Links: 2013-02-19
The subject of greatest note here in the links is the US economy. On the one hand, I have two links here pointing to a real drag on the US economy coming from rising pump prices as the prices at the pump have risen up to sixty cents per gallon in US states like Michigan. On the other hand, I have two links here suggesting that there is no sign of recession on the horizon whatsoever. I would agree that the data do not point to recession at this time and that my call for a Q2 recession is an outlier for that reason. But I do still believe the politics favour more government fiscal drag and that this will be enough in conjunction with the other factors to create recession. I could be wrong and will be willing to use the data available by June or July to say so.
I also have three links on Sweden which I will follow up on with later.
News links for 19 February 2013
Probability of Recession Remains Low – PRAGMATIC CAPITALISM
I post this and the note on Hatzius to show that it is by no means a done deal that the US will slip into recession despite my prediction that it will. I will be willing to concede I am wrong when the data definitively point this out by June or July as I predict recession to begin in Q2.
““Two economic indexes with impressive records of tracking the business cycle’s major downturns since the early 1970s indicate recession risk is low, based on a broad reading of economic data through December. While January’s profile has yet to be fully determined, the early numbers so far look encouraging.
The economic Trend index (eTi) remains well above the critical 50 percent mark, having risen above 90 percent at 2012’s close. The economic Momentum index (eMi) settled at 6 percent in December, a comfortable margin above the danger zone of zero and below.””
Nashville gas prices up 21 cents last week | The Tennessean | tennessean.com
Every local paper seems to be talking about the price of gas rising in the US. This is a problem when combined with the tax increases and government spending cuts.
“Prices in Nashville rose 21 cents last week to just over $3.56 per gallon of unleaded regular gasoline and costs are expected to continue to rise.
Tennessee’s average was up 18 cents per gallon to $3.53 per gallon average and the national average was 13 cents higher at $3.71 per gallon, according to data provided by AAA, The Auto Club Group.
Nationally, the average price for a gallon of regular retail gasoline is 13 cents more than this time last year.”
“Household bills are likely to rise sharply within five years as Britain will come “dangerously” near to an energy shortage, the chief executive of Ofgem has said.”
Sweden Teaches Bank Crisis Prevention to Top Basel Rules – Bloomberg
The Financial Supervisory Authority in Stockholm, which requires Swedish lenders to adopt more rigorous capital rules than those set by the Basel Committee on Banking Supervision, says industry demands to target uniform requirements don’t take into account the lessons of the most recent financial crisis.
“It would be silly, and negative, to have exactly the same rules in all countries,” FSA Director General Martin Andersson said in an interview. “While we should have minimum levels in all countries, different nations should be able to go above those minimum levels — otherwise we delete the experience we have made in the past few years that we sometimes have to do more to remove imbalances in individual countries.”
Banks in Sweden — a AAA rated nation struggling to contain record household debt — face a different set of risks than their peers elsewhere in Europe. Rules guiding the industry need to reflect that, Andersson said. It’s a viewpoint that has won support from the financial regulator in the U.K., home to Europe’s biggest banking hub.
Sweden Averts Deflation in Sign Economy Weathers Euro Recession – Bloomberg
“Sweden escaped deflation and the jobless rate was unchanged in January, showing the biggest Nordic economy may be weathering the demand slump in Europe, its main trade partner.
Consumer prices were unchanged in the year after falling 0.1 percent the previous month, Statistics Sweden said today. Economists estimated prices to remain unchanged, according to a Bloomberg survey with 11 responses. Prices fell 0.8 percent on the month. Adjusted for mortgage costs, the inflation rate was unchanged at an annual 1 percent and prices fell 0.7 percent on the month compared with an 0.3 percent increase in the prior period.
Sweden’s $500 billion economy is vulnerable to the debt crisis in Europe where countries are cutting spending to reduce debt. Its exports, which account for about half of its output, are primarily sold in Europe.”
Apple could triple share of Chinese market with $330 ‘iPhone mini’
“Riding on rumors of a purported “budget” iPhone, Morgan Stanley on Tuesday released a report estimating that Apple could add nearly $2.4 billion dollars to its handset business and triple its addressable smartphone market in China by debuting a $330 “iPhone mini.””
Goldman On Current State Of Economy, Payroll Tax Cut, Wal-Mart – Business Insider
“Goldman’s top economist Jan Hatzius has a new note out, taking stock of where the US economy is right now.
The basic idea is that things have slowed down a bit (due to the fiscal headwinds) but that mostly things are still holding on, and that downside tail risk has diminished.”
Who Pays the Corporate Income Tax – NYTimes.com
” Corporations, contrary to the views of some Republicans, are not people. They are legal entities that exist only because governments permit them to and are artificial vehicles through which sales, wages and profits flow. Hence, the actual burden of the corporate tax may fall on any of the groups that receive such flows; namely, customers, workers and shareholders, the ultimate owners of the corporation.
Probably most people assume that the corporate income tax is largely paid by consumers of its products or services. That is, they assume that although the tax is nominally levied on the corporation as a whole, in fact the burden of the tax is shifted onto customers in the form of higher prices.
All economists reject that idea. They point out that prices are set by market forces and the suppliers of goods and services aren’t only C-corporations, which pay taxes on the corporate tax schedule, but also sole proprietorships, partnerships and S-corporations that are taxed under the individual income tax. Other suppliers include foreign corporations and nonprofits.
The Treasury economists conclude that 82 percent of the corporate tax falls on capital and 18 percent on labor.”
In Europe, Mounting Debt May Push Companies to Public Markets – NYTimes.com
“The deals cannot come soon enough. The Continent’s corporate sector has a combined $430 billion of debt coming due by end of 2014, according to figures from the ratings agency Standard & Poor’s, making many companies eager to find ways of unburdening their balance sheets.
“We will see more I.P.O. activity,” said Mark Hughes, a capital markets partner at the accounting firm PricewaterhouseCoopers in London. “For corporate spinoffs, the rise in European equities has made new listings a realistic option again.”
Much of the recent efforts have involved companies seeking to raise billions of dollars by spinning off assets — in essence, “carving out” profitable business units to unlock their value. The money raised is being used to help repay large debt loads, restock cash reserves and revamp operations after shedding unwanted assets.”
LG Display Invests $656.7 Million to Make OLED Screens – WSJ.com
“The world’s largest flat-screen maker, which counts Apple Inc. and LG Electronics Inc. as clients, said in a filing the new line will produce large organic light emitting diode, or OLED, panels at an existing plant in Paju, a city north of Seoul. LG Display said it will invest 706 billion won ($656.7 million) until June 30 next year to install the production line and begin mass production by then.
While the hefty investment shows LG’s ambitious attempt to gain more ground in the production of next-generation displays, analysts don’t expect OLED TVs to contribute to companies’ bottom-lines any time soon given the difficulties in manufacturing them and low production yields. LG would have to see a significant jump in its yield to around 80% by next year, analysts said.
LG’s production line for OLED panels will have a capacity to process 26,000 motherglass sheets a month that are big enough to make six 55-inch screens per sheet, according to the company.”
BBC News – Sky high thinking: Could we all soon own a drone?
“Many countries around the world have authorised the use of fixed-wing and rotary UAVs for civil purposes, such as border control, police surveillance, fire-fighting, search-and-rescue, land management and topographical surveys.
In Brazil, for example, UAVs have been mapping the Amazonian rainforest for the past two years, while in Japan they are used extensively for crop spraying.”
Ohio Plans Drones to Hunt Lost Kids as They Bring Jobs – Bloomberg
“The remote-controlled, unmanned aerial vehicles used for years by the U.S. against al-Qaeda fighters overseas are poised to become fixtures in everyday U.S. life as law-enforcement agencies, states and universities acquire them, and businesses eye potential uses. Their steady advance is forcing governments and citizens to grapple with the consequences and opportunities created by the culture of surveillance.”
Debt Bubble Born of Easy Cash Prompts Swedish Rule Review – Bloomberg
“The regulator last year also proposed tripling the risk weights banks apply to mortgage assets to 15 percent. While the pace of credit growth has eased, household debt still reached a record 173 percent of disposable incomes last year, the central bank estimates.
That far exceeds the 135 percent peak reached at the height of Sweden’s banking crisis two decades ago. Back then, the state nationalized two of the country’s biggest banks after bad loans wiped out their equity. Nordea Bank AB is the product of a series of state-engineered mergers born of that crisis.”
El mercado inmobiliario de Buenos Aires cayó 21% en 2012 – lanacion.com
The volume of transactions for real estate in Buenos Aires fell 21% in 2012. La Nacion is looking at this like it is a sign of economic weakness, which it probably is.
Why I Am Considering Getting Rid of Comments . . . | The Big Picture
“Managing blog comments has become an increasingly time consuming job. Policing the spammers, trolls, haters, and other purveyors of falsehoods has become a larger time suck than I am willing to accept. Dealing with such cretins hardens your outlook and shortens your temper more than I care for. Perhaps this is the reason so many high profile blogs have closed down their comments altogether.”
ECB’s Draghi hails note deal – The Irish Times – Mon, Feb 18, 2013
“Former ECB executive Jürgen Stark has joined Bundesbank criticism of Ireland, describing the new promissory note arrangement as a clear breach of the bank’s prohibition of monetary financing. Dr Stark’s criticism follows fresh criticism from the Bundesbank in its monthly report yesterday that the deal underlines “increasingly stronger and more problematic inter-linkage between monetary and fiscal policy in the European monetary union”.”
Ugliest Danish Banks Find No Buyers in Toxic Asset Trap – Bloomberg
“The man who correctly predicted the failures that triggered Denmark’s banking crisis two years ago is now warning that a surge in bad loans will drag down more regional lenders too far gone to attract buyers.
Aggregate impairments will continue to rise this year, with fatal consequences for the country’s weakest banks, according to Nicholas Rohde, founder of Copenhagen-based Niro Invest Aps.
“The majority of Danish banks have sufficient capital and they shouldn’t have problems if the high writedowns continue,” Rohde said. “But some are still on shaky ground.””
Hollande wrestles with austerity demands – FT.com
“The problem for Mr Hollande is that Brussels and Berlin may now insist that France wields an additional budgetary axe to ensure the deficit target is met after all – in other words they may insist on more austerity.
The European Commission is set to publish its growth and deficit forecasts for all member states on Friday. Weeks of negotiations will then follow over what steps, if any, need to be taken to meet budgetary commitments.
Jörg Asmussen, German member of the European Central Bank’s executive board, left no doubt about what he thought last week. “(I) believe personally that it is particularly important that France reduces its deficit below 3 per cent this year,” he said, adding that France and Germany have a “particular responsibility” to set an example to the rest of the eurozone.”
Michigan gas prices soar 60 cents a gallon in past month | The Detroit News | detroitnews.com
“”It’s really quite a disturbing piece of data,” Laskoski said. “According to MichiganGasPrices.com, a gallon of gas has gone up 60 cents a gallon in the past month.””
The Agony Of The Fanboy | TechCrunch
“Every few months I’m reminded of the intensity of feeling some technologies – be they physical objects (they usually are) or web services – engender in a certain subset of the human population. It’s a well-documented effect: The object of desire is courted for months before launch, then at launch it is defended to the death, and then, when it is obvious that said object is a success or failure, they react with righteous jubilation or, barring that, a muted boosterism seen in people who play the same numbers in the lotto day after day.”
“Based on the reaction to the closing of the national parks almost two decades ago, I can’t help but wonder whether it will be the reaction of park-goers and users of other similar federal activities to the effects of the sequester that will change the politics of 2013 as quickly as the shutdown changed those in 1995.
It was only after the full impact of the shutdown became obvious to those who don’t do politics for a living that the incentives changed dramatically and a deal became more likely.”
How switching to Android helped me deal with my addiction to connectedness — Tech News and Analysis
“There are many things I like better about my Android phone compared to my old iPhone, but one of the big ones is something that is missing: namely, all those irritating real-time notifications”
The Post Post-PC Era: Will Apple, Google, Samsung, Amazon Or Microsoft Win? | TechCrunch
“With the compatibility and accessibility of the Android platform and the move toward mobile-focused UIs, I predict that in 2015 an Android OS will power nearly 70 percent of all computing devices.
Based on the above, it seems as if Google will continue to reign supreme and snatch markets from Apple, Microsoft and Amazon with the help of its partner Samsung.”
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