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 dayin the early am at GEI News (membership not required for access to "The Early Bird".).
The $600 Million Signal that the Oil Crunch is Over (Oil & Energy Investor) GEI contributor Kent Moors observes that a huge potential for price support for oil exists in the huge short positions (many of them leveraged) that are held. Short covering can produce very large price spikes. One of these spikes (8%) was demonstrated a few days ago when the liquidation of s $600 million position in the leveraged short ETN VelocityShares 3x Inverse Crude Oil ETN (NYSE:DWTI) coincided with a one day lead time with the price spike. Not that the big move (the largest withdrawal ever for any ETN) caused the price spike; it was simply a supporting boost for what might otherwise have been a much smaller price adjustment. Moors writes:
While volatility in oil prices continues, a consensus is rising that the current slide is nearing its end. Daniel Yergin yesterday was the latest “sage” to say he expected crude in the range of $40-$50 a barrel by mid-year.
Of course, that still puts the price at less than half of where it stood in the summer of 2014, just before the collapse set in.
My algorithm to determine the “discount” on oil caused by distorting artificial manipulation puts it at $12 a barrel at close yesterday for WTI (the benchmark for oil futures contracts traded in New York).
With WTI closing yesterday at $31.72 a barrel, that effectively puts the actual market price at a shade below $44. That’s hardly $70 or $80, but it will allow us to make some nice gains when buying returns in earnest to a distinctly oversold sector.
It’s worth noting that employment gains in January were far faster than needed to keep the unemployment rate from increasing. In fact, if payrolls continue to grow at January’s pace throughout the year, we should expect the unemployment rate to continue falling. As usual in the current expansion, private employers accounted for all of January’s employment gains. Government payrolls shrank slightly. The number of public employees is about the same as it was last July. Over the same period, private employers added about 213,000 workers a month to their payrolls.
The drop in unemployment was the result of a rise in the number of survey respondents who were employed. The labor force participation rate increased in January, and it has increased 0.3 points since October.
Oil and Stocks Are Joined at the Hip – The Real Reason Why, and What It Means for You (Oil & Energy Investor) GEI contributor bebunks four myths about the connection that has been maintained between oil prices and stock prices. He says that while lower oil prices are part of the equation that affects stock prices, the effect is minor compared with other business cycle and economic factors. The reason that the two have been correlated, he says, has more to do with "manufactured panics" that those with large short positions in oil are creating.
... a badly wounded Deutsche Bank has expanded its war against the ECB to include the BOJ as well, and in a note titled "The Risks From Further ECB and BOJ Easing" it wants that with the Zero Lower Bound already breached in nearly a third of global markets, the benefits to risk assets from further easing no longer exist, and in fact it says that while central banks have hoped that such measures would "push investors out the risk spectrum" the "impact has been exactly the opposite."
Democracy in Europe Movement (DiEM 25) Yanis Varoufakis, former finance minister of Greece, is one of the leaders of a new political movement with the motto: The European Union will de democratized - Or it will disintingrate! A formal launch will be held this week (09 February) in Berlin.
Greece's Economy is Getting Crushed Between Austerity and the Refugee Crisis (ApokoronasNews) The refugee crisis is testing the limits of Greece’s flagging economy, jeopardizing its ability to handle a flow of refugees that shows no signs of slowing. Added to the existing strains of austerity, the renewed economic pressure from the crisis is stoking fears within the Greek government that a new wave of anti-refugee xenophobia could take hold unless the European Union and Turkey significantly step up to help manage the crisis. See also next article.
In this comprehensive overview of the work of the late economist Hyman Minsky, the author serves up a rich variety of concepts that will stimulate and inform anyone concerned about the fate of the economy. If you want to know where we are going, it helps to know where we have come from, and this book provides an essential road map for that journey—past, present, and future.
Capitalism Promotes Equality (The Freeman) The author suggests that the rich, like Google founder Larry Page and superstar quarterback Tom Brady do not have consumption patterns greatly different from many Americans. (Of course, you have to ignore things like houses and cars to say that.) But we eat similar foods, watch similar entertainment, enjoy similar high water quality in out homes (you have to ignore places like Flint, Michigan to say that) and share many other quality of life accoutrements ( if you ignore a third or more of the U.S. population). Econintersect: This is written by a retired economics professor who has benefited the field by no longer teaching. Reality doesn't seem to coincide with his view of the economy so does he think that reality is wrong? The clear benefits of capitalism should not be supported by ignoring where the current state of economic activity is failing.
The Rise of Consumption Equality (The Wall Street Journal) Getting rich requires serving a mass market, which means the rest of us can buy what the rich buy. Econintersect: While this piece is basically an argument that income inequality does not exact as much of a penalty from the masses as it would have decades ago, it misses the point that with a less polarized distribution of income the rich would gain even more and more would become rich and masses would lead more fulfilling lives. Henry Ford discovered this almost a century ago. The principle is still valid today.
Market fundamentalism understood itself as the diametric opposite of the communist command economy, but in fact made the same cardinal mistake: to believe that a rational model could encompass, predict and optimise the dynamic complexity of collective human behaviour. As Roman Frydman and Michael Goldberg write: 'like a socialist planner, the economist thus believes that he can accomplish great feats, because he supposes that he has finally uncovered the fully determined mechanism which drives market outcomes'.
Large parts of academic economics fell prey to what has been called 'physics envy', by analogy with the Freudian notion of penis envy. Like some other areas of social science, they aspired to the status, certainty and predictability of physics. I have long thought that this one-dimensional hubris was fed by the fact that economics, alone among the social sciences, has a Nobel Prize. Strictly speaking, it is only the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, endowed by the Swedish central bank and first awarded in 1969, not one of the original Nobel Prizes. But everyone calls it the Nobel Prize in economics and economists have been ennobled by the special nimbus that it still retains.
Moreover, politicians and decision-makers listen to them in ways that they don't, for example, listen to political scientists of the Rational Choice school that dominates many American university departments. This may partly be because a politician who practised Rational Choice politics would soon be kicked out of office, whereas the public has had to pick up the bill for those who practiced Rational Choice economics.
Don’t Do Politics? Think Again. (The Freeman) The author says that most who say they are not political are wrong. Even not voting is a political act. It is simply a question of whether you are being effective with your political activity. Some who always vote may still be ineffective while others who seldom or never vote may be more effective. The author says:
Politics is omnipresent wherever humans negotiate over power and governance. We speak of “office politics” or “university politics,” and those phrases are not mere metaphors. Our negotiations with friends are a form of politics as well, as we figure out where to go out to eat or what show to see. Our romantic and familial relationships are full of similar negotiations about language, persuasion, power, and mutual consent. To say we “don’t do politics” is to have a narrow notion, in Ostrom’s view [Vincent Ostrom, 1997 book The Meaning of Democracy and the Vulnerability of Democracies], of what constitutes being a citizen in a society where democracy is a feature of so many institutions.
Econintersect wants your comments,
data and opinion on the articles posted. As the internet is a
"war zone" of trolls, hackers and spammers - Econintersect must balance its
defences against ease of commenting. We have joined with Livefyre
to manage our comment streams.
To comment, just click the "Sign In" button at the top-left corner of
the comment box below. You can create a commenting account using your
favorite social network such as Twitter, Facebook, Google+, LinkedIn or
Open ID - or open a Livefyre account using your email address.
Econintersect Behind the Wall
Print this page or create a PDF file of this page
The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.
Take a look at what is going on inside of Econintersect.com