News: 2014-03-28

Technology

“Microsoft, we have discovered, has paid up to $150 million to buy IP assets related to augmented reality, head-borne computers, and related items from the Osterhout Design Group, a low-profile company that develops wearable computing devices and other gadgets, these days primarily for the military and other government organizations.”

How a Chinese Tech Firm Became the NSA’s Surveillance Nightmare | Threat Level | Wired.com

“The NSA’s global spy operation may seem unstoppable, but there’s at least one target that has proven to be a formidable obstacle: the Chinese communications technology firm Huawei, whose growth could threaten the agency’s much-publicized digital spying powers. ”

North America

Americans Must Adjust to a World Dominated by China – Fed’s Bullard – Real Time Economics – WSJ

Speech: Systematic Policy and Forward Guidance (March 25, 2014) – Philadelphia Fed

“President Plosser highlights the relationship between systematic monetary policy and forward guidance. His goal is to help underscore how a systematic approach to monetary policy can improve the effectiveness of monetary policy in both normal times and in more unusual or extreme circumstances, such as when policy is constrained by the zero lower bound on nominal interest rates.”

Not foregone conclusion Fed will adopt U.S. repo facility: Plosser | Reuters

Fed’s Evans sees no rate rise before mid-2015 | Reuters BBC News – Wal-Mart sues Visa for fixing price of credit card fees

Macro and Other Market Musings: Ad Hoc Monetary Policy

Calculated Risk: Kansas City Fed: Regional Manufacturing increased in March

Calculated Risk: Q4 GDP Revised up to 2.6%, Weekly Initial Unemployment Claims decline to 311,000

Pending home sales fall to lowest level since October 2011 | Reuters

Nafta Still Bedevils Unions – NYTimes.com

““Nafta brought neither the huge gains its proponents promised nor the dramatic losses its adversaries warned of,” wrote Jorge G. Castañeda in an essay for Foreign Affairs this winter. “Everything else is debatable.” But for labor groups, there is no debate: Nafta hurt American jobs and household earnings. And the sweeping trade agreement cast a shadow that persists today, spurring deep skepticism of the major trade deals the Obama administration is negotiating with Europe and a dozen Pacific Rim countries.”

The Growth of Murky Finance – Liberty Street Economics

“While new regulations such as the Dodd-Frank Act impose restrictions on financial activities and increase their costs, especially those of large firms, our paper suggests that there may be limits to what regulation can achieve. In particular, we show that financial growth has occurred in the more opaque and harder to regulate sectors: private firms, shadow banks, and small nonbank financial firms. Moreover, we find that the stock market values these opaque areas of finance more, suggesting that they may expand even faster in the future.”

Canadian Firms Stashing Away “Dead Money” Faster than Peers in Other Countries – Canada Real Time – WSJ

BMO slashes 5-year fixed mortgage rate to 2.99% | Toronto Star

“The Bank of Montreal is lowering its five-year fixed-rate mortgage, prompting Finance Minister Joe Oliver to say he’s monitoring the mortgage market. ”

Ukraine

Russian belligerence damages CIS risk profile /Euromoney magazine

As the political tensions morph into economic problems for Russia and Ukraine, other regional states are becoming embroiled in the crisis, notably Kazakhstan, which had been improving in Euromoney’s Country Risk Survey.

Russian Border Buildup Stokes Worries – WSJ.com

Putin’s apologist? Germany’s Schroeder says they’re just friends | Reuters

Windfall for hedge funds and Russian banks as IMF rescues Ukraine – Telegraph

World Bank: Russian GDP to Shrink if Crimea Crisis Worsens – WSJ.com

IMF says no need for Ukraine debt restructuring now | Reuters

Will Russia Sanctions Push Europe Back into Recession? | Mohamed A. El-Erian

“A common refrain in Europe and the United States these days is that sanctions are a “means to an end” — namely, use economic and financial pressures to contain and, even reverse Russia’s annexation of Crimea. There is a considerable challenge, however. By potentially also pushing Western Europe back into recession, stepped-up sanctions could also be an end in themselves. All of which makes the decision-making process more complex and uncertain at an important geopolitical time.”

Ukraine Unlocks $27 Billion International Aid Deal – Bloomberg

““The IMF package should be sufficient to prevent the country falling into a full-blown balance-of-payments crisis,” London-based Capital Economics Ltd. said in an e-mailed note. “But the volatile political situation and Ukraine’s poor track record in implementing reforms demanded by the fund mean that there will still be many doubts about whether politicians will be able to push substantial changes through.””

Eastern promises: The IMF-Ukraine bailout | Ricardo Giucci and Georg Zachmann at Bruegel.org

“A gradual but decisive increase in energy prices is a necessary condition for fiscal consolidation in the short term, but also for current account sustainability in the medium term. Such a move would also reduce dependence on Russia and decrease the widespread corruption in the energy sector. But stabilisation of the banking sector is also crucial, including liquidity support and recapitalisation for systemic banks. A strong push for institutional reform should also be initiated, including the strengthening of key institutions such as the National Bank and the energy regulator, in order to avoid the mistakes of the recent past. Finally, decisive structural reforms are needed to reinstall the rule of law, improve tax administration, reduce bureaucracy and fight corruption. ”

Obama’s Anemic Speech in Europe – NYTimes.com

I think the tone of this Op-Ed is wrong and supports the neo-con view that Obama needs to take a more hawkish approach to the Ukraine crisis. It is this view which will create blowback and increase the number of unwanted negative potential outcomes on the US policy makers’ decision tree.

In U.S., Record 68% View Russia as Unfriendly or an Enemy

Wolf Richter: German Industry Goes To See Uncle Putin | naked capitalism

This is a good German-language review of Thomas Piketty’s book on income inequality in the Swiss paper Tagesanzeiger.

Piketty’s Inequality Story in Six Charts : The New Yorker

Names and wages: Being Brad ain’t bad | The Economist

Markets

World’s 10 bestselling prescription drugs made $75bn last year | Business | The Guardian

Yen Bears Take Bets Off Table – WSJ.com

“Investors are pulling out of bets against the yen amid concerns that Japan’s effort to rev up its economy will run out of gas. Until recently, wagers that the dollar would rise against the Japanese currency were among the currency market’s most popular—and successful—trades. The yen fell 18% last year as Japan’s government and central bank made a weaker currency an important part of their plan to revive the country’s economy. But the trade has stalled this year. Investors worried by slowing growth in many developing economies and the crisis in Ukraine sought out the safety of the yen”

BBC News – Are we staring at a tech stock bubble?

“”One of the great indicators of a bubble is when young companies are trying to access the capital markets in great quantities,” he says. “We’ve seen a proliferation of these at an accelerating rate over the past six months.” Mr D’Souza says that nearly 75% of recent stock market debuts have been from loss-making firms. In the months leading to the 2000 stock market crash, 80% of initial public offerings (IPOs) were of loss-makers.”

Cash Piles, Paranoia Fuel Tech Giants’ Buying Binge – WSJ.com

State of Banking: Not Awful, Not Great, Just ‘Meh’ | LinkedIn