Thursday saw Chinese stocks drop more than 6% on Thursday. Friday trading was very volatile early but ended up down marginally for the day. Click on chart for latest one-day candlestick data from Investing.com.
These Nine Charts Show the Shenzhen Stock Market Is Like No Other Market in the World (Bloomberg Business) This is a repost from Early Bird 27 May 2015. This is a bubble? Or is it a new permanently high level? The Shanghai market, which is open to global investors, is up 140% over the last 12 months (and 100% 2015 YTD). The Shenzhen market, which is not open to global investors, is up 180% over the past 12 months (and 140% 2015 YTD). See first chart below. Why is the Shenzen outperforming? The Shenzhen market will become accessible to investors outside of China with the Shenzen-Hong Kong stock connect expected to be established sometime this year. Chinese investors are trying to "front-run" the surge expected when foreign money starts pouring in. Once the new "connect" is established, joining the Shanghai-Hong Kong connect operating since last year, the Hong Kong-Shanghai-Shenzhen complex will be the largest stock market in the world outside of the U.S. But is the Chinese enthusiasm sustainable? Well, median PE (price-earnings ratio) on the Shenzhen exchange is 108 and the dividend yield is 0.26%. That is nose-bleed territory, far above the highest PE ratio for the NASDAQ Composite (72) in the dot.com bubble. Also, the climb of the Shanghai market is closely paralleling the build-up to the 2008 bubble top, see second chart below.
Other Economics and Business Items of Note and Miscellanea
How to Survive a Banking Crisis (Armstrong Economics) Many in Spain are starting to figure out that the only way to survive is to get your money out of the bank.
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