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What We Read Today 01 July 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:

  • New Record Low Hot for Treasuries

  • Most Advisors Don't Know Squat about Social Security

  • Why Private Equity Doe Not Perform

  • Market Timing Traps

  • Marc Faber:  Paper Money is Doomed

  • Global Occupational Fraud

  • Bill Clinton for Village Idiot

  • Puerto Rico Defaults

  • Osborne's National Accounting Ignorance

  • How Britain Can Stay in the EU

  • Even the Germans Want More Power Distributed to National Governments

  • Bangladesh Hostages

  • Does China Prefer Trump?

  • And More

Articles about events, conflicts and disease around the world

Global

"They are going to become worthless because of money printing. In other words, the purchasing power is going to continue to diminish as it has diminished for the last hundred years." 

  • Report to All Nations on Occupational Fraud and Abuse (Association of Certified Fraud Examiners)  Hat tip to Roger Erickson.  Below is a structure chart describing occupational fraud (first image) and an infographic discussing the extent (second image).  Note:  Bosses steal more than employees. 

Click for larger image.

Click for full infographic.
fraud.info.graphic.caption

U.S.

  • Obama claims US drones strikes have killed up to 116 civilians (The Guardian)  Barack Obama has claimed that drone and other airstrikes, his favored tactics of war, have killed between 64 and 116 civilians during his administration, a tally which was criticized as undercounted even before Friday’s announcement.  The long-promised assessment acknowledged that the government itself does not always know how many civilians it kills and that it may revise its death tolls over time.  Between 2009 and 31 December 2015, the administration claimed that it launched 473 strikes, mostly with drones, that killed between what it said were 2,372 and 2,581 terrorist “combatants”.

  • AG Will Approve FBI Call on Hil’s Emails (The Daily Beast)   Attorney General Loretta Lynch will accept the FBI’s recommendations about whether or not to prosecute Hillary Clinton over her use of a personal email server during her time as secretary of State, the Justice Department will announce Friday. Lynch technically has the power to overrule whatever decisions career prosecutors and the FBI director make about how the case should proceed, but, following revelations of an allegedly unplanned meeting at Phoenix’s Sky Harbor airport between Bill Clinton and Lynch, Lynch has agreed to let the decision—whatever it may be—stand. The Justice Department had reportedly been moving toward the arrangement for months, but bipartisan outrage at the Phoenix meetup has reportedly forced the issue.  Econintersect:  Hillary Clinton authored a book, "It Takes a Village".  We nominate Bill Clinton to be the village idiot.

  • Puerto Rico defaults on $779m worth of bonds despite rescue package (The Guardian)  Puerto Rico faced a historic default Friday as the US territory prepared to enter unchartered waters under the guidance of a newly enacted federal control board to oversee the island’s finances amid a dire economic crisis.  The government paid roughly half of $2bn in due debt, but said it did not have the money to pay $779m worth of general obligation bonds that are given top priority by the island’s constitution. The payment was made just hours after the governor signed an executive order Thursday declaring a moratorium on a portion of that debt.  Exempt from Thursday’s implementation of the debt moratorium is Puerto Rico’s heavily indebted power company, which announced that it reached a separate deal with creditors to avoid defaulting on a $415m payment.

  • People Actually Think Hillary Clinton Asked Putin For Photos Of His Pecs (Huffington Post)  Econintersect:  This demonstration of ignorance on the street is getting to be almost boring but we'll pass along the latest happening  when Jimmy Kimmel Live asked people on the street what they thought about made up fake news.

UK

  • Osborne abandons 2020 budget surplus target (BBC News)  Hat tip to Roger Erickson.  Chancellor George Osborne has abandoned his target to restore government finances to a surplus by 2020.  In a speech he said, given the effects of the referendum vote, the government had to be "realistic about achieving a surplus by the end of the decade".  The target had been the chancellor's most prized goal and had been driving austerity measures in previous budgets.  But he said the economy is showing "clear signs" of shock following the vote to leave the European Union.  

    Econintersect:  Osborne is an imbecile, at least when it comes to national accounting.  There is an accounting identity:  G+P+F = 0, where G is the government balance, P is the domestic private sector balance and F is the foreign exchange balance.  The Current Account (all flows from and to the rest of the world) has been in deficit for three decades.  The total of the other two must therefore be in surplus.  The average for F over the last couple of years has been approximately £25 billion.  So if G is balanced that leaves a surplus for P of £25 billion, or approximately 1% of GDP.  That would be approximately the upper limit for GDP growth.  If the government ran a surplus of £25 billion the limit for growth would be zero.  And greater than £25 billion, permanent depression.

  • How Britain stays in the EU (Politico)  The next prime minister, faced with mounting domestic chaos and internal party divisions, will simply decide it no longer makes sense to withdraw. Others, pointing out that the referendum was merely “advisory,” hope that the British parliament will vote not to implement it, or simply choose not to act. Still, others are looking to Scotland, where a majority voted for “remain,” to refuse its consent to Brexit, which Scottish First Minister Nicola Sturgeon argues is required for any UK decision of such consequence. Finally, many Brexit opponents simply hope for a “do-over”; already nearly 4 million people have signed an online petition calling for a second referendum, on the grounds that turnout was limited and the outcome a close call.

Germany

  • Majority of Germans want EU national governments to have more power: poll (Politico)  Hat tip to Roger Erickson.  Nearly two-thirds of Germans want the EU to return more responsibilities to national governments, a survey published Friday by German broadcaster N24 shows.  The poll of 1,000 eligible voters, conducted June 29, found that 62% of people want EU countries to become more powerful.  Econontersect:  When the ruler wants to weaken the kingdom, it is finished.

Bangladesh

  • Hostages Taken in Bangladesh Diplomatic Zone (The Daily Beast)  Two police officers are dead and at least 40 people are injured in a shooting in the Bangladeshi capital, Dhaka. As many as eight gunmen stormed a cafe in a diplomatic zone, taking at least 20 civilians hostage. Maruf Hasan, of the Dhaka Metropolitan Police, said that one officer was killed in the exchange in the Holey Artisan Bakery, which several sources said is popular with Westerners, expatriates, and diplomats.  Several foreigners were among a number of the people taken hostage.   More at The Guardian:  Dhaka attack: gunmen take hostages at restaurant.

  • Report: ISIS Claims Responsibility for Bangladesh Attack (The Daily Beast)   ISIS has claimed responsibility for the attack on a cafe in Dhaka, Bangladesh, according to the SITE Intelligence Group. At least eight gunmen took more than 20 civilians hostage in an area popular with westerners and diplomats. At least two police officers were killed and two others were injured.

China

  • China may prefer Trump to Clinton, says China Beige Book president (CNBC)   The Chinese people may prefer Donald Trump to former Secretary of State Hillary Clinton despite the presumptive Republican presidential nominee's repeated threats to impose tariffs on China, according to Leland Miller, president of China Beige Book International.  Many Americans think the Chinese hate Trump because of his anti-China rhetoric, Miller said. But he thinks the Chinese see the real estate developer and reality TV star as "an interesting opportunity."  Miller told CNBC's "Squawk Box" on Thursday:

"I think a lot of people in China, they see Donald Trump, they see this negotiator. They say, Hillary Clinton, we know she's going to be mean to us. Donald Trump wants to make a deal. He doesn't care about the South China Sea. He may not know where it is." 

Other Scientific, Health, Political, Economics and Business Items of Note - plus Miscellanea

  • Here's who is causing the bond market to freak out (CNBC)  The stunning move in Treasury yields to record lows early Friday morning signals panic and fear, but it's not necessarily coming from the United States.  U.S. bond yields are tethered to global rates, and with about $12 trillion in negative-yielding debt around the world, U.S. Treasurys and corporate debt look very attractive.  As the yields on U.K. gilts sunk to new lows overnight and German bunds dug deeper into negative territory, buying in U.S. Treasurys sent the 30-year bond yield to an all-time low of 2.18% early Friday and the 10-year dipped below its closing high of 1.38% temporarily. 

  • Retirement Scan: Most retirees get little adviser help on Social Security (Employee Benefits News)  A study by the Nationwide Retirement Institute has found that less than one-third of pre-retirees and retirees have hired a financial adviser. Moreover, 59% of those with an adviser say they received no guidance on Social Security benefits. Those findings are consistent with the past two years' study results, according to an article in CNBC.  According to an expert with the institute:

  "A lot of this is due to the fact that [most] advisers wish they had more information about Social Security rules and regulations.  Most advisers don't have [extensive] knowledge about it, so they don't it bring up to their clients."

Investors in private equity and other “alternative” investments cling to the canard that they deliver superior returns. Mind you, in the case of private equity, that was true once upon a time. In the 1980s, making money busting up undervalued, overly diversified conglomerates was like shooting fish in a barrel. Even in the 1990s, private equity, which is at its core just a levered play on equity markets, rose on the surging tide of dis-inflation-goosed stock market valuations.

But institutional investors, particularly those with long-term time horizons like pension funds and life insurers, have been desperately chasing anything that even dimly offers the hope of outperformance as QE and ZIRP put real yields on safe investments in negative territory. Even so, they’ve come to recognize that some of their hoped-for salvations, like hedge funds, routinely failed to deliver.

Click for larger image at Business Insider.

  • How Volatile is the US Stock Market? (Catherine Mulbrandon, Visualizing Economics)  CM has contributed to GEI.  Econintersect note:  Seven of the 15 days with a bounce greater than 5% occurred during the secular bear market from Oct 2007 to March 2009 when the S&P 500 was dropping 59%.  Yes, some day traders made money during this time, but more traders made money by taking longer-term short positions and holding through many (or a few, or all) of the 5% up days.  Trend-following is a better approach for many traders, rather than timing to try to catch the big move days.  Cavat:  There are a few who are successful, overall catching one-day swings, but only a few.

Click for larger image.
volatility.us.stocks.1950.2016.600x500


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