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What We Read Today 17 July 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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Note:  Today we have a section on the decline of the "loonie" (Canadian dollar) to $0.77 U.S. and implications for the Canadian economy.


Articles about events, conflicts and disease around the world

Global

  • The Freakish Year in Broken Climate Records (Bloomberg)  The annual State of the Climate report is out, and it’s ugly. Record heat, record sea levels, more hot days and fewer cool nights, surging cyclones, unprecedented pollution, and rapidly diminishing glaciers.  You say that can't be true?  We know where you live - see global map below.

temperature.record.2014.map

U.S.

  • Chattanooga Shooter Gave a Chilling Warning of Jihad (The Daily Beast)  The killer of four marines in Chatanooga left blog posts all but announcing his intentions.  The general image that Econintersect derives of this troubled young man is one of a degreed engineer who was unable to find work more than three years after graduation and who, possibly influenced by his lack of professional success, had settled into a depressed manic state. 
  • "Bank Lives Matter" – Obama Administration Moves To Protect Mega Bank Profits (Zero Hedge)  You can't make stuff like this up.  The Obama administration quietly changed rules for government guaranteed mortgages to allow convicted felon banks to participate.  ZH covers some of the key publications that disclosed this travesty. 

EU

Greece

Greece.gdp.1995.2015

greece.youth.unemployment.1998.2015

Iraq

Iran

Mexico

  • El Chapo’s Escape Was 27 Years in the Making (The Daily Beast)  The Mexican kingpin didn’t just plan to tunnel out of prison soon after his capture—he got construction going. They don’t call him ‘Lord of the Tunnels’ for nothing.  It started 27 years ago when he built his first tunnel - under the U.S. Mexican border connecting a house in Mexico with a warehouse in Arizona.
  • Part Robin Hood, Part Al Capone, ‘El Chapo’ Is a Hero to Many Mexicans (The New York Times)  The Mexican drug kingpin is a living legend. He fought the law, and he won. He beat what many Mexicans see as a corrupt and feckless governing class. And Mexico, just like America, loves an outlaw.

Currency Wars: The Maple Syrup Edition [Chart] (Visual Capitalist)  Hat tip to Mickey Fulp via Twitter.  Bank of Canada (BoC) has cut rates again, now down to 0.5%.  See chart below for how BoC easing has been driving the exchange rate.  Also see following two articles for historical context and more discussion.  From this article:

So why the rate cuts and competitive devaluation? The problem is that it is a “Prisoner’s Dilemma” from a global macro perspective: when every other country is either creating money out of thin air, cutting rates, using monetary stimulus, or borrowing extra debt, it makes it extremely difficult to go against the grain. Imagine playing the board game Monopoly in which other players amend the rules so they can take money straight from the bank. If you don’t follow suit, you’re going to lose.

loonie.2015


10-Year CADUSD (Investing.com)  Click on chart for latest streaming update.  What are the implications of a lowering CADUSD?  One is the negative impact on U.S. maple syrup producers due to the lower USD cost of imported Canadian syrup.  See previous article.  See also fourth article below.  Quebec produces about 75% of the world's maple syrup and "sugar bushes" in the northern tier of U.S. states have prices more or less determined by Quebec, which has established a state controlled system for regulating production, marketing and sales of the product.  Quebec even has a "strategic syrup reserve" which stores quantities of syrup in years of high production for suplementation of poor output years.  Another area of impact is in U.S. real estate values near the Canadian border.  When CADUSD is high there is Canadian demand for U.S. residential (and to a lesser extent, commercial) real estate, especially vacation properties in the mountains and on U.S. lakes.  A third area involves Canda's manufacturing exports to the U.S.  See second article below.

cad.usd.10.years


Conversion of 1 CAD to USD on 01 January 1990 (fxtop.com)  The current six-year low is still higher than during the 1993-2004 period when CADUSD got as low as $0.6183 and averaged around $0.73.

cad.usd.1990.2015.600x450


A rising tide: What the U.S. recovery means for Canadian manufacturing exports (The Canadian Trade Commission Service)  During the 2008-2009 recession, Canada’s manufacturing exports to the U.S. dropped by nearly a third from $251 billion to $180 billion. Manufacturing exports to the U.S. have recovered significantly since then; but, at $231 billion as of 2013, they remain 8% below their pre-recession level.  The decline of the "loonie" (Canadian dollar) from above $0.90 U.S. to $0.77 since the start of 2014 should accelerate the growth of exports to the U.S.  This will help the struggling Canadian economy offset some of the resource export losses, especially the decline in oil, natural gas and bitumen exports.  See also Canadian manufacturers take big hit (The Globe and Mail).  The first hint of impact from the declining loonie came in March with the largest contribution of net exports to GDP in almost 20 years being reported for 2014:  This Chart May Be The Best News In Ages About Canada's Economy (The Huffington Post).

canada.net.exports.1990.2015


Assessing the growth potential and economic impact of the U.S. maple syrup industry (Journal of Agriculture, Food Systems, and Community Development)  over the past 25 years Canada (especially Quebec) has seen a dramatic surge in maple syrup production.

maple.syrup.us.canada

Other Economics and Business Items of Note and Miscellanea

  • Grantham: Stocks Will Continue Upward until the Election (Advisor Perspectives)  Notable bear Jeremy Grantham is saying:  Not yet.  Grantham says equity valuations are heading toward the “two-sigma” level that is the requisite threshold for a true bubble. At some point – which is not imminent – he said a “trigger” will precipitate the reversion back to mean levels. The market will continue to deliver positive returns until the next election, according to Grantham. 

More and more investors have come to an understanding about how fees and commissions eat away at their long term returns, how difficult it is for active managers to beat their benchmarks, how inefficient stock picking is, how silly market timing strategies are. Every day the needle moves towards a more educated populace. It’s a good time to be an investor. It’s probably not a good time to be a paternalistic broker who makes money from an ignorant populace.

  • Google Adds a Record $60 Billion to Its Stock in One Day (Bloomberg) A big positive earnings surprise yielded a giant stock price jump.  NASDAQ:GOOG is up almost 25% in a week, more than 2/3 of that today.  Google now has a market cap of $464 billion, significantly larger than Microsoft ($375 billion) which it trailed last week, but still well below Apple's $$747 billion.

google.5.day.2015.july.17

sp500.may.july

  • NASA's New Horizons Brings Pluto Into Focus (Information Week)  Nice slide show.  Note:  In the "collage" below, Pluto and Charon are independently placed - they are actually separated by a distance of 19,640 km, equal to about 8.3 Pluto diameters.  Earth's moon is 12.2 times farther from Earth than the Pluto-Charon separation - a distance approximately equal to 18.7 Earth diameters.  If the separation of Pluto and Charon were displayed to scale the borders of the illustration would have to be expanded because the two are separated by approximately 1.5 Earth diameters.

pluto.charon.earth


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