Links: 2013-01-16
North America
U.S. Industrial Production Rises 0.3% on Equipment Demand – Bloomberg
“Production at U.S. factories climbed more than forecast in December and the cost of living was little changed, showing the economy gained momentum entering 2013 while inflation remained at bay.
Manufacturing output advanced 0.8 percent after jumping 1.3 percent in November, the strongest back-to-back reading in almost a year, Federal Reserve figures showed today. The Labor Department said its consumer-price index was unchanged last month, capping the third-smallest annual gain in a decade.”
“Over at The Plum Line, Greg Sargent has an important post about the way the debt ceiling fight could end without triggering a cash-crunch crisis for the federal government. Greg thinks is could be one of two possibilities.”
Bruce Bartlett: Accounting for a $1 Trillion Platinum Coin – NYTimes.com
“In effect, rather than the Treasury selling securities to the public to pay for spending in excess of revenues, the Fed would do so. Bonds in the Fed’s portfolio already count against the debt limit, so that is not a constraint.
Nor would the creation of a $1 trillion coin have led to higher spending. The Treasury could still spend only what has been authorized by Congress.”
Fed’s Rosengren: QE until jobless rate hits 7.25% – The Fed – MarketWatch
“The Federal Reserve should not consider halting its bond-buying effort to stimulate the economy until the unemployment rates falls to 7.25%, a voting member of the central bank told MarketWatch Tuesday.”
interfluidity » Yet more on the floor with Paul Krugman
“I agree with Krugman that zero-interest currency is inherently very different from interest-bearing paper, including both T-bills or interest-paying bank reserves. However, under a regime where cash can be redeemed at will for interest-bearing paper, that inherent difference disappears, and they trade as near-perfect substitutes.
Let’s try a more edible example. Plastic apples are inherently very different from organic apples. Only one of the two is yummy. But suppose there was an omnipotent orchard that, upon invocation of the phrase “apple-cadapplea”, converted plastic apples to fleshy ones and fleshy apples to plastic apples. Then choke-hazard-y, untasty, but easy-to-carry(!) plastic apples would suddenly trade as perfect substitutes for real apples. The two would still be inherently different. During periods when people travel a lot, they’ll drive up the quantity of plastic fruit as a fraction of the total, um, “apple base”. At everybody’s favorite snack time, the apple base will be nearly all flesh. But as an economic matter, at all times, they will trade as perfect substitutes. Because with a mere invocation of “apple-cadapplea” they are perfect substitutes, despite the fact that one is inherently tasty and the other a choke hazard.
Emitting plastic apples would then be equivalent to emitting real ones, and vice versa. Similarly, when cash is instantaneously interconvertible to interest-bearing debt at par, emitting cash is equivalent to emitting debt.”
All Your Bases and Dead Presidents Belong to the Government? – PRAGMATIC CAPITALISM
“So, what happens to this system if the government self finances? Obviously, we’re entering a monumental paradigm shift. We’re transferring from a system where money is created endogenously by banks who compete to issue money, to a system where the government exogenously creates money. It’s almost impossible to say whether one system is more inflationary than the other. But what becomes clear in a system of government self financing is that the existence of private banking becomes increasingly less significant which would render the need for the central bank as increasingly less significant (since the central bank exists to support private bank and operates policy through the banking system).”
CoreLogic: November Home Prices – Business Insider
“Including distressed sales, the five states with the biggest home price increases were Arizona (+20.9 percent), Nevada (+14.2 percent), Idaho (+13.8 percent), North Dakota (+11.3 percent), California (+11.1 percent).”
“Home prices nationwide, including distressed sales, increased on a year-over-year basis by 7.4 percent in November 2012 compared to November 2011. This change represents the biggest increase since May 2006 and the ninth consecutive increase in home prices nationally on a year-over-year basis. On a month-over-month basis, including distressed sales, home prices increased by 0.3 percent in November 2012 compared to October 2012. The HPI analysis shows that all but six states are experiencing year-over-year price gains.”
Europe
Bear Edwards upbeat over European stocks – FT.com
“Addressing his bank’s annual strategy conference in a London hotel, Mr Edwards said European stocks were “unambiguously cheap” and recommended them for any investor who was prepared to hold them for 10 years.
He also attacked UK pension funds, which have bought bonds and sold stocks in the last few years to the point where their holdings are virtually equal. “Even as a trenchant equity bear, I have to say that this is ridiculous,” he said. “It allows the rest of us to pick up stocks at cheaper and cheaper prices.””
FT interview: Mariano Rajoy – FT.com
“The Spanish prime minister insists his reform programme will begin to bear fruit this year”
Spain urges Germany to boost growth – FT.com
“Mariano Rajoy has called on Germany and other creditor countries in the eurozone to do more to stimulate growth, arguing that a switch to a more expansionary policy would boost economic recovery across the single currency area.
“I think that in this moment, when there is a need for growth, those who are able to implement growth policies should do it,” the Spanish prime minister told the Financial Times in an interview. “What is clear is that you cannot ask Spain to adopt expansionary policies at this time. But those countries that can, should.””
Investors rediscover eurozone bank bonds – FT.com
In a world of low rates, risk seeks return. I don’t see this ending well.
“Fortune favours the brave and at present eurozone banks are the beneficiary of such daring by US-based investors.
In the rush for high returns, some US investors are snapping up the new debt issues of eurozone banks, returning to a sector they have shunned for the past few years amid the region’s debt crisis.”
Asia
German Gold
“All 374 tons of German gold held in Paris vaults will be moved back to the Bundesbank’s vaults in Frankfurt by 2020, the bank said Wednesday. A further 300 tons of gold stored in New York will also be brought back.
In total, the shipments are worth US$36 billion at current market prices and represent about 19% of Germany’s gold reserves — the world’s second-largest after the United States’.
During the Cold War, Germany kept most of its gold abroad for fear it could fall into the hands of the Soviet Union if the country was invaded. Another reason was that it’s easier to swap the reserves for foreign currency in London, Paris and New York, where gold is traded.”
Germany may repatriate gold; less trust in Fed? – Market Extra – MarketWatch
““People have gotten a sense of how bad things could become and gold is the ultimate means of payment. The euro won’t last forever, [and] gold, for various reasons, is the anchor,” said Thorsten Polleit, Frankfurt-based chief economist at Degussa, a precious-metals firm.
What’s more, the report sparked a flurry of speculation that Germany had grown more uneasy with its U.S. counterpart, whose government is meanwhile facing a fierce fight over raising the debt ceiling.”
Technology
“the fact that Facebook has finally made its search intentions known could actually be really good for Google. That’s because regulators — especially those in Europe, who are in the thick of deciding whether to settle with Google over antitrust — now have the prospect of additional search competition to consider.
Google has about 70 percent of the search market share in the U.S., but it has 90 percent of the market in many European countries, where Microsoft’s Bing is not much of a player.”
Pacific Crest: We’re Downgrading Apple – Business Insider
“They are downgrading the stock to “sector perform” and giving it a price target between $440 and $550 for the next twelve months.
They believe Apple has real long term problems.
The high-end market for smartphones and tablets are going to be saturated sooner than expected which will lead to poor growth for Apple.”
Apple Lets Buyers on China Web Pay in 2-Year Installments – Businessweek
“Apple, based in Cupertino, California, is trying to make its products more affordable in China after being surpassed by local suppliers such as ZTE Corp. (000063) and Lenovo Group Ltd. (992) in the smartphone market. The iPhone 5, released in China last month, is priced at 5,288 yuan on Apple’s local site, equal to about six weeks’ pay for the average urban worker.
“There is an enormous mid-range consumer market that they are not tapping into,” said Mark Natkin, managing director of Marbridge Consulting Ltd., a Beijing-based market research firm. “They’re trying to figure out how to make products more accessible to that market segment. This is a good step in that direction.””
Apple’s next 9.7″ iPad to be ‘significantly lighter and slimmer’
“The next 9.7-inch iPad is expected to borrow design cues from its smaller sibling, the 7.9-inch iPad mini, according to KGI Securities analyst Ming-Chi Kuo. He expects the fifth-generation iPad to be “significantly lighter and slimmer” than the design featured in the third- and fourth-generation models.”
Facebook loses 1.4 million active users in U.S. – MarketWatch
Facebook is now about monetisation of its existing customer base rather than growth of its customers
Elsewhere
Peak oil theories ‘increasingly groundless’, says BP chief | Environment | guardian.co.uk
This is either disingenuous or wrong. Peak oil theories are about oil available from conventional sources ONLY and the price of extracting it.
“The US will be self-sufficient in energy by 2030, with only 1% coming from imports, the company’s analysts predict”
The FINANCIAL – Deutsche Bank recognised as world’s No 1 fixed income bank
“The bank captured a 10.7% share of the global fixed income market in 2012 with almost two thirds of investors naming Deutsche Bank an active counterparty, according to the study, which amalgamates Greenwich Associates’ regional fixed income market surveys.”
El dólar paralelo saltó hasta $7,36
It takes almost 50% more Argentine pesos per dollar on the black market than via the official exchange rate. That tells you that something is seriously wrong with the official rate and we should expect the currency to depreciate considerably from here.
Lance Armstrong
“Inspector general David Williams says cash-strapped service, saddled with debt and low revenues, is in ‘very serious trouble
Since 2006, the postal service has been required – unlike any federal agency – to pre-fund its retirement and healthcare benefits to workers. This costs it about $5.5bn a year. Currently, the post office has paid in $330bn for benefits, but the Office of Personnel Management recently told Williams that it will need $394bn to satisfy the legal requirement.”
“In addition to the Postal Service’s probe, two other legal cases have targeted Tailwind since October, when the U.S. Anti-Doping Agency (USADA) issued its devastating 1,000-page report portraying Armstrong as a serial cheat. Those cases also turn on whether Armstrong’s use of banned drugs constitutes financial fraud—and if so, whether the team’s owners can be held financially accountable.”
“When Lance Armstrong sits down with Oprah Winfrey on Monday at his Austin, Tex., home for an interview scheduled to be broadcast Thursday, he is expected to make a limited admission to doping in his illustrious cycling career, according to a report in USA Today.
WADA says Lance Armstrong must confess under oath for reinstatement – latimes.com
“The Lance Armstrong story took another turn on Tuesday when the World Anti-Doping Agency announced that he must confess under oath to using performance enhancing techniques if he wants to seek a reduction in his lifetime ban from sports for doping during his seven Tour de France victories. “
Armstrong faces legal hurdles – FT.com
““One of the tests of his interview is his willingness to return his ill-gotten gains,” said Brian Cookson, UCI member and president of British Cycling.
Mr Cookson also raised the prospect of the UCI suing for the damage Mr Armstrong has inflicted on cycling.
“It does seem to me that considerable reputational damage has been done to the sport, and we might think that was something we should seek to get a claim against,” Mr Cookson said.”
Lance Armstrong’s doping admission: Questions Oprah should have asked – Yahoo! Sports
“Armstrong isn’t necessarily a bad guy for doping. He is a bad guy for the way he used his immense power, fame and fortune to attempt to ruin anyone who dared to speak the truth to his avalanche of lies.
That was some punk behavior.”
Armstrong admission could kick cycling out of Olympics | Reuters
“Cycling could be dropped from the Olympic program if Lance Armstrong implicates the sport’s governing body of covering up a widespread doping scheme, International Olympic Committee (IOC) member Dick Pound told Reuters on Tuesday.”
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