There are no tech links in this links post. I will post a batch of those separately as I have a lot of links today.
News links for 19 Apr 2013
“Romania has dropped setting a target date for adopting the euro, although officials insisted that joining the single currency remains a fundamental objective for the country, according to reports.”
This page is good as a running commentary on where the investigation into the Boston bombing stands. If you want information, this is a good place to go.
“My guess is that the Fed will be forced to row back smartly from its exit talk, but first we must look deflation in the eyes.
As for the Bank of Japan, it had been assumed that the colossal monetary stimulus of Haruhiko Kuroda would revive the yen-carry trade, leaking $1 trillion into world asset markets. But the early evidence is the opposite. Japanese investors brought money home last week.
“Mrs Watanabe” is selling her Kiwi and Aussie bonds to bet on stocks and property at home. And she is selling gold like never before. That too is a shock.
Japan’s “Abenomics” may prove a net drag on the world over coming months. It is exporting deflation through trade effects.”
“Market expectations for US inflation over the next 10 years have eased to 2.40 per cent, down from a peak of 2.60 per cent in March, based on the difference or the so-called “break-even rate” between nominal and inflation-protected Treasury debt.
Inflation expectations for the next five years have fallen 30 basis points in the past month to about 2.10 per cent.”
“He was speaking as the government set out a revamped stability plan that would postpone hitting the EU-defined 2013 budget deficit target of 3 per cent of gross domestic product until next year. It has rejected taking steps to reduce the 2013 deficit, now forecast to hit 3.7 per cent, and set a target for 2014 of 2.9 per cent.
“[The government] has made the rational choice to fix a target for 2014 in order not to compromise the recovery of economic activity by more measures of rigour,” it said.”
“To make stocks correctly priced, “either earnings have to explode heavenward for 10 years or else stock prices have to come in a lot,” said Scott Frew, who runs Rockingham Capital Partners, a small hedge fund. He expects earnings to fall.
It’s not just stocks. Investors are bidding up junk bonds, commercial mortgage-backed securities and bundles of corporate loans called collateralized loan obligations. Last month, investors were paying more for such loans than at any time in the last five years. They are snapping up billions of dollars in securities made up of subprime auto loans.
And the housing market isn’t just rising, but roaring back so fast you can feel the G-force coming off the reports. Home prices in Phoenix went up 23 percent over the last year, according to the latest Standard & Poor’s Case-Shiller index. More than one in four homes in Phoenix was purchased by an investor who bought more than five homes, up from 16 percent a year earlier.”
“Britain’s biggest retailer, Tesco, wrote down the value of its global operations by $3.5 billion and announced plans to exit the United States, as it tries to rebuild after a year when profit fell for the first time in two decades.”
“German carmaker Opel has announced the planned closure of one of its factories by the end of 2014 after a deal with unions fell through.”
““Inflation is running very low” as measured by the personal consumption expenditures price index, the Fed’s favored inflation gauge, the policymaker said. “I’m getting concerned about that,” he said.
“If inflation [gains] continues to go down, I’d be willing to increase the pace of purchases” of bonds the Fed is now engaged in, Mr. Bullard said. “This is not what I expected, and I think inflation should be closer to the target than it is,” the official said, adding he considers it just as important to defend the Fed’s 2% inflation target from the low side, as it is to keep prices from going over 2%.”
“in 2013, our hypothetical Chained CPI COLA recipient would be receiving about 3.3% less than today’s actual payout. In our above illustration, that’s about $45 less per month, which would buy a fair amount of groceries for a frugal shopper at Wal-Mart.”
“Eight in 10 Greeks believe the government should pursue Germany over the outstanding issue of Second World War reparations, according to a new opinion poll.
The survey carried out by Marc for Alpha TV found that almost 90 percent of respondents felt that Greece should seek damages from Germany.”
“The estimated losses for Mr Paulson, who has made and lost more money on gold than almost any other hedge fund manager, reflect a bold all-in bet on the precious metal.
While many investors hold some gold in case of financial calamity or a return of the rampant inflation of the 1970s, since 2009 Mr Paulson has allowed clients of Paulson & Co to denominate their holdings in gold, rather than US dollars.”
“Car sales in Europe dropped another 10pc in March, marking the 18th consecutive month of declines, as a recession fulled by the region’s debt crisis crimped demand for new cars.”
“The Atlantic will launch a paid product within the next two or three weeks, a News Corp. is touting paywalls as “courageous,” and ProPublica wants to have paywall-free nonprofit journalism in every city.”
“The Guardian’s expansion into the U.S. is on track, editor-in-chief Alan Rusbridger said Wednesday, with traffic up by 37 percent last year. For now, there are no plans for a paywall.”
“recent growth has consistently fallen short of expectations and a very rough patch late last year turned disappointment into dread. Economists had been betting on a quicker U.S. recovery to boost Canadian exports, as well as a pickup in business spending.
The slowdown could spell trouble for the Conservative government of Prime Minister Stephen Harper, which is showing signs of mid-term stress and losing ground in opinion polls to the third largest party, the Liberals.
Policy makers predict a brighter second half of 2013, but people like Claros and business leaders are not so sure.”
“The deficit hit 8.17tn yen ($83.4bn; £54.5bn) as a slump in global demand hurt exports, while greater domestic consumption of fuel boosted imports.
A weak yen, which has dipped nearly 20% against the US dollar since November, also boosted the value of the imports.
Analysts said the deficit was likely to shrink in the coming months as the weaker yen will help Japan’s exports.”
“Brazil’s central bank sought to reassure markets on Wednesday night that it was still the nation’s principal guardian of inflation by ending a period of easier monetary policy that lasted nearly two years.
The central bank’s monetary policy committee increased the benchmark Selic interest rate by 25 basis points to 7.50 per cent, in response to a surge in inflation through the top of the government’s official target range last month.”
“Budget Secretary Luis Sarmento told a news briefing after an all-night cabinet meeting that the latest cuts and some other measures would allow Lisbon to meet this year’s budget deficit target of 5.5 percent of gross domestic product and secure the next 2 billion euro tranche of its bailout.
The government will hope its new plan is resistant to fresh court challenges, but the cuts could still stoke public anger which brought hundreds of thousands of people onto the streets last month in opposition to austerity.”
“The ONS also said retail sales volumes last month were 0.5% lower than a year earlier. The decline was in line with economists’ expectations.”
“Over the past three years, the European Central Bank has pumped €1 trillion of cheap loans into the euro zone’s financial system, helping shore up banks and sending government borrowing rates spiraling downward.
Yet large swaths of European small and midsize businesses—which employ three-quarters of the euro zone’s workers—have received precious little of this liquidity. And instead of reviving growth, the money has deepened the fault lines that separate Northern and Southern Europe, as well as big companies and small ones.”
Under Dutch guidelines of unemployment, the rate of unemployment is 8.1%, up from 7.8%. This is the highest level since about 1984-85.
“The unexpectedly large bump in the rate to 6.4 per cent from 6.2 per cent a month earlier comes as the Dutch government encounters increasing political resistance to the austerity policies it has pursued for the past two years, with further cuts needed to meet European budget deficit targets.”
“Erskine Bowles and Alan Simpson, the deficit-reduction duo, are trying to rekindle congressional interest in a $2.5 trillion package of spending cuts and tax increases with new details showing how it could work.
The updated plan, to be released today in Washington, includes $740 billion in increased revenue over the next decade that Republicans have deemed unacceptable and a higher eligibility age for Medicare that President Barack Obama has rejected.
The bipartisan pair are seeking to outline the elusive middle ground between the parties’ positions on deficit reduction, and continue to refine an alternative federal budget that few lawmakers have endorsed. Bowles said in an interview that they are trying to demonstrate what’s possible and absorb criticism so they can catalyze a deal.”
“What Herndon had discovered was that by making a sloppy computing error, Reinhart and Rogoff had forgotten to include a critical piece of data about countries with high debt-to-GDP ratios that would have affected their overall calculations. They had also excluded data from Canada, New Zealand, and Australia — all countries that experienced solid growth during periods of high debt and would thus undercut their thesis that high debt forestalls growth.
Herndon was stunned. As a graduate student, he’d just found serious problems in a famous economic study — the academic equivalent of a D-league basketball player dunking on LeBron James. “They say seeing is believing, but I almost didn’t believe my eyes,” he says. “I had to ask my girlfriend — who’s a Ph.D. student in sociology — to double-check it. And she said, ‘I don’t think you’re seeing things, Thomas.'””
“Departing Bank of Canada Governor Mark Carney deserves the plaudits he has received for steering an effective monetary policy that has kept the Canadian economy growing. But the bank’s economic forecasting record on his watch has been consistently wide of the mark, forcing steep revisions to account for worse-than-expected conditions and calling into question its persistent bias toward raising rates down the road.”
“The International Monetary Fund sharply raised its economic growth estimate for Japan in a report released Tuesday, saying the central banks’ new monetary easing policy will provide substantial stimulus.
In its semiannual World Economic Outlook report, the IMF projected that the nation’s economy will grow 1.6 percent this year in terms of inflation-adjusted gross domestic product, up from 1.2 percent in its January estimate.”
This is a picture of the 2nd suspect in the Boston bombings. Please look at the photo and contact authorities if you know anything about the man in the white baseball cap on the left of the photo.
“U.S. District Judge William Pauley in Manhattan in July had dismissed various claims against the executives by shareholders led by the Pennsylvania Public School Employees’ Retirement System, while letting their case against the second-largest U.S. bank proceed.
But Pauley said the new allegations in an amended lawsuit “plausibly establish fraudulent conduct and a culpable state of mind as to all executive defendants” for allegedly concealing the buyback potential when certifying the bank’s financials.”
“Canada’s net worth was at a healthy 648% of gross domestic product in the final quarter of 2012, according to a report from independent economic research firm Capital Economics, which has gained something of a profile for its bearish views on Canada’s economy, and particularly its housing market.
By contrast, U.S. net worth was a more modest 550% in the same period.
The catch is that Canadians’ wealth advantage is built mostly on the big run-up in housing prices in recent years, and that’s a very shaky foundation, at least from Capital Economics’ point of view.”
“Mr Osborne fears that an anti-austerity faction is winning an internal IMF power struggle and that the Fund will hand the opposition Labour party a propaganda tool by formally urging him to relax his fiscal plans.
The chancellor believes that key IMF officials want to criticise his Plan A next month as part of a proxy attack on US Republicans who are forcing through a tight fiscal contraction in Washington.
The IMF, which has previously provided Mr Osborne with political cover for his rolling five-year deficit reduction plan, this week said in its twice-yearly World Economic Outlook that he should consider greater “flexibility” in his deficit reduction plan.”
“Opinions will differ on whether Christine Lagarde, managing director of the IMF, was admonishing or backing her chief economist, Olivier Blanchard – who has been criticising UK austerity – at her press conference on Thursday.”
“”We clearly support the [austerity] policy,” she said. “[But] we’ve also said that, should growth be particularly low, then there should be consideration to adjusting by way of slowing the pace [of austerity].”
You can read a cached version of this article at Diigo where I have it cached. Reuters made a big error in releasing to the public this ready-to-go obituary that they had already written of Soros. And some eagle-eyed person caught it!
Yeah, this time is different!
“This time, homebuyers are being more selective – putting more money down and making calculated bets on smart renovations.
“There are fewer real estate investors now, compared to during the boom. But this time, they have really done their homework,” says Andy Heller, author of “Buy Low, Rent Smart, Sell High: Real Estate Investing for the Long Run.””
“The current crisis has exposed both fiscal and macroeconomic imbalances caused by a lack of reforms in several euro zone countries as well as structural problems in the institutional set-up of Europe’s economic and monetary union. But in the eye of the storm, we strengthened the foundations of our currency and improved the sustainability of our economies.
Not everything is in its right place yet, and the necessary adjustment is bringing serious social challenges, notably in the form of unacceptably high unemployment. These challenges have to be addressed with determination.”
“So the doctrine of “expansionary fiscal contraction” has essentially been discredited. Since then the IMF has found that the fiscal multiplier is much great than thought – and therefore the effect of excess austerity are much worse than thought – in a world of near-zero rates and a post-bubble hangover.
This has not stopped the monks in Brussels and the zealots in Berlin from continuing to uphold the Alesina thesis as the leitmotif of EMU policy.”
“The expiry of a payroll-tax cut and the imposition of higher income taxes on the rich will cost taxpayers some $150 billion this year in higher taxes. On March 1st the “sequester”—across-the-board federal spending cuts worth $85 billion in the current fiscal year—took effect. The economy is now starting to look less resilient in the face of that austerity than it did at first.
The odds are, then, that the economy is not really stalling now, which may explain why the stockmarket has for the most part shrugged off the bad news. But the economy has not shrugged off the effect of austerity. Instead, it still plods along with growth of about 2%. A recovery worthy of the name is still to come.”
“Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said the central bank’s low interest rate policies, though necessary, will probably generate signs of financial instability.
“Unusually low real interest rates should be expected to be linked with inflated asset prices, high asset return volatility and heightened merger activity,” Kocherlakota said today in the prepared text of a speech in New York. “All of these financial market outcomes are often interpreted as signifying financial market instability.””
“Spain’s 10-year yield fell four basis points, or 0.04 percentage point, to 4.65 percent at 1:31 p.m. London time, and reached 4.61 percent, the lowest since Nov. 17, 2010. The 5.4 percent security maturing in January 2023 rose 0.285, or 2.85 euros per 1,000-euro ($1,305) face amount, to 105.805. The five- year note yield fell two basis points to 3.31 percent after reaching 3.26 percent, the lowest since Nov. 3, 2010.
The Spanish Treasury sold 4.71 billion euros of debt due between 2016 and 2023, beating a 4.5 billion-euro target. The 10-year bonds were sold at an average yield of 4.612 percent.”
“Controlling for the previous year’s GDP growth largely erases the negative relationship between debt-to-GDP ratio and GDP growth, especially for the range where debt is 30 percent or more of GDP. This is because a fall in GDP precedes the rise in Debt-to-GDP ratio. This is yet another demonstration that the simple bivariate negative correlation is driven in substantial part by reverse causality.”