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What We Read Today 08 January 2016

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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Topics today include:

  • Minimum Wage Hurts the Young

  • 2016 Most Promising Tech Investments

  • How Long Will Fed Maintain Balance Sheet?

  • Record November Weather for December in U.S. NE

  • Oil Keeps Falling

  • Shale Keeps on Producing

  • Pound Breaks Lower

  • Germany’s 1.1 Million Newcomers

  • Saudi Arabia to Citizens:  Get a Job!

  • China a Captive of the Fed

  • El Chapo Recaptured

  • And More

Articles about events, conflicts and disease around the world

Global

  • US oil settles at $33.16 a barrel, down 10% for the week (CNBC)   Over the past four days, futures of global benchmark Brent and U.S. West Texas Intermediate (WTI) crude slid sharply, hitting 12-year lows, after China's stock market plunge this week roiled global markets.  Brent was down 24 cents at $33.51 a barrel. It hit a session low of $32.78, after sliding on Thursday to $32.16, the lowest since April 2004.  Analysts are asking:  Where is the bottom?  U.S. West Texas Intermediate (WTI) settled down 0.33 percent, or 11 cents, at $33.16 a barrel, down about 10 percent for the week. It fell to a session low of $32.64, after hitting $32.10 a day ago, the lowest since December 2013.

U.S.

  • The Latest: Suspect's relatives appear in court in Milwaukee (Associated Press)  More problems for the public relations image of refugees.  Two men related to a suspect in a terror investigation out of California have been accused in Milwaukee of conspiring to transport stolen cellphones and computers across state lines.  Younis Mohammed Al Jayab and Ahmad Waleed Mahmood appeared in federal court Friday to hear the allegations against them in a criminal complaint.

  • Attorneys: Chicago cops falsified witnesses' accounts, threatened them (CNN)  At least three witnesses to the Laquan McDonald police killing were questioned for hours, threatened by officers and ordered to change their accounts to match the official Chicago police version of the shooting, the attorneys for the teen's estate say.  The allegations are contained in more than 3,000 pages of recently released documents related to the case. The attorneys also allege that police officers up the chain of command fabricated witness accounts to support the way officers at the scene described the October 20, 2014, shooting as justified.

  • Philadelphia police officer ambushed 'in the name of Islam' (BBC News)   A police officer in Philadelphia was ambushed by a man who pledged allegiance to the so-called Islamic State (IS), officials have said.  Edward Archer fired at least 11 shots at the officer, in an act done "in the name of Islam", police said.  Despite being shot, Officer Jessie Harnett left his vehicle and was able to to return fire, striking Mr Archer at least once.  Mr Archer escaped on foot but was apprehended by police shortly after.

  • How Big a Worry Is a Strong Dollar for Fed? (Bloomberg)

Bottom line: the US employment market is doing just fine right now. Yes, jobs are a lagging indicator. Nonetheless, upward revisions and the positive delta between the 3-month and the 12-month rolling average are not lagging indicators and they are indicative of economic support.

So, despite my general outlook being one where the risks are to the downside to the point where even recession is possible, I think there is a Goldilocks scenario possible here.

  • Systematic Candidate Selection Improves Haynesville Refracturing Economics (Oil Pro)  How can U.S. oil production remain so high in the face of low prices?  There are ways to produce oil much more cheaply that heretofore exercised.  One of these is refracturing existing wells which can reduce production cost by as much as 75%.  Of course this practice does have limits:  (1) once successfully refractured a well is less likely to produce well if done again later; and (2) successful candidates for refracturing must be carefully selected (see graphic below).

UK

  • Pound Forecasts Face Hatchet as Cracks Emerge in Bulls' Resolve (Bloomberg)  Pound bulls are finding it harder to hold on to an optimistic view.  UniCredit SpA cut its year-end sterling forecast to $1.50 on Friday from $1.63. It’s the first time the Italian bank’s call has fallen below the median analyst projection -- currently $1.51-- in a Bloomberg survey. And until October, it was the second-most bullish contributor.  Econintersect:  We hate to show our age but we remember when the pound was $4.20.

pound.2010.2015

Germany

  • Germany: nearly 1.1 million migrants arrived last year (Associated Press)  Nearly 1.1 million people were registered as asylum-seekers in Germany last year, more than 400,000 of them from Syria, the government said Wednesday.  The Interior Ministry said that 1,091,894 people in total were registered between January and December. Syrians were by far the biggest single group, accounting for 428,468 people.  They were followed by Afghans, 154,046 of whom were registered, and 121,662 Iraqis.  Germany has seen more refugees and other migrants arrive than any other European country.

Egypt

  • Gunmen open fire at Egyptian hotel, wounding foreign tourists (Reuters)   Gunmen opened fire at the entrance of a hotel in the Egyptian Red Sea resort city of Hurghada on Friday, wounding two foreign tourists, security sources said.  The assailants had arrived by sea to launch the assault, the sources said.  The Islamic State militant group said on Friday an attack on Israeli tourists in Cairo on Thursday was carried out by its fighters, in response to a call by the group's leader, Abu Bakr al-Baghdadi, to target Jews "everywhere".  Security sources said those tourists were Israeli Arabs. None was hurt and Egyptian authorities said the attack was aimed at security forces. 

Saudi Arabia

  • A New Saudi Arabia Is in a Hurry in Dangerous Era of Cheap Oil (Bloomberg)  Saudi Arabia, one of the most tradition-bound societies on the planet, where family structure and tribal patriarchy differ little from a century ago, is suddenly in a hurry. It has done more in the past week than in most years.  Over eight days, it has executed dozens of militants, severed ties with Iran and announced numerous steps for a radical rollback of the state that may include privatizing oil giant Saudi Aramco, among the world’s largest companies.  And the government is telling citizens more of them will have to get jobs.

China

North Korea

Mexico

Other Economics and Business Items of Note and Miscellanea

  • The Minimum Wage Hurt the Young and Low-Skilled almost as Much as the Recession (Foundation for Economic Education)   University of California-San Diego Professor Jeffrey Clemens’ concludes that federal minimum wage hikes from 2006 to 2009 accounted for 43% of the decline in employment among young, low-skilled workers during the Great Recession.  Young, low-skilled workers — defined as individuals between 16 and 30 without a high school degree — are the most likely to be hurt by minimum wage hikes because they are the least likely to have skills that employers consider valuable. Businesses might be willing to take on these individuals at low wages in order to train them before moving them up to higher-paying work. But when the government sets a high minimum wage, that first step on the career path might disappear.  This author suggests a special  sub-minimum wage for young workers (under 25) who have little or no work history.  Current federal law permits a temporary sub-minimum wage of 59% of the standard minimum wage for up to 90 days for those under age 20.   Econintersect:  The author doesn't state but we infer that he is probably thinking of a longer period, what might be considered analogous to an apprenticeship, that could last up to one or two years.  Such a period might, especially if for a longer period of two years, for example, have an annual (or other periodic) step-up above the starter wage.  For example, $4.25 to start; $5 after six months; $5.75 after a year; $6.50 after 18 months; and full minimum wage after 2 years.  For research details see The Minimum Wage and the Great Recession: Evidence from the Current Population Survey and  The Minimum Wage and the Great Recession: Evidence of Effects on the Employment and Income Trajectories of Low-Skilled Workers.

  • 2016's Most Promising Tech Investments (Investopedia)  This post recommends GoPro, Inc. (NASDAQ: GPRO); Atlassian Corporation PLC (NASDAQ: TEAM); and First Solar, Inc. (NASDAQ: FSLR).  If these recommendations were good at year end 2015, when written, they are just as good or better right now.  As this is written, First Solar is essentially unchanged for the year, while Atlassian is down 7% and GoPro is off 8%.

  • Bob Doll's 10 predictions for 2016 (Investment News)  Many predictions reflect a continuation of 2015.  Differences?  Oil won't continue declining and the dollar won't continue rising.  Doll sees something else that hasn't happened for nearly 40 years:  A single-digit percentage change for U.S. equities for the second year in a row.  Finally:  Republicans will sweep everything on the national kevel in the election of 2016.

  • Fed leans on big balance sheet to soften rate hike impact (Reuters)   Federal Reserve policymakers appear to have succeeded in their push last month to convince investors the central bank will hold on to its $4.5-trillion portfolio at least until next year, a Fed survey showed on Thursday.  Recent interviews with officials showed they were counting on the Fed's massive bond holdings to blunt some of the impact of interest-rate hikes this year. But they were also concerned that markets did not fully appreciate that the central bank was willing to hang on to the bonds for longer than thought only three or six months ago.  They said that apparent perception gap could explain in part why they are expecting a brisker series of rate hikes in 2016 than investors do. It was also a reason why, as it raised rates last month for the first time in nearly a decade, the U.S. central bank used new language saying it will keep its portfolio at its record size until rate hikes are "well under way."  Econintersect:  We have asked for sveral years:  Why do people think the Fed will shrink its holdings any time soon?  They could maintain the large asset base for years.  See, for example, Fed's Williams Sees Balance Sheet Taking Six Years to Normalize.

  • How A Warm Winter Impacts Local Wildlife (Adirondack Almanack)  This article contains the astounding abnormal weather data for the northeast region of the U.S. for December 2015.  For global data on weather and climate, read Sig Silber's weekly GEI column.


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