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:
Blockchain Has the Potential to Revolutionize the Supply Chain
The Bond Selloff Can Continue
The Companies Hiring the Most for the Holidays
Why the Small Cap Rally May Fizzle
Why Trump Will Fail Trying to Bring Manufacturing Jobs Back
Will OPEC Members Sink the Deal by Cheating?
Obama Blocks Chinese Company Takeover of Aixtron as a U.S. Security Risk
Trump Turns to Democratic Donors for White House Panel
Did Trump Promise Too Much in Carrier Deal?
Syrian Rebels Claim Russia Not Serious About Talks
Philippines' Duterte Gets White House Invitation
Trump Calls Taiwan, Risks Rift with China
Chinese Educational Firm Faces U.S. Fraud Investigation
Articles about events, conflicts and disease around the world
OPEC Deal Can Work, But ‘We Tend to Cheat,’ Al-Naimi Says (Bloomberg) OPEC’s agreement to cut production for the first time in eight years has the potential to balance the oil market, as long as everyone sticks to it, former Saudi Arabia Oil Minister Ali al-Naimi said. Speaking at at an event in Washington, DC, al-Naimi said of OPEC:
"The only tool they have is to constrain production. The unfortunate part is we tend to cheat."
Obama Blocks Chinese Takeover of Aixtron as U.S. Security Risk (Bloomberg) U.S. President Barack Obama blocked a Chinese company from buying Germany’s Aixtron SE, marking only the third time in more than a quarter century that the White House has rejected an overseas buyer as a national security risk. The president upheld a recommendation by the Committee on Foreign Investment in the U.S. that the sale of the semiconductor-equipment supplier to Grand Chip Investment GmbH should be stopped, according to a statement Friday by the Treasury Department.
U.S. spy agencies fight Congress over plan for probe of covert Russian influence campaign (Reuters) The top U.S. intelligence officer has asked Congress to drop a provision in a pending bill that would create a special committee to combat Russian efforts to exert covert influence abroad, saying such a panel would duplicate current work and hinder cooperation with foreign allies. Director of National Intelligence James Clapper laid out the objections of the U.S. intelligence community in a Sept. 9 letter to the chairmen and top Democrats on the House of Representatives and Senate intelligence committees. He charged that parts of the bill amounted to "micromanagement" of the intelligence community.
Trump Turns to Schwarzman, Dimon for White House Panel on Jobs (Bloomberg) President-elect Donald Trump turned to some of Wall Street’s biggest names on Friday to create a panel of business leaders that will give him strategic advice on the economy after he takes office, including two financiers with deep Democratic roots. Blackstone Group LP Chief Executive Officer Stephen A. Schwarzman will chair the President’s Strategic and Policy Forum, which will begin meeting with Trump in February, after his inauguration, according to a statement from his private-equity firm. JPMorgan Chase & Co. CEO Jamie Dimon and BlackRock Inc. Chairman and CEO Laurence Fink, major donors to Democratic politicians, will also sit on the panel.
Trump Sealed Carrier Deal With Mix of Threat and Incentive (The New York Times) The long-promised call from Donald J. Trump to the heating and cooling giant Carrier came early one morning about a week after the election, when he unexpectedly won the industrial heartland. Trump promised tax cuts and removal of regulations as part of the incentives and tarrifs as threats.
Russia not serious in talks with Syrian rebels: opposition official (Reuters) A senior Syrian opposition official accused Russia on Friday of procrastinating in talks with rebels over Aleppo, signaling no progress in diplomacy which rebels hoped would ease dire conditions in the city where they are in danger of defeat. The rebels' talks with Russia, the most powerful ally of President Bashar al-Assad, in Ankara point to the bad set of options they face. The government assault aims to take Aleppo by the time U.S. President-elect Donald Trump takes office. The rebel official said, speaking on condition of anonymity due to the secret nature of the talks:
"There is severe procrastination by the Russians. There is absolutely no seriousness,"
Philippines' Duterte gets Trump White House invite during 'animated' call (Reuters) U.S. President-elect Donald Trump invited Philippines leader Rodrigo Duterte to the White House next year during a "very engaging, animated" phone conversation, a Duterte aide said on Friday, amid rocky relations between their two countries. Trump's brief chat with the firebrand Philippine president comes during a period of uncertainty about one of Washington's most important Asian alliances, stoked by Duterte's unrelenting hostility toward the United States and his repeated threats to sever decades-old defense ties.
Donald Trump risks China rift with Taiwan call (CNBC) Dolad Trump risks opening up a major diplomatic dispute with China before he has even been inaugurated after speaking on the phone on Friday with Tsai Ying-wen, the president of Taiwan. The telephone call, confirmed by three people, is believed to be the first between a US president-elect and a leader of Taiwan since diplomatic relations between the two were cut in 1979.
Exclusive: U.S. standards council to investigate New Oriental after Reuters report (Reuters) A U.S. standards-setting body said it would investigate Beijing based New Oriental Education & Technology Group Inc (EDU.N) in the wake of a Reuters report that detailed allegations of academic fraud at the company. The American International Recruitment Council, which certifies agencies that recruit foreign students on behalf of U.S. colleges, will investigate the company in response to the report, said Jeet Joshee, AIRC’s president-elect. “It’s concerning, highly concerning,” he said of the allegations in the report. The article can be read here: reut.rs/2gHWbwZ
Other Scientific, Health, Political, Economics, and Business Items of Note - plus Miscellanea
Blockchain has the potential to revolutionize the supply chain(TechCrunch) Hat tip to Neil Peters. At the time of its inception some two centuries ago, the supply chain was a revolutionary idea that would improve visibility and control on goods and products as they moved from point A to point B. But the old concept and technology can no longer support today’s production and supply cycles, which have become extremely fragmented, complicated and geographically dispersed. In effect, the supply chain is now an opaque and faulty process that is extremely hard to manage. The emerging technology, blockchain, that has proven its value in bringing transparency and efficiency to a number of different industries may be the ultimate solution to the supply chain quagmire that we have today.
Yes, the Bond Selloff Can Continue (Russ Koesterich, Black Rock, Advisor Perspectives) RK has contributed to GEI. Russ explains why the post-election selloff in bonds may be a longer-term, not temporary, phenomenon. The unexpected outcome and potential consequences of the U.S. presidential election continue to shake financial markets. Nowhere is this more so than the U.S. bond market. Yields on the 10-year Treasury are up 50 basis points (bps, or 0.50%) since the election and nearly 100 bps from the July lows, as bonds sold off. This marks the fastest rise since the so-called “taper tantrum” in 2013, when expectations of an increase in interest rates by the Federal Reserve triggered a bond selloff. He expects that longer-term bonds will continue to sell off (yields to rise) for two reasons:
The U.S. is entering a period of higher GDP growth
More treasury securities will be issued - more supply to sell
Companies hiring the most for the holidays (24/7 Wall St., MSN Money) Online shopping continues to cut into sales of brick-and-mortar retailers on this list. Indicative of this is the fact that this year’s largest hirer of seasonal workers will likely not be Wal-Mart but Amazon, which is set to hire 120,000 seasonal workers -- double Wal-Mart’s holiday hires last year. Most of these seasonal workers will be let go when the shopping season ends. 24/7 Wall St. reviewed the 13 companies hiring the most employees this holiday shopping season. Wal-Mart actually ranked 13th this year. Click on the title link for slide show of all 13 top hirers, who are expected to add more than 600k temps for the holidays.
Why the Small Cap Rally May Fizzle (Russ Koesterich, Black Rock, Advisor Perspectives) RK has contributed to GEI. Going forward small caps face two significant headwinds.
The small cap rally is more likely to go on if credit spreads continue to tighten. Unfortunately, a stronger dollar is also a de facto form of monetary tightening, and a further rise in the dollar suggests that spreads are more likely to widenthan contract.
The second headwind is valuation. The recent rally has occurred at a time when small caps — along with the rest of the U.S. market — are already expensive. Following the recent gains, the Russell 2000 Index is now trading at roughly 47x trailing price-to-earnings (P/E), compared to a five-year average of approximately 39x. And as with the broader U.S. equity market, recent gains have been driven by multiple expansion — investors willing to pay more per dollar of earnings — only more so. Since the lows in early 2016, the trailing P/E on the Russell 2000 is up by more than 40%. In contrast, while large cap stocks have also undergone significant multiple expansion, the P/E on the S&P 500 is up less than 25% from the 2016 bottom.
Trump's Carrier deal aside, here's why most US factory jobs aren't coming back (CNBC) U.S. manufacturing is growing (and has been growing) but manufacturing jobs are declining and appear to be continuing to shrink. Trump's promise to "bring manufacturing jobs home" is just not something he can deliver. People aren't needed for many manufacturing processes any more. Since 1990, U.S. manufacturing output has doubled, adjusted for inflation, and manufacturing employment is down more than 40%.
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