News: 2014-02-27
Note: Today’s commentary will appear later and will not be attached to today’s newsletter but will go out with Friday’s newsletter. See the last two day’s commentary on my ten surprises for 2014.
North America
Debating Geithner’s Appearances in 2008 Transcripts – Real Time Economics – WSJ
Banks Averting Bond Losses With Accounting Twist: Credit Markets – Bloomberg
“The largest U.S. lenders are moving assets into the “held-to-maturity” column of their books instead of designating them as “available for sale,” an accounting method that under post-crisis banking regulations allows paper losses to erode measures of their health. The change pushed the share of securities that the five biggest banks keep in the held-to-maturity category to 8.4 percent, the highest in almost two decades, according to Credit Suisse Group AG analysts. “
U.S. New Home Sales Surge in January, Led By Northeast – WSJ.com
“Last month’s increase was boosted by sales in the Northeast, where activity expanded by 73.7% and reversed the prior month’s declines. The South and West also saw gains, but new home sales in the Midwest fell.”
Foreclosures Surging in New York-New Jersey Market – Bloomberg
“The epicenter of the U.S. foreclosure crisis is shifting to New Jersey and New York, threatening a housing rebound in one of the country’s most densely populated areas. New Jersey has surpassed Florida in having the highest share of residential mortgages that are seriously delinquent or in foreclosure, with New York third, a Mortgage Bankers Association report showed last week.”
U.S. Housing Markets Face Growing Wealth Inequality – Real Time Economics – WSJ
Don’t Get Excited by Jump in New Home Sales – Real Time Economics – WSJ
“The recent growth in starts means housing isn’t really hurting the economy anymore, but it’s still not much of a lift. Last year residential fixed investment — a category that is mostly home building but also includes home renovations — contributed to GDP for the first time since 2006. The category accounted for 3.1% of nominal GDP in 2013, down from 6.5% at the peak but well below the 4% to 5% range that persisted before the boom. One percentage point was about $170 billion last year — not insanely huge in the context of a $17 trillion economy, but not negligible either. Why are starts lagging? Because there are still a lot of vacant homes out there, and household formation, though improving, remains weak. Builders complain about a lack of developable land and a shortage of skilled labor.”
Calculated Risk: New Home Sales: Don’t read too much into January Sales Rate
Why mortgage applications fell to a two-decade low | New York Citybiz
Mortgage applications at lowest level in two decades
“Mortgage applications to buy a home fell last week to the lowest level in nearly two decades, according to a weekly survey from the Mortgage Bankers Association. The report is a clear sign of weakness in buyer demand heading into the usually busy spring housing season.”
Twinkies Bankruptcy Exposes Peril to Some U.S. Pensions: Economy – Bloomberg
Corporate Economists Are Hot Again – WSJ.com
“With more data available than ever before and markets increasingly unpredictable, U.S. companies-from manufacturers to banks and pharmaceutical companies-are expanding their corporate economist staffs. The number of private-sector economists surged 57% to 8,680 in 2012 from 5,510 in 2009, according to the Bureau of Labor Statistics. In 2012, Wells Fargo & Co. had one economist in its corporate economics department. Now, it has six.”
US senators want Credit Suisse to be forced to identify tax evaders | Business | The Guardian
“Senators have called on the US justice department to force the Swiss banking group Credit Suisse to hand over the names of thousands of US citizens who used its accounts to evade taxes. At a heated hearing of the permanent subcommittee on investigations on Wednesday the Democratic senator Carl Levin blamed the bank, the Swiss government and the justice department for allowing close to 22,000 US citizens to get away with hiding $12bn (£7bn) from the taxman in Swiss bank accounts.”
Obamacare Hits 4 Million Enrollees | TIME.com
“More than four decades after his death, J. Edgar Hoover still haunts the US political landscape. For 48 years Hoover served, first as head of the Bureau of Investigation and later as head of the FBI, his power expanding in tandem with the country’s growing global footprint. While the scandals that broke in the early 1970s unleashed a flood of revelations, there was so much the bureau had undertaken that much remained unexamined, to say nothing of secrets still buried. Now as the new millennium begins to hit its stride, something of a second pass is taking place. In that respect two new contributions stand out.”
US ambassadorial nominees face more backlash over appointments | World news | The Guardian
“Association of diplomats considers criticising the giving of posts to donors who had little or no knowledge about assigned countries”
The bank tax rises from the dead | Felix Salmon
“I like the simplicity of the Camp plan, although I would have preferred to tax liabilities rather than assets. After all, it’s not size that’s the real problem, it’s leverage, and it’s always good to give banks an incentive to raise more capital and less debt.”
Biggest Banks Said to Face Asset Tax in Republican Plan – Bloomberg
“The biggest U.S. banks and insurance companies would have to pay a quarterly 3.5 basis-point tax on assets exceeding $500 billion under a plan to be unveiled this week by Congress’s top Republican tax writer. “
Emerging Markets
Sifting the sodden evidence of Ukraine’s corruption | beyondbrics
In South Korea, Reform Plan Resembles Japan’s Abenomics – Real Time Economics – WSJ
Rajan Defends His Hawkish Moves – Real Time Economics – WSJ
Raghuram ‘Volcker’ Rajan… good luck with that | FT Alphaville
“we believe an inflation targeting regime, particularly with the sort of glide path for price rises suggested by the Urjit Committee, faces significant credibility issues. At the very least, it seems to us absolutely essential that the government fully buys into the project – something which is most unlikely to happen before this year’s general election and is far from guaranteed thereafter.”
Petrobras cuts $16bn from investment plan – FT.com
“Petrobras has sliced $16bn off its five-year investment plan, as Brazil’s petrol subsidies have strained the finances of the state-controlled company and turned it into the world’s most indebted oil producer.”
Brazil raises interest rates to 10.75pc – Telegraph
Why Thailand is looking like the next Ukraine – FT.com
“Something potentially nasty is brewing in Thailand. In recent weeks the world’s attention has understandably been on Ukraine. But the political stand-off in southeast Asia’s second-largest economy is just as intractable. The chances of more serious violence spilling on to the streets is real. For the first time in decades, there have even been murmurings about the possibility of the country splitting into two, with the poorer northeast ceding from a generally richer and more urban south centred on Bangkok.”
Recep Tayyip Erdogan is now the source of Turkey’s problems – FT.com
“If he continues to lash out at disembodied conspiracies confidence in the country could collapse “
Turkish lira’s dive wrecks balance sheets, deters foreign investment | Reuters
“The lira’s dive to a record low has badly exposed Turkish firms with foreign debts, forcing them to scrap some investments at a critical time as the country weathers a corruption scandal and tries to revive economic growth. The weak currency is also denting profits made by foreign firms in Turkey, and deterring overseas investors who fear that uncertainty over monetary policy and domestic politics is creating too great a risk.”
China
China dismisses concern over sudden renminbi fall – FT.com
“When the currency started falling last week it was the central bank that steadily lowered its daily reference rate, while banks and companies continued to trade it at a stronger level.”
The real photos from Venezuela’s protests are very disturbing | GlobalPost
China unlikely to see a sharp correction in property market | Reuters
Hmmm… “China’s property market is likely to see at most a moderate correction in prices in some small cities this year, according to a Reuters straw poll of 13 industry watchers this week, with the chance of a sharp fall in prices nationwide very slim.”
Japan/Australia
In Japan, Nationalism On the Rise as Regional Tensions Escalate – WSJ.com
Qantas to shed 5,000 jobs – Telegraph
Europe
Italiens Industrieproduktion seit 2008 um ein Viertel geschrumpft « DiePresse.com
Italian industrial production has shrunken by almost 25% in the 5 years since 2008. And Italy is the third largest economy in the eurozone. This shows you how devastating European economic policy has been.
La economía crece menos de lo previsto en el cierre de 2013 con un 0,2% | Economía | EL PAÍS
Good chart in this article on the progression of the Spanish economy. You can see Spain getting hit by the financial crisis in 2008 and then again by the European crisis in 2010. The economy grew 0.2% in Q4 after 0.1% in Q3, the first growth since 2010
Switzerland grew much more than the eurozone in 2013, 2% versus 0.4%. But the 0.2% rise in Q4 was noticeably slower than the first three quarters.
Exporten föll 7 procent 2013 – DN.SE
Swedish exports fell 7% in 2013, adding a drag to economic growth
R.B.S. Posts $15 Billion Loss for 2013 – NYTimes.com
Minimum wage expected to rise 3% to £6.50 an hour | Society | The Guardian
Zahl der Arbeitslosen im Februar 2014 bei 3,138 Millionen – SPIEGEL ONLINE
Germany’s unemployment rate was unchanged at 7.3% for February. The number of unemployed is 3.138 million, slightly higher than January.
ekathimerini.com | Greek yields drop to 4-year low, stocks rally amid troika talks
“Greece’s bonds jumped, sending yields to a four-year low, and stocks climbed on speculation the nation will reach and agreement with international creditors to ensure its bank-recapitalization requirements are manageable. Greece’s 30-year yields dropped below 7 percent for the first time since April 2010 as Greek central bank Governor George Provopoulos meets with officials from the European Commission, International Monetary Fund and European Central Bank in Athens on Wednesday.”
ekathimerini.com | Greek banks’ non-performing loans rose to 31 pct in Q3 2013, sources say
“Non-performing loans held by Greek banks rose to about 31 percent of their total loan book at the end of the third quarter last year from 29.3 percent at the end of the first half, a banker told Reuters on Wednesday.”
Technology
360 million newly stolen credentials on black market: cybersecurity firm | Reuters
“When U.S. operators start bonding together their LTE networks later this year, the Galaxy S5 will be one of the first devices in the market that can tap into their increased network speeds.”
Why Skype isn’t safe for journalists : Columbia Journalism Review
“Skype has long been favored by journalists and travelers because it’s free and easy to use. But there are some real risks to using Skype, and many of the safer alternatives are actually just as free and easy.”
Tesla Announces Plans to Raise $1.6 Billion, Reveals More Gigafactory Plans | Re/code
Institutional ownership of Apple stock reaches new 5-year low
“Institutional ownership of large-cap stocks is currently at high levels, but there is one glaring exception to that trend: Apple, which is currently at a five-year low among hedge funds, banks, mutual funds, and other powerful types of financial institutions.”
Disconnect Search For Android Makes Your Google Queries Private
Line will come preloaded on Nokia’s new Android-based handset – Digits – WSJ
The US News Editor on the Disappearance of Its Online Archives – James Fallows – The Atlantic
P&G’s Pact With Amazon Angers Target – WSJ.com
“The goal was to make it cheaper and faster for Amazon to fill orders for Pampers diapers and Bounty paper towels. But the move riled Amazon’s bitter rival Target Corp., which reacted by retaliating against P&G, according to people familiar with the matter. “
Crypto-currency
Man selling home for $135,000 in Dogecoins – CNN.com
Senator calls on the US government to ban Bitcoin | The Verge
Beyond Mt. Gox, bitcoin believers keep the faith, see more robust system | Reuters
“This shake-out is already underway as users learn to be more discerning about where to put or exchange their money”
MtGox CEO speaks out as Japanese regulators discuss intervention | Technology | theguardian.com
“Mark Karpales, the bitcoin exchange’s chief executive, confirms legitimacy of ‘crisis strategy draft’ amid regulatory interest”
Markets
Can we finally lay to rest the idea that zombies justified their existence in 2008? | FT Alphaville
“hedge funds stopped being exceptional in 2003. Less politely, returns to the hedge fund industry have been crap since money rushed into it, just as economic logic would suggest. The sales pitch continues to be human ingenuity, but what investors have received is expensive mediocrity.Hedge funds underperformed slightly when asset values plunged in 2008, and by a lot in the difficult year of 2011 when the crisis was in Europe. Remember too that this is the hedge fund average, before we get into the challenge of selection when there is no persistence in returns, and the zombie problem when the average life of a hedge fund is only five years.”
China’s yuan might ultimately challenge dollar: ECB’s Mersch | Reuters
Coffee shortage caused by Brazilian drought?
“An epic drought—Brazil’s worst in decades—is threatening exports from the world’s largest coffee exporter and driving up wholesale prices worldwide.”
Elsewhere
Convicted Goldman Sachs trader Fabrice Tourre to teach economics – Telegraph
BBC News – Saddle Ridge Hoard: Buried gold coin stash ‘worth $10m’
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