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
Obama Frees Dozens Of Nonviolent Federal Inmates (The Huffington Post) President Barack Obama announced Monday that he has granted dozens of federal inmates their freedom, as part of an effort to counteract draconian penalties handed out to nonviolent drug offenders in the past. The 46 inmates who had their sentences reduced represent a small fraction of the tens of thousands of inmates who have applied. The U.S. Justice Department prioritizes applications from inmates who are nonviolent, low-level offenders, have already served at least a decade in prison, and would have received a substantially lower sentence if convicted today, among other factors.
Facebook Close Sets Speed Record for $250 Billion Market Cap (Bloomberg) Today Facebook's market value has topped $250 billion. The record close on Monday made it the first company in the Standard & Poor’s 500 Index to breach that market cap so quickly. The previous record holder was Google Inc., which took about eight years. Facebook made it in 38 months.
Germany—not Greece—will be the real loser (CNBC) Germany is using its size and wealth to compel its euro-zone partners to take a hard line toward Greece, but in the end, Germany has much to lose by forcing the Aegean nation to choose between more austerity and dumping the euro. For Econintersect comments see first article in Greece section.
Greece’s new deal: From austerity to ‘austerity squared’ (Al Jazeera) Economic bailout package means further cuts to Greek benefits and state assets, despite months of negotiations. Econintersect: The economic prescriptions of the EU and friends (Troika, Institution) have all the sophistication of 18th century medicine: If bloodletting did not improve the patient then we didn't drain enough blood. When debts cannot be paid they will not be paid, especially true if the means for acquiring repayment are removed. When history offers judgment on this event it will not be kind. When all over, the creditors will have traded an opportunity for partial repayment for no repayment and the Greeks will be reduced to restarting their society from a status last seen in World War II, and before that the Dark Ages of Europe.
Greek Bailout Rests on Asset Sale Plan That’s Already Failed (Bloomberg) Greece’s last-ditch bailout requires the country to sell €50 billion ($55 billion) of assets, an ambition it hasn’t come close to achieving under previous restructuring plans. The government of then-Prime Minister George Papandreou in 2011 set the same financial goal, which it sought to achieve by hawking airports, seaports, and beachside real estate. Since then, such deals have yielded €3.5 billion, according to the state privatization authority. For Econintersect comments, see previous article.
May 2015 Housing Affordability Index (Michael Hyman, National Association of Realtors) At the national level, housing affordability is down from a year ago and for the month of May as fewer previously owned homes are available and prices continue to grow at an unhealthy pace relative to incomes, and lower mortgage rates did not completely offset this effect.
Financial firms create mathematically-modified funds with “proprietary formulas” or “quantitative algorithms” that manage to beat the stock market in back tests. But the industry graveyard attests to the reality that simplicity trumps complexity. Financially-engineered assets often fail to perform as their creators intended. Or they are ill-equipped to deal with unanticipated events. Ultimately, hedge funds, mutual funds, and exchange-traded funds have to destroy their own creations to save themselves from ruin.
The U.S. Treasury Market on October 15, 2014(U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Federal Reserve Bank of New York, U.S. Securities and Exchange Commission and U.S. Commodity Futures Trading Commission) The U.S. Treasury market is the deepest and most liquid specialized financial market in the world - except when it isn't. The multiple agencies listed above today (13 July 2015) issued a joint report analyzing the significant volatility in the U.S. Treasury market on October 15, 2014. Using non-public data from the U.S. Treasury cash and futures markets, the joint report provides detailed analysis of the market conditions and record trading volumes that day, including an unusually rapid round trip in prices and deterioration in liquidity during a narrow window. In otherwords there was another event that might be called a series of "mini-flash-crashes". See Tumultuous stock market plagued by ‘mini flash crashes’ (MarketWatch, 15 October 2014). The report released today basically concludes that what happened was because "that's just the way of the world" (Econintersect summary words). From the Fed press release:
The joint report makes clear that a number of developments help explain the conditions that likely contributed to the volatility. Specifically, the report finds that in addition to other factors, changes in global risk sentiment and investor positions, a decline in order book depth, and changes in order flow and liquidity provision together provide important insight into the developments that day. The report also underscores the changing structure of the U.S. Treasury market, the deepest and most liquid government securities market in the world.
Finally, the report also offers several next steps to further enhance the public and private sectors' understanding of changes to the structure of the U.S. Treasury market and their implications. The report recommends continued analysis of U.S. Treasury market structure and functioning, focusing on trading and risk management practices, the availability of public data, and continued efforts to strengthen monitoring and inter-agency coordination related to trading across the U.S. Treasury cash and futures markets.
Why Barry Ritholtz Went Robo (ThinkAdvsior) Barry Ritholtz has adopted automated online investing. For the last nine months, Ritholtz Wealth Management has offered Liftoff, a low-cost way for millennials to start saving for retirement. This enables the firm to accept accounts as small as $5,000 using Ritholtz’s proprietary asset management allocation for long-term investing. It uses commission-free ETFs only in a broad assortment within a variety of asset classes and a digital platform from Upside. Included in the automated process is quarterly portfolio rebalancing. The annual fee for clients in 40 basis points and Ritholtz says he would like to drive that cost lower over time.
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