For Your Tuesday Morning Procrastinations – March 3, 2015

thEBX1G870Here is a reading list for your Tuesday morning procrastinations. As usual some are pertinent to the market and investing and some are not. But, hopefully, you will find all of these interesting.

  1.  Going to the Dogs – Like Wiggles, the “home breed” blue ribbon winner, there’s a similar contest going on in global financial markets where the “home country” seeks to outdo the competition in a race to the interest rate bottom. None dare call it a “currency war” because that would be counter to G-10/G-20 policy statements that stress cooperation as opposed to “every country for itself”, but an undeclared currency war is what the world is experiencing. Close to the same thing happened in the 1930’s, a period remarkably similar to what many countries’ policies resemble today. “When the going gets tough” as the saying goes, “the tough get going” and back during the Great Depression, the first countries to abandon the gold standard and get going were the first ones to escape the clutches of the depression.
  2. Reasons to worry about US equities – Both of these key fundamental drivers are now less convincing than before. US real GDP growth has slowed to around 3 per cent currently, compared to about 4 per cent in mid 2014, according to recent “nowcasts”. This, in itself, is not worrying, since the slowdown represents a return to a sustainable growth path after temporary factors boosted growth in mid 2014. The growth rate has been steady in the past couple of months and, although some data releases have disappointed economists’ optimistic forecasts, there is no evidence of a serious slowdown in the economy.
  3. The 15 Most Miserable Economies in the World – That affliction this year will be most acute in Venezuela, Argentina, South Africa, Ukraine and Greece — the five most painful economies in which to live and work, according to Bloomberg survey data that make up the so-called misery index for 2015. (It’s a simple equation: unemployment rate + change in the consumer price index = misery.)
  4. Chinese Rushing to Buy Property for Portugal Visas Get Burned – Portugal can’t afford to leave a sour taste in the mouth of Chinese investors. The golden-visa program, which began in late 2012 while the country, like much of Europe, was in the throes of the financial crisis, has raked in more than one billion euros in much-needed investment, mainly from Chinese property buyers, according to the country’s foreign ministry.
  5. Comparing performance between Republican and Democratic years – No matter how one looks at the data- by relying on the findings of economists, by looking at state level or looking a federal data, and no matter which economic measure one looks at, the answer is the same: Democratic policies are performing better. And not just a little better- drastically better. Any of these measures standing alone could simply be a coincidence. For example, even if policy was not related to economic performance at all, we would still see results that differ as dramatically as they differ in the GDP chart above approximately 1 out of every 200 times. However, when you add up all of this data, the odds of it happening purely due to bad luck are for all practical purposes zero.
  6. Taiwan Tells Alibaba to Exit Within 6 Months on Investment Rules – Like many Chinese corporations, Alibaba relies on holding companies to operate and raise funds overseas, with the U.S.- listed entity being a Cayman Islands company. Mainland business investments in Taiwan, which views Communist Party-led China as its largest political and military rival, require approval from Taiwan’s Investment Commission.
  7. Dollar Bulls Are Undone as Yellen Turns Foe – While bullish-dollar bets remain the biggest position in the market, investors are reducing the amount they’re speculating, according to data from the Commodity Futures Trading Commission in Washington. Net longs on the dollar versus eight major peers fell for the past three weeks to 404,276 contracts as of Feb. 27, down from a record 448,675 in January.
  8. Market tantrum about RBA rates decision is over the top -Share prices were sliding and the dollar was jumping higher on Tuesday afternoon as investors threw a tantrum over the Reserve Bank’s decision to leave its cash rate unchanged, but they and the markets should calm down fairly quickly. There was an “either-or”  hint that this would happen in the minutes of the Reserve’s previous meeting, on February 3.
  9. China Steering Back Toward Bubbles? – The confusing nature of the PBOC’s actions in the past year or so has led now to publications of theories over a potential power struggle at the central bank. While finally acknowledging that last year was all about “targeted” approaches to monetary “guiding” economic reality, this year is about to explode in personnel changes and therefore, supposedly, a reactionary course to more familiar “flooding” of broad-based approaches. Curiously, unlike last year, there is no contention about the state of China’s economy as it is now-universally accepted as foundering badly.
  10. The Eurozone: on the road to recovery with a lingering risk – Back in September the idea that the Eurozone’s economy could potentially undergo a recovery (see post) was met with some skepticism. And yet here we are. The EuroStoxx50 index is up 14% for the year while the Dow is up 2.5%. We now see plenty of indicators showing strengthening economy in the euro area.
  11. Raising Interest Rates Might not be as Crazy as Some Make it Seem – The bottom line is, we aren’t in a liquidity trap and we never were. So this line of reasoning for keeping rates low is not justified. Dr. Krugman is right that the rationalization for rising rates (to get ahead of inflation and asset bubbles) has been wrong over the years. But that doesn’t necessarily mean that the rationale for keeping rates low is right.  I see no reason why the US economy couldn’t handle a modest increase in interest rates. In fact, it might actually provide a modest boost at a time when we could certainly use all the help we can get.
  12. Consumers Spending Less on Gas, More on Health – Last week, I observed that while consumers are spending less of their budgets on gasoline, they are spending more on health care. The latest data through January show that the percentage of current-dollar consumption for gasoline plunged from last year’s high of 3.2% to 2.1% in January. Consumers saved $133 billion (saar) on gasoline over this period.
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