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What We Read Today 26 December 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


  • UN adopts resolution to disrupt Islamic State funds (Associated Press)  The U.N. Security Council unanimously adopted a resolution Thursday aimed at disrupting revenue that the Islamic State extremist group gets from oil and antiquities sales, ransom payments and other criminal activities — a goal that finance ministers agree will be challenging.  The Islamic State group, also known as ISIL and Daesh, is already subject to U.N. sanctions under resolutions dealing with al-Qaida. The resolution, sponsored by the United States and Russia, elevates IS to the same level as al-Qaida, reflecting its growing threat and split from the terror network behind the 9/11 attacks.


  • A year of reckoning:  Police fatally shoot nearly 1,000 (The Washington Post)  The Washington Post found that the kind of incidents that have ignited protests in many U.S. communities - most often, white police officers killing unarmed black men - represent less than 4% of fatal police shootings. Meanwhile, The Post found that the great majority of people who died at the hands of the police fit at least one of three categories: they were wielding weapons, they were suicidal or mentally troubled, or they ran when officers told them to halt.  See also next article.

  • Preliminary 2015 Law Enforcement Officer Fatalities (National Law Enforcement Officers' Memorial Fund)  Through 26 December a total of 124 police officers died in the line of duty, 39 by gunshot wounds.

  • Why Christmas Day sales could become a reality (USA Today)  With the dominance of mobile devices shopping can be done 24/7/365 - and that includes even Christmas day.  This year saw more than $600 million in online sales for 25 December, up from $500 million in 2013 and $550 million last year.

  • At least 60 people charged with terrorism-linked crimes this year — a record (The Washington Post)  The Justice Department has charged at least 60 individuals this year with terrorism-related crimes, an unprecedented number that officials attribute to a heightened threat from the Islamic State and the influence of social media on potential recruits.


  • UK floods: Homes evacuated amid heavy rain (BBC News)   Heavy rain has caused more flooding in northern England, with homes evacuated in Lancashire and Yorkshire, and rivers overflowing in Manchester and Leeds.  Damage has included the destruction of a former pub in Greater Manchester, and a large hole has appeared in the M62.  Met Office warnings of further rainfall are in place for northern England, Scotland and Wales.  Hundreds of flood alerts and warnings have been issued - more than 30 of them severe, meaning danger to life.


  • France Changes Constitution To Protect "Emergency" Police Powers From Court Challenges (Zero Hedge)  France has essentially instituted marshal law with local authorities now allowed a carte blanche to arrest anyone with or without cause.  And, according to a proposed constitutional amendment, the French state-of-emergency police powers, such as to conduct warrantless searches and order house arrests, "will be unconditionally shielded from court challenges".  Finally, it is proposed to amend the constitution to strip citizenship from people born French - who have belonged to the national community since their birth - if they are convicted of terrorism.


  • Japan Protests Intrusion of Armed Chinese Vessel Into its Waters (Bloomberg)  The Japanese government formally protested the entry of an armed Chinese government ship and two other vessels into waters that Japan claims as its own on Saturday, according to an official in the Japanese Ministry of Foreign Affairs. This is the first time that an armed Chinese vessel has intruded into the areas that Japan’s claims as its territory, the official said.  The vessel was formerly a People’s Liberation Army Navy ship and is now operated by another department, according to the official, who asked not to be identified, citing government policy. The ship is armed with an auto-cannon, although the main armament has been removed, the official said. 


  • Taiwan banks' exposure to China fall for 4th consecutive quarter (Focus Taiwan)  Lending extended by Taiwanese banks to China as of the end of September has fallen further, marking the fourth consecutive quarter of decline at a time when China's economy is slowing down, according to Taiwan's central bank.   The central bank said that since the Financial Supervisory Commission (FSC), the top financial regulator in Taiwan, has asked Taiwanese banks to tighten their risk control, banks' exposure to China moved lower accordingly.  Still, China remained the largest debtor to Taiwan's banking system.


  • Christmas Day blaze guts Australia homes (BBC News)  A Christmas Day bushfire has destroyed more than 100 homes in Australia's Victoria state, officials say.  Officials said 98 homes had been razed in Wye River and 18 at Separation Creek. No injuries are reported.  Hundreds of firefighters have been battling the blaze along the famous Great Ocean Road in Victoria's south-west, popular with holidaymakers.  A change to cooler weather and rain has greatly reduced the threat, but some emergency warnings remain in place. 

Is It Time to Get Long Crude? (  The author says that crude oil will not stay at low prices. OPEC nations will realize that over suppling the market to keep prices down to hurt Russia is not working. For the simple reason Russia's friend China has accepted more imports, to the detriment of Saudi Arabia.  But, he goes on, there are still dozens of oil tankers going around in circles in the ocean who have yet to give up the long trade and have yet to sell there oil back into a depressed market, further depressing prices.  The author provides below two technical readings to watch for, to show that things maybe improving for the bulls. 

1) On a down swing volume is relatively less, than previous down swings. This means those that have purchased at depressed levels have no intention of selling their accumulated positions while prices are still falling, a very bullish sign. They know higher prices are near.

2) On a down swing implied volatility is relatively less, that the previous down swing. This means the heat is gone out of the battle to acquire options, and BID and ASK spreads find some sort of normal spread. This means there is less fear present. A down swing with less fear of lower prices by the market players is very bullish because they know that higher prices are very near (These ETF have no earnings dates).

In the charts below volume or implied volatility have not slumped during the latest down swing, therefore there is no evidence the depressed price period is over. Therefore thinking of getting long is only for those with deep pockets and no trade margin.  Click on graphics for larger images.

Other Economics and Business Items of Note and Miscellanea

  • Federal Reserve Gradualism: A Dangerous Game? (Michael Hartman, LinkedIn)  MH is a GEI contributor.  After parsing the language in Janet Yellen's statement, the belief is that 2016 may see two or three more hikes of .25% each leaving the fed funds rate in the .75%-1% range at the end of the year.  If this rate of increase is assumed to be the norm, it will take the Fed as long as four years to reach the normalized fed funds rate of 3%.  Former Morgan Stanley chief economist and now member of the Yale University faculty, Stephen S. Roach, has a problem with this chosen methodology and monetary policy strategy!  Michael provides an excerpt from Roach's Project Syndicate article.

  • Douglass North and the Importance of Institutions (Economics Express)  On 23 November, iconoclastic American economist Douglass North died at the ripe age of 95.  North had shared the Nobel Prize in economics in 1993 with Robert Fogel, whom he outlived by two years. North and Fogel were worthy but unlikely Nobel winners at a time when the economics profession was dominated by the increasing use of math and formal modeling.  North and Fogel were outliers, if not renegades, when they nabbed the most coveted prize in economics back in 1993. Both were skilled practitioners of classical economic history, which—along with its sister field of study within economics, the history of economic thought—had been all but relegated to the dustbin by the Anglo-American economic mainstream by the early 1990s.  Econintersect:  Without denying the importance of the individual, these two were among a minority who felt that institutions played key roles in defining the progression of an economic system.  Read this very well written discussion and two good obituaries for North:  Douglass C. North, Maverick Economist and Nobel Laureate, Dies at 95 (The New York Times) and Douglass North, a pioneer in institutional economics, has died (The Economist).

  • The Effects of Chronic Heavy Drinking on Brain Function Are Underdiagnosed (The Wall Street Journal)  Hat tip to Marvin Clark.  Chronic heavy drinking can cause insidious damage to the brain, even in people who never seem intoxicated or obviously addicted.  Experts say alcohol-related brain damage is underdiagnosed and often confused with Alzheimer’s disease, other forms of dementia or just getting older.  Now, brain imaging is revealing how long-term alcohol abuse can change the structure of the brain, shrinking gray-matter cells in areas that govern learning, memory, decision-making and social behavior, as well as damaging white-matter fibers that connect one part of the brain with others.

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