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What We Read Today 11 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

U.S.

EU

  • Europe needs a more perfect union (Al Jazeera)  Greece is being forced into a dead end, and the continent’s future hangs in the balance, according to this Op Ed by a Berlin journalist.

Greece

  • Greece accepts harsh new bailout terms (Al Jazeera)  Draft agreement follows months of acrimonious negotiations between creditors and Greek government.  The draft agreement forces Tsipras to accept what he had vowed to resist only months ago: the sale of some state property and deep cuts to pensions, military spending and ending tax credits to people considered vulnerable.

Turkey

Syria

  • Syria conflict: Rebels advance on Assad heartland (BBC News)  Syrian rebels are reported to have forced government troops to retreat to the edge of the north-western region that is the heartland of President Bashar al-Assad's Alawite sect.  A military source was quoted as saying the troops had taken up new defensive positions in the Sahl al-Ghab plain.  It lies just to the east of the coastal mountains where Mr Assad's ancestral village of Qardaha is located.  The rebel advance is the latest in a series of setbacks for the president.

Ukraine

  • MH17: 'Russian missile parts' at Ukraine crash site (BBC News)  Fragments of a suspected Russian missile system have been found at the Flight MH17 crash site in Ukraine, investigators in the Netherlands say.  They say the parts, possibly from a Buk surface-to-air system, are "of particular interest" and could help show who was behind the crash.  But they say they have not proved their "causal connection" with the crash. 

Japan

  • Toshiba to write down over $800 million after accounting probe: Nikkei (Investing.com) Hat tip to Marvin Clark.  Independent investigators concluded last month that Toshiba had overstated profits by around 152 billion yen in the past few years.  The company will take more than 100 billion yen ($802 million) in impairment charges for the last fiscal year in addition to marking down past results by around 50 billion yen ($400 million).  Investors have long been concerned that the value of assets and goodwill related to Toshiba's 87 percent stake in Westinghouse was overstated.  Toshiba spent $5.4 billion for a majority stake in 2006 at the height of the nuclear industry boom. It is now looking to reduce its stake in the business, although analysts say it could be hard to find a buyer.  Ultimately losses from this venture could total much more than the current accounting corrections.
  • Japan's return to nuclear meets with fear and loathing (CNBC)  Kyushu Electric Power Company's Sendai plant, located in the southern Kagoshima prefecture, is the first to come back online since Japan issued new safety requirements in 2013.  All nuclear plants in Japan were shut down in 2011 after the disaster at Fukushima.  The move is highly controversial among citizens, with regular opinion polls revealing that a clear majority of the population want Japan to end nuclear power permanently.

Australia

  • Aussie devaluation fails Economics 101 as export income slides (The Sydney Morning Herald)  It's one of the first rules of economics: make a product cheaper, and people will buy more. Things aren't playing out that way Down Under.  Econintersect:  One might say 'it's the demand, stupid'.  Iron ore is a big Aussie export, with China a major buyer - and China ain't dancing to that tune so much any more.  (Second graph below is from Market Realist.)

iron.ore.aussie.price.past.year.2015.aug.10

china.crude.steel.2008.2015
 


Xiaomi: the Apple iPhone Killer? (Mauldin Economics)  A Chinese company named Xiaomi is eating Apple’s lunch in China, and its popularity is slowly spreading across the globe.  Xiaomi—pronounced SHOW-em—is a smartphone maker, and it happens to make the #1 bestselling smartphone in China.  But, even worse for Apple, it isn't even #2 in China - a Taiwanese company called Huawei was a close second with a 15.7% market share. Xiaomi and Huawei together now control one-third of the smartphone sales in China.  The iPhone has fallen to third place with 10.9% of the market, closely followed by Samsung.  And Apple is losing ground rapidly:  China sales plunged by 21% in the second quarter from Q1.  And Apple has other problems, as well:

  • Apple missed expectations on shipments for all its major products. In particular, investors were expecting a monster iPhone quarter, but Apple sold only 47.5 million iPhones instead of nearly 49 million as predicted.
     
  • Microsoft’s Windows 10 will provide more competition to the iPad and Mac.

Click for large image at Business Insider.

  • Apple hasn’t revealed specific sales figures for the Apple Watch, but analytics firm Slice Intelligence says that sales have dropped from an average of 35,000 a day in April to 5,000 a day in July.
     
  • The smartphone market is maturing. Global mobile phone shipments grew a paltry 2%, from 428 million units in Q2 2014 to 434.6 million units in Q2 2015

OPEC just kicked oil into the $30s (Patti Domm, CNBC)  China is slowing and OPEC is pumping more oil.  What's the logical outcome?  See also next article.  Watch the talking heads at CNBC:

oil.falling.to.30s


Exxon Mobil: Time To Buy The Oil Crash? (Regarded Solutions, Seeking Alpha)  The article reviews the bullish and bearish cases for NYSE:XON.  The author is inclined to start buying.  Maybe he isn't buying the preceding article conclusion?

xom.2015.aug.09

xom.yield.1997.2015


These are the biggest losers from China's currency devaluation (Myles Udland, Business Insider)  Note:  See more on this in GEI News this evening. The biggest losers are Asian countries with countries with high export exposure and export competitiveness with China (which are coincidentally also suffering from issues of disinflation) and countries globally with high levels of exports to China.  The following chart from Morgan Stanley summarizes:

china.deval.losers


 

Other Economics and Business Items of Note and Miscellanea

  • A book with too much information? (The Economist)  This review of the book “Why Information Grows” by MIT professor César Hidalgo is at times distressingly flippant.  But there are some useful points made about what is important in Prof. Hidalgo's work.  One in particular points out the lack of relationship of real world economic data to David Rinaldo's iconic "comparative advantage":

By analysing troves of trade and production data over time, the authors discovered some peculiar patterns. For example, richer countries do not specialise in high-value-added exports, contrary to classical theories of comparative advantage. Instead, poorer countries produce subsets of the exports of richer countries (a phenomenon called “nestedness of production”). Hence, richer and more complex economies tend to export pretty much everything. Messrs Hidalgo and Hausmann speculate that countries grow richer by combining simple technologies into more sophisticated ones. Indeed, their most startling finding is that economies that were more complex relative to their level of income in 1985 grew fastest since then.

  • Breaking Down the Broken Economics of Hillary's College Debt Plan (The Weekly Standard)  The main point of the article is a good one:  Hillary's plan does nothing to reduce the opulent inefficiency of American colleges and universities.  If the government increases the amount of money it will pay for education of less than wealthy students, then colleges and universities will find a way to expand their ability to soak up taxpayer money without offering any improvemnt in education or any rduction of student debt.

... new forms of sociability and of non-monetary exchanges lead to the inescapable conclusion that our species might not require that much re-engineering. Once general automation finally devalues most goods and makes most luxuries uninteresting as status signals, there will still be plenty to compete for. The very definition of status is already shifting towards the more abstract and the more elevated. Instead of collecting objects and financial resources, one will be compelled to accumulate public prestige and beneficial achievements.

In time, with Keynes’ “economic problem” behind us, we might all become like the richest man in the world, Bill Gates, who lives forever beyond need and thus has the freedom and the drive to change the world for the better.

Progressives don’t enjoy a monopoly on narratives about the good and the economy. Yet many conservatives seem reluctant to discuss economic issues in moral terms. Crony corporatism is fundamentally unjust2. A lengthy and excessively complicated tax code does undermine rule of law. So why do so many conservatives handicap themselves by relying on strictly technical arguments, mixed with occasional antiphons to negative liberty and appeals to be “pragmatic,” when addressing these matters?

The oddness of this situation is underscored by the fact that American conservatives can draw upon numerous normative resources to make their case. These range from the commercial republicanism espoused by Alexander Hamilton and other Founders, to the economic vision portrayed in Michael Novak’s The Spirit of Democratic Capitalism. Though differing in certain emphases, these sources share an understanding of commerce and the institutions that promote economic liberty as indispensable to societies that take the good life seriously.

In short, pro-market conservative reformers need to grasp what progressives have recognized for decades: that people who embrace social democratic views of economic life will become increasingly disinclined to protect the values and institutions undergirding a market economy.


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