Econintersect: Today is a special edition of WWRT (What We Read Today). We have an abbreviated section of new material to start, content that would be available to the public on every regular daily post, followed by a complete file from ‘behind the wall’ that was only visible to our premium content subscribers when first posted two days ago.
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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.
There are two sections below: First is a section with new material for today, similar to what would be seen by the public if this was a normal day with premium content ‘behind the wall’; Second is the ‘behind the wall’ file from 26 September 2014.
Section 1: New Material
- Bill Gross Leaves Pimco, Reportedly Under Pressure, to Join Janus (Matthew Goldstein, DealBook, The New York Times) Approximately six months after CEO Mohammed El Erian was forced (reportedly, at the time) to leave PIMCO after a period of disagreements with co-founder Bill Gross, the second shoe has fallen with Gross’s departure. In recent days it has been revealed that the flagship bond fund, PIMCO Total Return Fund, is under investigation by the SEC (Securities and Exchange Commission) for accounting fraud which inflated the fund’s reported investment returns. These new problems have been discussed in WWRT during the past several days – See second and third articles below from ‘behind the wall’ 25 September. For more perspectives see Advisers “blindsided” by Gross departure as Pimco faces rebuilding (Trevor Hunnicutt, Investment News).
- Mohamed El-Erian Says He Left Job As Pimco CEO To Spend More Time With Daughter (Emily Thomas, The Huffington Post) In this interview article published this week, El-Erian is sticking to his story that leaving PIMCO was his idea. See also a report shortly after El-Erian left PIMCO about the apparently conflicted position than Bill gross was in at the time: Bill Gross: Split with Mohamed El-Erian was like a ‘near-death experience’ (Katherine Rushton, The Telegraph).
- Pimco under investigation by SEC (Alanna Petroff and Jesse Solomon, CNN Money) Repeated from ‘behind the wall’ 25 September. It is reported that PIMCO Total Return fund boosted its returns by buying securities at a discount and recording them at full value on their books, thereby artificially boosting their reported returns. See also next article.
- PIMCO’s Bond ETF Woes Widespread in Industry: Morningstar Expert (Janet Levaux, ThinkAdvisor) Repeated from ‘behind the wall’ 25 September. Other mutual funds may have used the same accounting trick as PIMCO Total Return. Morningstar’s Michael Herbst says other fund families in the fixed-income space are also likely to have same pricing problems as PIMCO’s. Other investigations may be coming: SEC’s investigation into Pimco could ripple through ETF, fixed income markets (Trevor Hunnicut, Investment News).
- Recent articles about Scotland:
Where the dream lives on (The Economist)
- Articles about wars elsewhere in the world:
NGO Calls for UN Intervention in Nigeria (Voice of America)
Nigeria turns to Russia for anti-insurgent training (Star Africa)
Gaza war may be over but Jerusalem is still simmering (The Guardian)
Palestinian Leader Urges U.N. to Back a Deadline to End Israeli Occupation (The New York Times)
Somalia’s Shebab stone woman to death for polyandry (The Daily Star, Lebanon)
Turkey Inching Toward Alliance With U.S. in Syria Conflict (The New York Times)
British jets complete first combat mission over Iraq (The Guardian)
Russia, Cuba give views on Ukraine, Syria (USA Today)
Russian banking sector creaking under pressure (Business News Europe)
Section 2: ‘Behind the wall’ file from 26 September
Note: ‘Behind the wall’ page starts with the public section material and moves seamlessly into the premium content.
- Banking on New Mexico, A Public Bank Funding Sustainable, Local Economies (Conference Program) This conference is being held Saturday 27 September 2014 in Sante Fe, New Mexico. Sig Silber is attending and will report back to GEI.
- Japan’s Inflation Rate Dips (Takashi Nakamichi, The Wall Street Journal) Japan’s consumer price inflation in August fell to +1.1% year over-year after correction for the 01 April consumption tax increase. This is down from 1.3% for both June and July and brings into doubt achievability of the Bank of Japan objective of 2% consumer inflation within about six months.
- Apology or not, Ferguson police chief tells CNN: I will not step down (Eliott C. McLaughlin and Ana Cabrera, CNN) Hat tip to Alun Hill. The embattled police chief says “Im truly sorry” and he will not resign. He says “this is mine, and I’m taking ownership of it.”
- Recent article about Scotland Independence Vote :
Scots demand powerhouse parliament, says Salmond (Scott MacNab, The Scotsman) Alex Salmond, the soon to be former First Minister of Scotland, says that Scotland should have a “powerhouse parliament” as a result of the strong (46%) vote for separation from the UK.
- Articles about wars elsewhere in the world:
Bashar al-Assad seeks to reap benefits from US-led raids in Syria (Financial Times)
The battle against the Islamic State is not ours to fight or win (The Washington Post) Hat tip to Roger Erickson.
Lindsey Graham: We need troops to fight Islamic State ‘before we all get killed here at home’ (The Washington Post) Hat tip to Roger Erickson.
U.S. imposes financial sanctions on Islamist fighters (Reuters) Hat tip to Chuck Spinney.
U.S., Saudi Arabia, UAE strike modular oil refineries in Syria (Reuters) Hat tip to Chuck Spinney.
New airstrikes in Syria take aim at Islamic State’s oil money (Reuters) Hat tip to Chuck Spinney.
Rouhani charm offensive at UN fails to impress Iran’s hardliners (Financial Times)
Financial Times: Putin demands EU-Ukraine pact rewrite (Financial Times, Kyiv Post)
Putin demands reopening of EU trade pact with Ukraine (Financial Times)
There are 12 articles discussed today ‘behind the wall’.
Do not miss “Other Economics and Business Items of Note”, the final section every day.
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- Gold / Silver / Copper futures – weekly outlook: September 22 – 26 (Investing.com) This is the third in a series of metal price charts. Gold was discussed ‘behind the wall’ 23 September and copper 25 September. Silver has the most bearish technical pattern of the three metals. It has the longest established descending triangle and it is also the steepest. Silver has just slipped below the four year support level and this is the time for speculators to go short looking for a near-term gain of 15% or so around 15.00. Futures and options can be used for higher return potential. Notice the high volatility for silver, which makes stop loss management particularly tricky. Note: Silver has continued to trade lower every day this week. It is at 17.50 as this is written. Click here for latest spot price. For more on gold see third article below.
- Top 10 Dividend-Paying Stocks of 2014 (Financial Planning) The title is misleading. Correctly stated it would be: The ten largest market cap stocks which pay dividends. The average payout for these ten large cap giants is 3.18%. Most have a long history of dividend increases over time.
- Investor confidence up, but majority still no better off than five years ago (Nick Otto, Employee Benefit News) The Wells Fargo / Gallup Investor and Retirement Optimism is at the highest level since the stock market reached its pre-crisis high in late 2007. However 60% of those in the same survey say they were no better off than they were five years ago – and that was the bottom of the financial crash. See also Investor Confidence Still Dinged by Financial Crisis, Wells Fargo Survey Finds (Paul Vigna, The Wall Street Journal).
- The Golden Dilemma (Claude B. Erb and Campbell R. Harvey, SSRN) Hat tip to Wayne Marr, Financial Economics Association. The authors find that data does not support gold as an inflation hedge over intermediate time frames. Since 1985 about 2/3 of the time the real return for gold has been negative. The history of inflation for the U.S. is one of the very interesting graphics in this paper (second graph below).
- GDP targets too high for China this year? (Liang Shih-huang and Staff Reporter , Want China Times) Hat tip to Ian R. Campbell, GEI Discussion Group, LinkedIn. This article suggests that GDP growth estimates for 2015 may be revised down to 7%. Econintersect has estimated that if IP (Industrial Production) growth remains near the low level recorded in August China may have trouble getting even 6% growth: China GDP in Second Half 2014 May Come in Below 6%!!!
- The Core Idea (Edward Hadas, Breaking Views) This is a book review for a new economics text book (available free on line). The book, “The Economy” has a group of authors under the banner Corecon. The project is supported by the Institute for New Economic Thinking. Prof. Hadas feels the book does not make enough of a break with traditional economics teaching but then rationalizes the fact with the idea that if it were too radical then it would never be used by traditional economics teachers. Here is an excerpt from Hadas’ essay:
- Last Time this Happened, the Housing Market Crashed (Wolf Richter, Wolf Street) The inventory of unsold new homes is rising at an alarming rate. In spite of a reported “spurt” in new home sales (see latest GEI Analysis report this week) year-over-year inventory of new homes available for sale increased by 16% and the inventory of unsold completed homes surged by 23%. Sales of all new residential properties (single family homes, condominiums, and townhomes), new and existing, were down y-o-y by 16%. Single family new home sales declined by 2%. After all these “downers” there was one “upper”: median sales price surged by 15% y-o-y. The last time house prices were shooting up and and sales were falling off a cliff was when the housing bubble was bursting in 2006. Not a comforting comparison to make. Especially when the smoothness of the roll-over data is considered – we are not dealing with noisy data here (see graph below).
- UBC professor explores gender wage gap and balance of power in economics (Mischa Milne, The Ubyssey) Women have different behavioral tendencies than men in finance and business situations but little exists in text books about the important factors. Professor Mukesh Eswaran has written a book which addresses the above factors as well as the general economic wellbeing of women: Why Gender Matters in Economics.
- Who’s afraid of free trade with Europe? (Angella MacEwen, The Progressive Economics Forum) The problems arise in the area of interference with established regulatory areas and national social and economic policies.
- Watch US inflation expectations (Walter Kurtz, Sober Look) Inflation-linked treasuries (TIPS) are forecasting a declining inflation expectation. Below we see the 5-year expectation dropping well below the Fed 2% target. With action like this estimates of when the Fed might raise rates will have to move out. At this level of five-year expectation there is no way that rates can be raised. Current estimates for end of this year and all of 2015 must be off the table as long as inflation expectations stay significantly below the Fed target.
- Other Economics and Business Items of Note and Miscellanea
Germany expresses concerns about US and Canada trade deals (Financial Times)
BOE Inching Towards Raising U.K. Interest Rates, Says Carney (The Wall Street Journal)
Civil Asset Forfeiture Allows Police to Confiscate Cash With Impunity From Suspects of Drug Crime (Armstrong Economics) Canadian government warns its citizens not to carry cash in the U.S.
Economics needs to reflect a post-crisis world (Financial Times)
Fed Economist Calls for ‘Urgency’ in Addressing Unemployment (The Wall Street Journal)
Plight of Germany – Down For the Count? (Armstrong Economics)