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What We Read Today 30 September 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

  • Stock Gains Trim Quarter's $11 Trillion Rout as Bonds, Yen Drop (Bloomberg)  From stocks to commodities to emerging-market currencies, traders got a measure of solace at the end of the most volatile quarter for financial markets since 2011.  Global equities advanced from a two-year low, though gains in U.S. stocks faded in afternoon trading as investors adjusted holdings at the end of the worst quarter in four years. Copper and nickel jumped to ease losses among metals, while oil traded at the lowest average quarterly price since 2009. The yen weakened with Treasuries as demand for havens eased for at least a day.
  • Lagarde Says Fed Hike, Slower China to Test Global Economy (Bloomberg)  Global growth will only modestly accelerate next year as the world grapples with the twin prospects of rising U.S. interest rates and slowing expansion in China, International Monetary Fund Managing Director Christine Lagarde said.

U.S.

  • Congress passes funding bill to avoid government shutdowns (Reuters)  The U.S. Congress, ending weeks of infighting, gave final approval on Wednesday to a bill funding the government through Dec. 11 and averting agency shutdowns that would have otherwise begun on Thursday with the start of a new fiscal year.  By a vote of 277-151, the House approved the stopgap spending bill and will now send it to President Barack Obama for signing into law before a midnight deadline.  House Speaker John Boehner, who is resigning on Oct. 30, needed significant support from Democrats to pass the bill as a majority of his fellow Republicans voted against the measure.
  • Everything That Can Go Wrong Is as Joaquin Churns in Atlantic (Bloomberg)  The weather outlook for the eastern U.S. is starting to resemble the plot of a 1970s disaster movie in which everything that could go wrong did.  From the mid-Atlantic to the Northeast, the coastal states have been soaked by rain. While this is happening, Hurricane Joaquin lurks in the shadows, passing over water that is just perfect for it to strengthen explosively. No one can say where it will go.  On top of that, high pressure in Canada and low pressure in the southern U.S. will conspire to slam the surf onto land, eroding beaches and keeping water pinned along the shoreline. As that happens, another round of rain could leave 2.5 inches (6.4 centimeters) in New England to as much as 5 to 8 inches from New Jersey to North Carolina.  Get the latest update on Early Bird tomorrow morning.
  • Putin's Syria moves leave U.S. looking weak (CNN)  Good Op Ed other than the poor grammar in the headline.  The U.S. is correctly referred to in the singular.

Germany

  • German Unemployment Unexpectedly Rises in Sign of Economic Risks (Bloomberg)  German unemployment unexpectedly rose in September in a sign that Europe’s largest economy is not immune to risks from slowing growth in emerging markets.  Joblessness increased a seasonally adjusted 2,000 to 2.795 million, the Federal Labor Agency in Nuremberg said on Wednesday. Economists had predicted a drop of 5,000. The unemployment rate remained unchanged at 6.4%, the lowest level since German reunification.

Syria

  • How Putin Plans to Wage War in Syria as Russian Airstrikes Begin (Bloomberg)  Russia is embarking on its most ambitious military campaign outside former Soviet borders in more than three decades, launching airstrikes against mainly Sunni militants at the request of embattled Syrian President Bashar al-Assad.  Russian pilots began bombing on Wednesday, the same day President Vladimir Putin passed a measure through parliament authorizing the use of force. The bold move has already pushed the U.S. and its allies to backpedal on demands for Assad’s immediate ouster by shifting the balance of power in the country’s 4 1/2 year civil war.  According to Robert Munks, editor of IHS Jane’s Intelligence Review

[Russia has a] “large expeditionary force on the ground at the moment in Syria and it’s likely to expand.  It’s already capable of inflicting quite a lot of damage on insurgent positions.”

  • Syria crisis: Russian air strikes 'not hitting IS areas' (BBC News)   The US and Nato have expressed concern that the first Russian air strikes in Syria have not targeted the Islamic State group, their stated aim.  Russian defence officials said their aircraft had carried out about 20 missions against IS.  But US officials said they were concerned that the raids had hit non-IS opponents of Syrian President Bashar al-Assad, Russia's ally.  Nato said there had been little co-ordination with US-led anti-IS forces.  Econintersect:  There is concern that Russia entered Syria to attack Assad's opponents using the guise of attacking IS, just as Turkey appears to have entered the "war" against IS as cover for attacking Kurds.

Afghanistan

  • US airstrikes back Afghan push to retake city from Taliban (Associated Press)  Afghan troops backed by U.S. airstrikes massed Tuesday on the outskirts of a key northern city seized by the Taliban in the buildup for what is likely to be a long and difficult campaign to drive out the insurgents.  Despite the overnight U.S. bombing of Taliban positions, the militants extended their grip on Kunduz, forcing government forces to retreat from a strategic fortress hilltop and giving the insurgents a vantage point overlooking the city. The airport remained the only pocket of resistance to the militant onslaught, which began with a coordinated attack Monday that took the government, military and intelligence agencies by surprise.

India

China


Debt and (not much) deleveraging (McKinsey)  Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007. Global debt in these years has grown by $57 trillion, raising the ratio of debt to GDP by 17 percentage points (Exhibit 1). That poses new risks to financial stability and may undermine global economic growth.

global.debt.1

global.debt.2

global.debt.3

Other Economics and Business Items of Note and Miscellanea

  • Prospect of renewable energy amid falling oil prices (Hedge SPA, LinkedIn)  This was posted at GEI Discussion Group, LinkedIn.  This was posted at GEI Discussion GroupLinkedIn.  Investment in renewable energy is liely to continue unabated regardless of the privce of fossil fuels.  Due to innovations in the sector, the price of solar energy has been falling in line with the price of oil. However, the demand for renewable energy is highly inelastic since it represents a longer-term investment than oil. Similarly, in the US, investors and utility providers are likely to consider renewables in the long run where there is possibility of resource depletion.

... an unexpected macro event or large-sized risk transfer has the potential of creating much larger market moves today compared with the past. This would be consistent with a greater number of days in recent months exhibiting 1σ or 3σ sigma moves. The taper tantrum and the October 15, 2014 event where Treasury rates moved amid very little news would be some examples of these events in recent times. Interestingly, an increase in volatility and reduction in depth can be self-reinforcing, in which reduced depth causes any risk transfer to have a greater price impact, while the resultant volatility causes market depth to shrink further.

fat.tails.bonds

  • 3 strategies to keep Medicare premiums low (LifeHealthPro)  Medicare premiums are scheduled to rise in coming years for high income retirees.  There are strategies discussed here to mitigate the impact.  What are the high incomes impacted?  Here is an excerpt from the article:

For example, Part B premiums are expected to rise from $238 per month per person to $310 per month per person in 2018 for Medicare beneficiaries with incomes from $133,501 to $160,000 (or $267,001 to $320,000 per couple), according to a Kaiser Family Foundation analysis. And, for beneficiaries with incomes between $160,001 to $214,000 (or $320,001 to $428,000 for a couple), monthly Part B premiums are expected to rise from $310 to $381 per person in 2018.

  • Caution...Delayed Closings Ahead...TRID Is Coming October 3rd! (Michael Haltman, LinkedIn)  Michael Haltman contributes to GEI.  This was posted at GEI Discussion GroupLinkedIn.  TRID is a new consumer disclosure law that goes into effect on October 3, 2015. TRID will significantly change the way a mortgage lender discloses terms and fees of most residential mortgage loans to an applicant as it requires the replacement of the Good Faith Estimate, Final Truth-in-Lending Disclosure, and HUD-1 Settlement Statement with new disclosures known as the Loan Estimate and Closing Disclosure.  While the new law provides better disclosure of loan terms for home buyers, it may take up to double the time to close on a home purchase and increase closing costs where a mortgage is involved. 

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