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What We Read Today 13 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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Today’s topics include:

  • Dow Testing Long-term Channel Support

  • Why World Economy is Slowing

  • European Bank Bail-Ins

  • New Forecasts of Disaster by Leading Bears

  • How China is Rebalancing

  • Russian-Iranian Arms Deals?

  • Saudi-Iran Conflict Screwing Russia

  • Iran Releases American Sailors

  • Central American Children Again Crossing U.S. Border

  • Republicans and Democrats Agree

  • Republicans and Democrats in Denial

  • And More

Articles about events, conflicts and disease around the world

Global

  • Beware the great 2016 financial crisis, warns leading City pessimist (The Guardian)  Hat tip to Roger Erickson.  Albert Edwards, strategist at the bank Société Générale, said the west was about to be hit by a wave of deflation from emerging market economies and that central banks were unaware of the disaster about to hit them.  He was joined by analysts at Royal Bank of Scotland urged investors to “sell everything ahead of an imminent stock market crash.

  • Global PC Shipments Fall to Lowest Since 2008, Gartner Says (Bloomberg)  Worldwide personal-computer shipments dropped 8.3% in the fourth quarter, ending the year at fewer than 300 million units for the first time since 2008.  Shipments have declined every year since a peak of more than 360 million in 2011 as more consumers turn to smartphones and tablets.

U.S.

  • Surge in Central American migrants at US border threatens repeat of 2014 crisis (The Guardian)  A surge of undocumented children and families from Central America detained at the US border could trigger a repeat of the 2014 migrant crisis just as the presidential campaign gathers pace.  Unaccompanied minors more than doubled to 17,370 in the last quarter, while U.S. border agents detained 21,469 in family groups.  See Southwest Border Unaccompanied Alien Children Statistics FY 2016 (U.S. Customs and Border Protection).

  • National Guard activated to help deal with Flint, Mich. water crisis (Associated Press, Fox News)  Members of the Michigan National Guard began arriving in Flint on Wednesday for briefings on the drinking water crisis ahead of a larger contingent of Guardsmen who will help distribute bottled water, filters and other supplies to residents.  Flint's tap water became contaminated with too much lead after the city switched its water supply in 2014 to save money while under state financial management. Local officials first declared a public health emergency in October in response to tests that showed children with elevated levels of lead.

EU

European Central Bank Governing Council member Francois Villeroy de Galhau said that the world isn’t about to see a repeat of the 2008 financial crisis.

“What’s happening in China doesn’t amount to serious illness,” Villeroy said on Europe 1 radio. The economic recovery in France and the euro zone is “undeniable” and “depends on us.”

  • In Europe, 2016 Will Be The Year Of Lawsuits (Frances Coppola, Forbes)  FC has contributed to GEI.  Hat tip to Constantin Gurdgiev (true economics).  2016 is fast approaching, and with it another phase in the EU’s attempts to make creditors pay for failed banks. The European Bank Recovery and Resolution Directive (EBRRD) has been law in all EU countries since January 2015, but up till now the bail-in rules have not been fully implemented.  The EBRRD provides bank regulators with four main tools for resolving a failed bank (and the fourth one is the one on sticky legal footing - "bail-ins"):

  • Sale of the failed bank partly or entirely to another entity

  • Creation of a “bridge bank” containing the good assets, which would be sold to another entity or floated as an independent business

  • Creation of a “bad bank”, or asset management vehicle, which would be gradually wound down over time (to prevent state aid rules being breached, this tool must be used in conjunction with at least one of the other tools)

  • Write-down of creditor claims (or conversion to equity) in order of rank.

Iran

  • Are reported Iran-Russia arms deals genuine? (Al Monitor)  The past six months have been filled with nonstop stories by Russian media outlets quoting officials voicing Moscow’s keen interest in selling weapons to Tehran.  But there is still nothing substantive in the way announcements.

  • US thanks Iran for swift release of 10 Navy sailors (BBC News)  The US has thanked Iran for the swift release of 10 US sailors held for entering its territorial waters.  Secretary of State John Kerry said the resolution of the matter was "testament to the critical role diplomacy plays in keeping our country safe".  The sailors were detained yesterday when one of their two vessels broke down while training in the Gulf and drifted into Iranian waters.  The incursion was "unintentional", a statement from the Iranian Revolutionary Guards quoted by state media said.  Iranian state media said the sailors were released into international waters after they apologized. But Vice-President Joe Biden denied this, saying the boat had had simply a problem and there was "nothing to apologize for".  The sailors were held on Farsi Island.  They had been sailing from Kuwait to Bahrain.

iran.border.persian.gulf

Russia

  • Why Iran-Saudi fallout will be costly for Moscow (Al Monitor)  The ongoing dispute between Iran and Saudi Arabia following the kingdom’s execution of Saudi Shiite cleric Sheikh Nimr al-Nimr on terrorism charges adds to many of the Middle East’s existing problems, but might be especially challenging for Russia’s foreign policy in the region, which followed a "work-with-everyone approach to the Middle East".

China

china.rebalancing.world.bank.2016.jan


Dow is Testing Support in a 6-Year Channel (Chart of the Day)  This is one of the most productive trading channels in history with a 100% gain without a bear market (20% pullback) and a 70% rise since the bottom of the only correction (more than 10% pullback) in late 2011.  Clearly a sustained break below 16,000 now would be a very strong sell signal because it would be a down move from what would have been a double bottom.  Conversely, a move back above 18,000 would be a bullish confirmation of the double bottom.

dow.channel.2010.2016


That Savage Deleveraging: Global Debt 2000-2015 (Constantin Gurdgiev, true economics)  CG contributes to GEI.  The source of the global slowdown is evident in the IMF data.  See Econintersect annotation of chart:

total.global.credit.outstanding.2000.2015.600x450.annotated

Other Economics and Business Items of Note and Miscellanea

  • Republicans and Democrats Agree: We Hate Wall Street (The Wall Street Journal)  Wall Street is confronting a presidential election unlike any it has seen: One in which the banking industry is denounced by candidates on the left and the right.  The banker-bashing is prompting uncertainty and disagreement in the industry about how, or whether, to respond.  Democratic challenger Bernie Sanders has said “fraud is the business model of Wall Street”, while party front-runner Hillary Clinton has vowed to rein in risky financial activity.  Republicans Marco Rubio, Jeb Bush, John Kaisich and Ted Cruz have all made anti-bank statements.

  • One of the Biggest Bond Market Players Has No Employees (Bloomberg)  One of the most prolific issuers in the $3.7 trillion municipal market is a Wisconsin agency with no employees, coveted tax-exempt bond status and a nationwide client list.  The Public Finance Authority last year issued bonds for more than 30 charter schools, senior living facilities, universities and real estate developers in 15 states. None were from Wisconsin. The University of Kansas sold $327 million of tax-exempt bonds last week through the authority for the first time so it didn’t have to wait on the legislature’s approval to raise money for a new 285,000 square-foot science building, a student union and housing.  Econintersect:  So no one is in charge.  What could possibly go wrong with that?

  • Delta Surpasses United for No. 2 Airline Spot by Traffic (The Wall Street Journal)  Delta said it ended the year with 209.6 billion miles flown by paying passengers, up 3.3% from the prior year. That put it behind American Airlines Group Inc., which on Tuesday reported its traffic rose 2.4% to 223 billion revenue-passenger miles in 2015. United came in at 208.6 billion revenue-passenger miles, up 1.5% from 2014. The figures include regional-carrier partners flying under the airlines’ brands.

  • Gravitational Wave Rumors in Overdrive (Scientific American)  Physicists have for months been buzzing about the possible detection of gravitational waves—a finding that would confirm one of the key predictions of Albert Einstein’s general theory of relativity. On January 11, that speculation exploded in a frenzy of media headlines, after excited physicists spilled some of the gossip online.

  • “A Day’s Work” (Documentary, 2015) (Vimeo)  Hat tip to Roger Erickson.  Temporary work can be hazardous to your health and even your life.  See also The Crushing Life of a Blue Collar Temp  and Temporary Work, Lasting Harm, both ProPublica articles from GEI News (2013).

"A Day's Work" (Documentary, 2015) from A Day's Work on Vimeo.


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