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.
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Topics today include:
Some Segments of US Stocks in Bear Market
Will the Economy Follow Stocks Down?
Global Markets Corrections
Emerging Markets Bears
Not So Smart ‘Smart Homes’
China is Dumping US Treasuries
Americans Released by Iran
Articles about events, conflicts and disease around the world
Iran's Oil Will Just Make Life Worse for Gulf Rivals (Bloomberg) As Iran emerges from a decade of international sanctions, its Gulf Arab rivals are facing their toughest economic predicament since the global financial crisis. Governments across the six-nation Gulf Cooperation Council are taking unprecedented measures to counter the slump in oil prices, curtailing some of the world’s most generous welfare systems to plug widening budget deficits. In some countries, contractors are facing delays in government payments, while companies are reducing their workforces to trim costs. See more about the new oil supply under Iran, later below.
Hedge Fund Bets Signal There's More Pain Ahead for Commodities (Bloomberg) The commodity meltdown that pushed oil to a 12-year low and copper to the cheapest since 2009 isn’t over yet. At least, that’s how hedge funds see it. Money managers increased their combined net-bearish position across 18 raw materials to the biggest ever, doubling the negative bets in just two weeks. A measure of returns on commodities last week slid to the lowest in at least 25 years. Metals, crops and energy futures all slumped amid supply gluts and an anemic outlook for the global economy.
Weak U.S. data deluge points to sharply slower growth (Reuters) U.S. retail sales fell in December as unseasonably warm weather undercut purchases of winter apparel and cheaper gasoline weighed on receipts at service stations, the latest indication that economic growth braked sharply in the fourth quarter. The growth picture was further darkened by other data on Friday showing industrial production fell in December, dragged down by cutbacks in utilities and mining output. Business inventories were also weak, posting their biggest drop in just over four years in November. Signs the economy has hit a soft patch - together with weak inflation, a stock market sell-off and faltering global growth - raises doubts on whether the Federal Reserve will raise interest rates again in March. The Fed lifted its benchmark overnight interest rate from near zero last month, the first rate hike in nearly a decade.
New York police say assailants chanted 'ISIS' while beating man (Reuters) New York City police were investigating on Sunday an assault on a man who was pummeled by suspects shouting "ISIS, ISIS," leaving him with bruises on his head and face, authorities said. The 43-year-old man was attacked while walking with a nine-year-old girl in the Bronx around 5:30 p.m. on Friday, according to the New York City Police Department. He was punched several times in the head, knocked down and kicked, police said. The victim, whose name was not given, was treated for injuries at a hospital and released. He had been wearing a shalwar kameez, a traditional South Asian outfit featuring a long tunic, the New York Times reported.
U.S. prisoners leave Iran (Reuters) Three Iranian-Americans left Tehran for a U.S. base in Germany on Sunday under a prisoner swap following the lifting of most international sanctions on Iran under a deal that President Barack Obama said had cut off Tehran's path to a nuclear bomb. A Swiss plane took Jason Rezaian, the Washington Post's Tehran bureau chief, Saeed Abedini, a pastor from Idaho and Amir Hekmati, a former Marine from Flint, Michigan, as well as some family members from Tehran to Geneva, Switzerland.
Man dies after taking part in botched French clinical trial (Associated Press) A man died in a French hospital Sunday after taking part in an experimental drug trial for a painkiller, and five other participants remain hospitalized after one of France's most troubling medical incidents. French prosecutors have launched a manslaughter investigation into the unusual case, which shined a spotlight on the practice of testing drugs on paid, healthy human volunteers. Scores of others were also given the drug. The Portuguese pharmaceutical company testing the drug, Bial, said in a statement that it's working with health authorities to determine what caused "this tragic and unfortunate situation". The Rennes University Hospital in western France announced the death in a statement, but didn't identify the patient, who had already been in a state of brain death. He was among six male volunteers between 28 and 49 hospitalized last week after volunteering to take the drug. French health authorities have said three of the hospitalized volunteers face possible brain damage.
Istanbul suicide bomber registered as refugee before attack (Associated Press) The suicide attacker who detonated a bomb that killed 10 German tourists in the heart of Istanbul's historic district had registered as a refugee just a week earlier, Turkish officials said Wednesday, raising questions over whether extremists are posing as asylum-seekers to inflame anti-immigrant sentiment in Europe. Turkish authorities identified the assailant in Tuesday's attack as a Syrian man who was born in 1988, and said he was affiliated with the Islamic State group. Turkish media, including some close to the government, identified him as Nabil Fadli and said he was Saudi-born. The extremist group has not so far claimed the attack.
Iran Could Get Five Times More From Oil Sales by Year-End (Bloomberg) Iran could get more than five times as much cash from oil sales by year-end as the lifting of economic sanctions frees the OPEC member to boost crude exports and attract foreign investment needed to rebuild its energy industry. The Persian Gulf nation will be able to access all of its revenue from crude sales after the U.S. and five other global powers removed sanctions on Saturday in return for Iran’s curbing its nuclear program. The fifth-biggest producer in the Organization of Petroleum Exporting Countries had been receiving only $700 million of each month’s oil earnings under an interim agreement, with the rest blocked in foreign bank accounts. Iran is striving to add 1 million barrels to its daily crude production and exports this year amid a global supply glut that has pushed prices 22% lower this month.
Warning: The Broader Stock Market Has Already Turned Bearish! (Harry Dent, Economy & Markets Daily) Hat tip to John O'Donnell. Large-cap stocks opened this morning (Tuesday 12 Janiary) in the green, seeming to offer a little reprieve from an ultra-violent start to 2016. Small- and mid-caps weren’t so lucky. They’re continuing to rip through fresh new lows. This has been the toughest bull market and bubble to call, as many leading indicators that we have used in the past simply don’t work since central banks hijacked the markets after 2008. But with these major divergences continuing to build, and after many years of the Fed’s zero-percent interest rates, it seems we’re finally coming close to the end.
Nearly half of U.S. stocks are in a bear market (Matt Egan, CNN Money) Posted 08 January. There hasn't been a bear market in the U.S. since the Great Recession. And even after the atrocious start to 2016, Wall Street isn't close to a bear market. The major indexes have to plunge 20% below their previous high to be in one. The S&P 500 is down about 9% from its record highs of last year. The Dow and Nasdaq were down 10% from the highs on Thursday, officially falling into "correction" mode. But lurking beneath the surface, the picture looks a lot worse. As of Friday nearly half -- or 229 -- of the stocks in the S&P 500 have crumbled at least 20% below their 52-week highs, according to FactSet data. Econintersect: We expect the number of stocks down 20% has grown considerably in the week since this was posted.
World Markets Weekend Update: The Selloff Continues (Advisor Perpsectives) In week two of the new year, the eight indexes our world watch list continued their selloff. The top performer over the previous week was the UK's FTSE 100, down only 1.83%. The biggest loser is China's Shanghai Composite, down 8.96% this week, which (bizarrely enough) is an improvement over its 9.97% plunge the first week of the new year. Are we seeing a global bear market? Consider this: Since their 2015 highs, four of the eight are down more than 20%: The Shanghai at -48.3%, the Hang Seng at -31.4%, the DAX at -24.4% and the CAC 40 at 20.1%. The FTSE and SENSEX are not far behind at -18.3% and 17.6%, respectively.
Other Economics and Business Items of Note and Miscellanea
What is Islamic Economics? (The ExpressTribune) Leading Islamic thinkers like Maududi and Baqir Al-Sadr offered a third alternative to capitalism and communism as the natural option for newly-liberated Muslim countries in the 20th century. They argued that Islam had its own distinct economic system, and this system was superior to both capitalism and communism. For reasons to be discussed, this idea of constructing a radical alternative to dominant economic systems was not realized in the post-colonial period. While embracing the concepts of competition, at the core of Islamic economics is the idea of social responsibility — as a society, we are collectively responsible for the needs of all members, and not just for those who can earn enough money to purchase these needs in the marketplace.
Real World Economics: China's selloff of U.S. bonds affects us all (Twin Cities Pioneer Press) The value of the yuan relative to the dollar is indeed declining, but the Chinese central bank is intervening in foreign exchange markets to limit that slide. To do so, it must sell dollars; and to have dollars to offer, it has to sell off the U.S. Treasury bonds it has been holding. Here uis the start of an excellent discussion:
Often predicted by naive catastrophists in apocalyptic terms -- China demands all its money back in one day and the U.S. and world economies collapse -- the reality seems much more benign. The Chinese have cashed in a tenth of their dollar holdings in the past three months, and effects on the U.S. are barely perceptible. Still, this sell-off of U.S. bonds into world markets -- rather than a Chinese premier slamming a dun notice down on President Barack Obama's desk -- may become the dominant factor in the economic history of 2016.
In retort to Trump pointing out a necessary shift in trade position (a shift to put American interests first – a shift to stop the dependency on cheap import goods – a shift to use China’s dependency on access to our market to OUR advantage) Jeb Bush came back with an example of Boeing manufacturing.
Donald Trump, responding to Jeb’s Boeing example, pointed out China is forcing Boeing to open a manufacturing plant in China. As typical from a candidate who is unfamiliar and unbriefed on the issue Jeb looked back incredulously and said:
There you have it. There’s the disconnect. Almost everyone missed it. There, in that exact moment, is the spotlight upon all that is wrong with a professional political class; globalists dependent on Wall Street for their talking points.
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