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What We Read Today 10 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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Today we have several discussions about the latest decline in oil prices.


Articles about events, conflicts and disease around the world

Global

  • BRICS Mutual Trade Increased By 70% Since 2009 (Emerging Equity)  The economies of the five BRICS nations (Brazil, Russia, India, China and South Africa) account for almost 30% of global GDP.  BRICS presents an aggregate GDP exceeding $32 trillion. This marks a 60% growth since the formation of the grouping in 2008.  BRICS countries produce 1/3 of all manufactured goods and 50% of all agricultural goods.  BRICS also attracted almost 21% of total global direct investment in 2014, which is an increase of 3.5% over 5 years.

U.S.

poverty.concentration

EU

Germany

  • Germany government gained from Greek crisis - IWH study (BBC News)  The Greek debt crisis has saved the German government some €100bn (£70bn; $109bn) in lower borrowing costs because investors have sought safety in German bonds.  Now Germany is pressing Greece for more aggressive privatization plans so they can use the money to sweep up the rest of Greece at fire sale prices.

Norway

  • For Norway, Oil at $50 Is Worse Than the Global Financial Crisis (Bloomberg)  When the financial crisis brought the global economy to its knees, Norway was largely unscathed. But oil under $50? That's another story for a country where the economy is heavily dependent on oil.  Unemployment has been driven to an 11 year high.  But its not yet a crisis - that high unemplyment is 4.3%, which is higher than the 3.7% at the low point following the Great Financial Crisis.

Turkey

  • Turkey attacks: Deadly violence in Istanbul and Sirnak (BBC News)  In south-eastern Sirnak province, four police officers were killed by a roadside bomb and a soldier died when gunmen fired on a military helicopter.  In Istanbul, a police officer was killed in clashes after a car bombing.  Kurds are responding to Turkish government attacks which were in response to Kurdish rebel attacks.

Iraq

  • Islamic State claims Iraq car bombs that kill nearly 60 (Reuters)  New violence in Iraq is near the Iranian border.  At least 58 people were killed and more than 100 wounded on Monday in two blasts in eastern Iraq claimed by Islamic State in a province once considered mostly free of them.  In January Iraqi officials declared victory over the insurgents in Diyala province, which borders Iran, after security forces and Shi'ite paramilitaries drove them out of towns and villages there. But the militants have remained active.

China

  • This Is What China's Version of Quantitative Easing Looks Like (Bloomberg)  China’s leaders are increasingly relying on the central bank to help implement government programs aimed at shoring up growth, in an adaptation of the quantitative easing policies executed by counterparts abroad.  But they have insisted they would not embark on QE programs such as Japan, the Fed and the ECB have been using.  However, what China is doing is related indirectly to the QE programs in the other countries: 

Rather than bankroll projects directly, the People’s Bank of China is pumping funds into state lenders known as policy banks to finance government-backed programs. Instead of buying shares to prop up a faltering stock market, it’s aiding a government fund that’s seeking to stabilize prices. And instead of purchasing municipal bonds in the market, it’s accepting such notes as collateral and encouraging banks to buy the debt.


Oil Futures Signal Weak Prices Could Last Years (The Wall Street Journal)  The oil market indicates that prices could stay lower for longer, delivering a fresh blow to hard-hit energy exploration-and-production companies.  Long-term expectations are rapidly shifting lower.

future.oil.price.expectations


Double Bottom or Another Leg Down? (Walter Kurtz, The Daily Shot)  Ovcernight Sunday into Monday morning WTI crude continued lower, matching April lows.  See aso next discussion.

wti.crude.double.bottom


Baker Hughes iIncreases Well Counts Just as Price Plummets Again (Walter Kurtz, The Daily Shot)  While this is considered very bearish for near-term oil prices, fracked wells differ from traditional wells because they can better serve as "in-ground" storage:  The wells can be drilled and not fracked until later.

baker.hughes.rig.count


Oil futures bounce off multi-month lows (Market Watch)  WTI crude futures for September were up $0.73 (1.7%) at noon today (Monday) to $44.60.  But this was hardly enough to qualify as a retracement after last week's 6.9% decline.  In the afternoon, after rising to a high just above $45, WTI closed at $44.81 - nearly a 1/3 retracement of last week: 

Click for latest live streaming chart at Investing.com.
wti.4pm.2015.aug.09
 


If you're bullish on oil, you might not want to look at this chart (Joseph Weisenthal, Twitter)

Other Economics and Business Items of Note and Miscellanea

Surprise! Fees Not Reason Active Investing Loses vs. Passive (ThinkAdvisor)  Even after ignoring fees and expenses less than half of active managers outperform indexes on average.  But when fees were included in the calculation only two classes did mange to bearly outperform their indexes (intermediate bond funds (51%) and global income funds (53%)).  For stock funds, even for small-caps, active management is especially ineffective with less than 20% beating their index after fees and expenses.

Dumb Beta Strikes Back for U.S. Stocks Starved of Breadth (Bloomberg)  What works is always changing.  With gains in equities confined to the biggest stocks in 2015, equity gauges that emphasize their largest members such as the Standard & Poor’s 500 Index are suddenly trouncing newer rivals that don’t make the distinction. One example is consumer shares, where size-ranked indexes are returning more than twice as much as those that strip out the market-value bias.

Pimco Gets Wells Notice Over Total Return ETF Valuations (Bloomberg)

pimco.wells.notice


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