I will be away visiting family in Germany for the next two weeks. So I will not be posting anywhere near as regularly as I have done. But expect me to post sporadically.
News links for 22 Mar 2013
“Oracle’s severe miss in quarterly sales, dismissed by management as a blip, amplified questions on Wall Street about the business-software giant’s diminishing clout in an industry moving rapidly toward cheaper Internet-based rivals.”
“Caution: Pure speculation follows. If this recovery is built on an asset bubble (and I am starting to entertain a possibility that I had previously discounted, that it could be a joint equity/housing bubble), then I suspect we will learn after the Fed tightens policy that we are not off the zero bound. If so, I further suspect the next recovery will require the Fed to deliver a pure-helicopter drop of money.
Bottom Line: The US economy is less fragile than commonly believed; it has endured a series of shocks over the last three years without major incident. I am claiming neither that equity prices won’t stumble, nor that we should be happy with the pace of activity. But I do think that a recession is unlikely before the Federal Reserve begins raising interest rates – something not likely to happen for two years. While long-run predictions are dangerous, for the sake of argument add up to another two years for tighter policy to reverberate through the economy and you are looking at sometime around 2016/2017 when the next recession hits. That’s the timeframe I am currently thinking about.”
“Apple has added two-factor authentication to iCloud and everything else connected to your Apple ID. This adds a nice boost to security for the service. Here’s how to set it up.”
“Google may face a trust issue. Translated into economese, Google has failed to consider the Lucas Critique: adoption behaviour for newly offered services will change in response to Google’s observed penchant for cancelling beloved products.”
“Two days after a Chinese real estate agency, whose location was not disclosed, advertised an investors’ tour in Detroit, thousands of people have expressed interest, according to a report in the People’s Daily.
The same agency is advertising a tour to the US east coast in April, which costs 25,000 yuan and will take investors to Washington DC, Boston and New York City.”
“U.S. crude oil production in the fourth quarter will exceed imports for the first time since 1995, as booming fields in North Dakota and Texas put the nation on track to surpass a quarter-century output record.
The U.S. Energy Information Administration, the research arm of the Energy Department, said domestic crude production will be 2 million barrels a day higher than imports at the end of 2014, as oil from outside the U.S. is forecast to drop late in that year.”
“The dismissal of the plan comes as time is running out for the island nation to agree on a plan to raise €5.8bn and avert financial collapse before the European Central Bank suspends funding on Monday.
There were already long lines at cash machines in Nicosia on Friday and one Cypriot official summed up the sense of desperation saying: “We are waiting for a messiah to come and save us, and of course, there is none”.”
“Supported by an impressive list of fellow professors, Mr Lucke has three main goals. The most urgent is an “orderly dissolution” of the euro, with a return to national currencies or to new, smaller and more homogenous currency blocks. He wants a decentralised European Union with less bureaucracy and more emphasis on the single market. He favours more direct democracy, with Swiss-style plebiscites.”
“THE NETHERLANDS has spent the past year sinking ever deeper into economic gloom. GDP shrank by almost 1% in 2012, and forecasters expect another 0.5% contraction this year. Looking over the border, the Dutch see a German economy that managed small growth last year, and wonder where they went wrong. A visit from the professional scolds at the IMF could hardly be expected to lift the mood.
The Dutch weakness is consumer spending, which has been falling for a year and a half. Household consumption last year was lower than in 2006. Consumer confidence fell to the lowest level ever measured in February. The chief source of anxiety has been house prices. Over the past decade, Dutch housing experienced a bubble comparable to those in Spain or Ireland. But house prices dropped by 6% last year and have fallen by 16.6% from their peak. Feeling poorer, homeowners have simply stopped spending.”
“Evernote, after suffering a data breach that caused the company to reset passwords for all of its 50 million users, announced that it plans to adopt two-factor authentication as quickly as possible.
“We were already planning to roll out optional two-factor authentication to all of our users later this year,” said Evernote spokeswoman Ronda Scott via email. “We are accelerating those plans now.””
“Despite the buzz surrounding its Galaxy smartphones, which cost hundreds of dollars, the South Korean giant has been quietly launching a greater number of cheaper handsets with little fanfare. Among the eight handsets unveiled so far this year by Samsung, only the Galaxy S 4 is a high-end device. Its low-end phones, typically with price tags of less than $100, are meant for emerging markets such as Indonesia and India—its growth markets in the future.”
“The Treasury auctioned 10-year inflation-indexed notes at a negative yield for an eighth consecutive time as investors remain skeptical that Federal Reserve measures won’t lead to a resurgence in consumer prices.
The $13 billion in Treasury Inflation Protected Securities, which mature in January 2023, yielded negative 0.602 percent, versus the average forecast of negative 0.603 percent in a Bloomberg News survey of nine of the Fed’s 21 primary dealers that are required to bid on U.S. debt sales. ”
“According to Nigel Farage, leader of the UK Independence Party, northern EU leaders realize they risk vast losses if they allow Cyprus, Greece or any other southern member to fail. To prevent this, they have resorted to extreme measures – even theft.”
“Cyprus’s finance minister left Moscow empty-handed on Friday after Russia turned down appeals for aid, leaving the island to strike a bailout deal with the European Union before Tuesday or face the collapse of its financial system.
The rebuff left Cyprus looking increasingly isolated, with the deadline looming to find billions of euros demanded by the EU in return for a 10 billion euro ($12.93 billion) bailout.
Without it, the European Central Bank said on Wednesday it would cut off emergency funds to the country’s teetering banks, potentially pushing Cyprus out of Europe’s single currency.”
“Cyprus, in an 11th-hour bid to unlock international aid, reopen the nation’s banking system and preserve membership in the euro, readied a plan that would restructure its second-largest lender and enforce unprecedented restrictions on financial transactions.
The proposals, if they take effect, would allow authorities to restrict noncash transactions, curtail check cashing, limit withdrawals and even convert checking accounts into fixed-term deposits when banks reopen. They have been closed since March 16.
Parliament is set to debate the measures on Friday. If Cyprus can’t pass them, it could find itself with little choice but to leave the euro zone—opening a Pandora’s box that could threaten Spain and Italy.”
“NATURAL gas futures fluctuated near an 18-month high above $4 (€3.09) in New York on forecasts of colder-than-normal weather and a government report showing an above-average decline in US stockpiles.
Gas futures have surged 18pc this year as winter storms brought below-normal temperatures, widening a year-on-year supply deficit to the most since 2008. Inventories dropped 62 billion cubic feet in the week ended March 15 to 1.876 trillion cubic feet, above the five-year average decline of 26 billion, The Energy Information Administration report showed.”
“The argument for deposit insurance is that banks are inherently unstable, by virtue of their economic function; they borrow money in the form of deposits (which can be instantly withdrawn) and lend to businesses on a longer-term basis. They are thus vulnerable to destabilising and self-fulfilling bank runs. But the counter-argument is that of moral hazard; depositors have no incentive to choose between banks on grounds of riskiness, and bank executives can take risks knowing that they are underwritten by the insurance scheme.”
“”Gluskin Sheff has been increasing its allocation to the U.S. market,” Rosenberg said in a telephone interview late Wednesday. The firm’s favored stocks adhere to a theme of owning shares of cash-rich companies that can not only cover their dividend, but increase it.”
“Euro zone finance officials acknowledged being “in a mess” over Cyprus during a conference call on Wednesday and discussed imposing capital controls to insulate the region from a possible collapse of the Cypriot economy.”
“How can media companies and publishers monetize their content when advertising continues to decline and paywalls are not filling the gap? This is one of the major themes we’re going to explore at paidContent Live on April 17 in New York.”
“Standard & Poor’s cut the sovereign long-term foreign currency credit rating on Cyprus deeper into junk status on Thursday, lowering the rating to CCC from CCC-plus as the country struggles with a banking crisis.”
“scientists have found another piece of evidence that overheard cellphone conversations are far more distracting and annoying than a dialogue between two people nearby.
In a study published Wednesday in the journal PLoS One, college students who were asked to complete anagrams while a nearby researcher talked on her cellphone were more irritated and distracted — and far more likely to remember the contents of the conversation — than students who worked on the same puzzles while the same conversation was conducted by two people in the room.”
“Our friends over at Lifehacker Australia suggest hiding them in plain sight: your kids’ bag.
Besides being less appealing to thieves, a child’s colorful bag is also easier to spot in a crowd should it get swiped.”
“The problem-again, a familiar one-was that Cyprus’s two biggest banks couldn’t manage the flood of deposits. Cypriot regulators fell short as well. Athanasios Orphanides, who worked for the U.S. Federal Reserve before becoming governor of the Central Bank of Cyprus in 2007, realized the hot money could cause bubbles and inflation in the domestic economy, so he limited the share that could be lent domestically. Fine, except the big two-the Bank of Cyprus (BOC) and the Cyprus Popular Bank-simply shoveled the money westward into loans in Greece. Greek government bonds were particularly attractive because they offered higher yields at supposedly zero risk-since everyone knows sovereigns don’t default, right?”
According to Le Figaro, the EU fears capital flight of 30bn euros out of Cyprus when banks open
“With support built into every Mac and iOS device, Apple’s iCloud is the most-used cloud media service by U.S. consumers, a new survey has found.”
“Cyprus is hardly alone in being a financial center with banks that are a big multiple of GDP. Luxembourg is the really extreme case here, with a banking sector at over 20x GDP. England’s banking sector is 6x GDP. Swiss banks were 6.8x GDP in 2010 (Switzerland has forced much higher equity requirements on its banks, so its balance sheets have shrunk since then). Singapore also has an outsized banking sector. But let us remember that the EU has also set out to trash the Cyprus banking sector pretty much overnight with the deposit garnishing threat. It is important to recognize that while a restructuring was necessary, the severity of the crisis and the degree of damage that will be inflicted on the economy was not.
This is not to underplay Cyprus’s problems. But it would help to depict them accurately.”
“Now that Google Keep is live, it wouldn’t be right if we don’t compare it with other popular note taking services out there. In our detailed review of Keep, we’ve mentioned that its features are rather basic at the moment, especially if you compare it with note taking giant Evernote. However, Evernote isn’t the only impressive notes service out there, and it’s only fair to broaden our comparison. After considering just what features does it takes to make a good note taking service, we ended up with quite a list. Not all services here share the exact same feature set, but each of them has its own pros and cons and as a user, this comparison should give you a quick idea of which one of them is right for you, and whether switching to Google Keep will work for you, or should you stick with the one you’re currently using.”
“Slovenia, which is struggling to avoid a bailout, must issue a bond by June 6 to meet its financial obligations, former Prime Minister Janez Jansa said on Thursday.
“The Slovenian state is liquid and can meet its obligations without any problems for now, but the situation can change significantly on June 6 unless we issue new bonds by then,” Jansa told reporters while handing over power to Bratusek.”
“Given current policy and political uncertainties – and the multiple equilibria that they entail – it is difficult to predict with a high degree of confidence which road will be taken and when. Those who claim otherwise may well be failing to fully appreciate the exceptional nature of the situation.
In these circumstances, timing may not be everything, but it may prove to be a key determinant of the probabilities. If the journey to the crossroads is accelerated by a large geopolitical shock (originating in the Middle East or North Korea, for example) or a serious political breakdown in Europe (perhaps, a meltdown in Cyprus or prolonged political paralysis in Italy), the probability of taking the adverse path rises to an uncomfortably high level. If, however, central banks can contain domestic and global inconsistencies for long enough, the combination of endogenous healing and eventual political progress would significantly improve the probability distribution.
Have no doubt: today’s markets rely heavily on the old adage that “time heals all wounds”. The timekeepers are central banks. But their control of the clock is less than perfect. It will become increasingly ineffective if economic improvement faces additional political headwinds in the months ahead.”
“The Cypriot saga has thrown the spotlight on Slovenia, which is also a small euro zone country struggling with an over-burdened banking sector.
Slovenia’s mostly state-owned banks are nursing some 7 billion euros of bad loans, equal to about 20 percent of GDP, underpinning persistent speculation that the country might have to follow other vulnerable euro zone countries in seeking a bailout.”
“The crisis in Cyprus has renewed concerns about the stability of the EU’s emerging markets, potentially ending the region’s recent run of good luck when it comes to market sentiment.
Poland, the Czech Republic and even Hungary have been able to borrow at very low rates, while the region is showing signs that the economy bottomed out towards the end of last year and should recover by the second half of this year.
While CEE fundamentals look sound, the shock, as is the case over the last few years, is coming from outside the region.”
“Sales of previously owned properties grew last month to the highest level in more than three years and more people put their properties up for sale, yielding fresh signs that the improving housing market will lift the economy this year.
Existing-home sales increased 0.8% in February from a month earlier to a seasonally adjusted annual rate of 4.98 million, the highest level since November 2009, the National Association of Realtors said Thursday. Sales were 10.2% above the same month a year earlier, the 20th straight month of year-over-year gains.”
“When Cyprus ordered its banks shut, Internet entrepreneur Marina Kolesnik found herself with a frozen corporate account.
Like many businesspeople in Russia, she had incorporated her hotel-reservation company, Oktogo.ru, on the Mediterranean island. Now she is uncomfortable. “Do I even want to be associated with a jurisdiction like that?” Ms. Kolesnik asked, adding that if she were doing it all over, she would choose to incorporate somewhere else.
Cyprus has thrown its international reputation as an offshore banking hub into peril after considering a bold plan to levy a one-time tax on deposits like Ms. Kolesnik’s. The proposed tax—which would have helped Cyprus raise funds as part of a €10 billion ($13 billion) bailout deal from the European Union and International Monetary Fund—was rejected by Cyprus’s Parliament on Tuesday. Cyprus is now scrambling to find other ways to raise the funds.”
“I notice, for instance, Google News doesn’t have ads, nor will it in the near future, because the only thing that keeps most publishers from suing Google is that Google doesn’t generate direct revenue from Google News. (And even that doesn’t stop some publishers.) At what point does Google look at the amount of effort they put into News and see they’re not getting the expected returns?
Google Voice, which provides voice-over-IP, voice mail and transcription services users, does have a Skype-like freemium model, where the voicemail and Google-provided phone number is free, but making outbound international calls from the U.S. costs something. With a little revenue coming in – and, possibly, integration into Babble on the horizon – maybe Voice won’t be on the chopping block.”