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What We Read Today 09 August 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

Among the concerns preoccupying Grantham are income inequality, food shortages, and a US economy that looks set to grow closer to 1.5% per year, about half what many expect over the long term. 

Often considered a "Malthusian" for his belief that a lack of resources poses the greatest threat to humanity and economic growth, bearish outlooks are nothing new for Grantham.

  • Copper Bears Keep ‘Stranglehold’ on Market as Stockpiles Rise (Bloomberg)  Hedge funds and others are stockpiling copper with the expectation that prices, now at prices not seen since the summer of 2009, are headed much lower.  China, which uses 40% of the world's copper, saw Shanghai inventories surge by 11% just last week.  

U.S.

  • Insight: Tesla burns cash, loses more than $4,000 on every car sold (Reuters)  The Silicon Valley automaker is losing more than $4,000 on every Model S electric sedan it sells, using its reckoning of operating losses, and it burned $359 million in cash last quarter in a bull market for luxury vehicles. The company on Wednesday cut its production targets for this year and next. Chief Executive Elon Musk said he's considering options to raise more capital, and didn't rule out selling more stock.  Even in the face of losses, the company is expanding its line of offerings, including a new all-wheel option for the Model S.
  • The Revenue Recession (Charlei Billello's Tumblr)  Hat tip to John O'Donnell.  Today the U.S. economy is still expanding, but corporate sales are not. Much of this decline has been blamed on the stronger Dollar which has made U.S. multinationals less competitive.  With 80% of companies already reported, S&P 500 sales are on pace to decline (year-over-year) by 3.1%, the second consecutive quarter of negative growth. Note the last two periods of negative revenue growth: 2001-2001 and 2008-2009.  Let's see . . . what is it that happened at those two times?

sales.growth.sp500.2001.2015

Romania

  • Romania's Disappearing Girls (Al Jazeera)  Girls are disappearing from their homes after being seized by sex traffickers who deploy them both in the country's capital, Bucharest, and in other European countries.

Saudi Arabia

  • Saudi Arabia's oil price war is backfiring (Business Insider)  The strategy was to hold higher prices in Asia to offset reduced revenue from lower prices in the West.  Now they have to cut prices in Asia to avoid losing market share to other sources such as Nigeria, Iraq, Mexico, and Venezuela.  If Iran production starts to increase over the coming year the Saudi's will likely lose both price leverage and market share.

Iraq

  • Iraqi PM Haider al-Abadi moves to tackle corruption (BBC News)    Iraqi Prime Minister Haider al-Abadi has unveiled sweeping reforms to reduce government costs and fight corruption after protests across the country.  He said senior political appointments should not be based on sectarian or party quotas and moved to abolish the posts of vice-president and deputy PM.  Most of Mr Abadi's proposed reforms will require parliamentary approval.  The move follows recent anti-government protests sparked by unreliable electricity amid a major heatwave. 

China

  • Typhoon lashes China's east coast, eight dead: media (Reuters, Investing.com)  Hat tip to Marvin Clark.  A typhoon battered China's east coast on Sunday, killing eight people and forcing authorities to cancel hundreds of flights and evacuate more than 163,000 people.  Typhoon Soudelor killed six people in Taiwan earlier on the weekend then moved across the Taiwan Strait and slammed into the mainland's Fujian province late on Saturday.  It churned towards the neighboring provinces of Zhejiang and Jiangxi on Sunday, now downgraded to Tropical Storm status.
  • China Steel Flood Deepens, Cutting Earnings, Fanning Trade Rows (Bloomberg)  China is shipping ever more steel into world markets as its economy slows, leading to lower prices, reduced earnings at global producers and more trade disputes.  Mills in the country that produces half the world’s steel are maintaining output as domestic demand falters, exporting the surplus. Sales overseas surged 9.5 percent to 9.73 million metric tons in July, the highest level in six months, customs data released on Saturday show. Exports expanded 27 percent to 62.13 million tons in the first seven months, the highest ever for the period, according to customs data compiled by Bloomberg.  Econintersect:  Increasing exports into a weak global economy- what could go wrong?

Gold Is Now A Buy (Gary Savage, Investing.com)  For those who have been waiting until Gold's 'technicals' signaled a 'buy', the signal has been given:

Click for larger image.
gold.daily.2015.aug.07.600x800


What's happening in the oil market right now is 'unprecedented' (Miles Udland, Business Insider)  The usual control factors in the U.S. oil market are no longer working as the rapid efficiency of fracking and the dramatic decline in production costs have kept U.S. oil production high, driving the price of crude back toward a second "bottom".  And, of course a second bottom is the best case scenario for those wanting to sell oil - it could end up being a dip to a new low.

wti.2011.2015.07.aug

Other Economics and Business Items of Note and Miscellanea

  • Revolting – 08.05.15 - Interview with Michael Hudson (It's Our Money with Ellen Brown)  This is an excellent review of how money is created (mostly as credit), how many influential economists do not consider this in their thinking and how the Eurozone has institutionalized oligarchial control of government.  One priceless quote (slightly paraphrased):  Understanding money and banking is a disqualification for winning a Nobel Prize.   Download this episode (right click and save)
  • Rand Paul: Income Inequality Comes From 'Some People Working Harder' Than Others (The Huffington Post)  Asked if his flat tax plan would further separate the haves from the have-nots, GOP presidential hopeful Sen. Rand Paul (Ky.) said Sunday that income inequality is the result of some Americans working harder than others, rather than economic policies.  Paul has proposed what he calls a "flat and fair tax," which would put a flat 14.5% tax on all types of income. An analysis by the Tax Foundation found that under the plan, households earning more than $1 million per year would see their after-tax incomes rise by 13%. Households earning between $50,000 and $75,000 per year, meanwhile, would see their after-tax incomes rise only by 3%.  Sen. Paul disagrees that their is any unfairness or inequality aggravation in this and gave another version of the 'give money to the job creators' argument:

"It's a fallacious notion to say, 'Oh, rich people get more money back in a tax cut.'  If you cut taxes 10%, 10% of a million is more than 10% of a thousand dollars. So, obviously, people who pay more in taxes will get more back.  We all end up working for people who are more successful than us and that's a good thing, that more money will be back in the economy."

  • Why You Should Invest In Africa's Fastest-Growing Country (Ky Trang Ho, Forbes)  KTH has contributed to GEI.  Discussed at GEI Discussion Group, LinkedIn.  While much focus about the future of equatorial Africa considers the most populous country, Nigeria, KTH addresses her attention to the fastest growing country for the entire continent, Kenya.  She discusses how U.S. investors can gain exposure to Kenya using ETFs (electronically traded funds) and mutual funds.

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