|By Marilyn Much, Investor’s Business Daily, 10/31/2013|
MarketMinder's View: Though Black Friday gets a lot of hype as the busiest shopping day of the year, we’d suggest investors look longer term. Seasonal data matter more than a single day, and yearly data matter more than a season. For more, see our 10/30/2013 cover story, “Selling Retail Short?”
|By Nouriel Roubini, Project Syndicate, 10/31/2013|
MarketMinder's View: One, while it’s true most QE money is sitting as excess bank reserves, this doesn’t mean liquidity is accumulating in the financial sector and inflating bubbles—banks’ trading assets haven’t skyrocketed, and idle cash doesn’t cause “froth.” Two, given central banks’ abysmal track record at identifying and pre-empting bubbles, why would “macro-prudential regulation” work? In our view, we’d all be better off if central banks stuck to their primary role—lender of last resort—and let the money supply rise by a small, predictable amount each year.
|By David Wessel, The Wall Street Journal , 10/31/2013|
MarketMinder's View: Neither side of this argument makes a ton of sense, and we’d encourage folks not to get too bogged down in the theoretical and philosophical claims. Instead, here are some simple facts: The deficit has fallen, overall and on average, since 2009; tax revenues are rising, up 15% in fiscal 2013; and interest payments are falling. Would endlessly adding more debt be great? No. But the US has far more breathing room than many think. For more, see our 9/18/2013 cover story, “Indebted to the Future?”
|By Juergen Baetz, Associated Press, 10/31/2013|
MarketMinder's View: If the US-EU spying spat disrupts transatlantic trade and stalls the ongoing free trade talks, it could potentially have knock-on effects on growth and markets (which tend to do best when trade is high and free). This isn’t necessarily the likeliest outcome—spats blow over all the time, with both sides’ economic best interests prevailing—but events bear watching.
|By Ben Rooney, CNN Money, 10/31/2013|
MarketMinder's View: While mutual fund flows can be a rough gauge of investor sentiment, higher stock inflows don’t necessarily mean investors are euphorically charging into stocks and signaling the bull’s end. Rather, it more likely means investors who shunned its first four and a half years are finally gaining confidence in markets. Once sentiment starts shifting, it takes a while to move all the way to euphoria—and the many other signs of grinding skepticism suggest we’re a ways off.
|By Tavia Grant, The Globe and Mail, 10/31/2013|
MarketMinder's View: The shale oil bonanza isn’t just a US phenomenon—Canadian GDP grew +0.3% in August thanks to a big contribution from the energy sector (and record output in oil and gas extraction).
|By Ambrose Evans-Pritchard, The Telegraph, 10/31/2013|
MarketMinder's View: While we agree confidence alone isn’t enough to spark sustainable economic growth, a struggling Italy doesn’t automatically mean the eurozone is in the danger implied here—the risk Italy prompts a disorderly splintering is exceedingly low given politicians’ commitment to the union overall (not to mention all they’ve sacrificed to preserve it). That includes Italian pols as well as German, institutional and everyone else.
|By Sri Jegarajah, CNBC, 10/30/2013|
MarketMinder's View: First, we’re suspicious the dollar’s reputation has even been materially tarnished—Congress’s 11th hour budget deal was nothing new. Plus, the dollar is just a currency. Whether it remains the world’s leading foreign exchange intermediary or reserve asset—a very, very long-term issue—likely won’t much impact the US’s borrowing abilities, GDP or markets. For more, see our 10/08/2009 commentary, “The Dollar’s Doom Looms?”
|By Jana Randow, Bloomberg, 10/30/2013|
MarketMinder's View: Banks’ easing loan standards may slightly boost eurozone lending growth, which would be a positive! Looser credit could encourage growth overall. But ongoing regulatory uncertainty and lingering economic weakness are probably still tempering willingness to lend—and with ECB “asset quality” tests on the horizon, further deleveraging seems likely.
|By Mark J. Perry, AEIdeas, 10/30/2013|
MarketMinder's View: The US shale revolution couldn’t have happened if strong personal property rights, entrepreneurial spirit and profit-motived risk taking were absent. That’s why fracking has developed and shale production has increased so much in the US over the last five years—benefiting US citizens and global markets overall.
|By Paul Day, The Globe and Mail, 10/30/2013|
MarketMinder's View: It’s official: Spain’s out of recession, having grown 0.1% in Q3 on stronger exports. Headwinds remain, but this is yet another sign the eurozone is slowly improving—and as the area overall grows, more troubled countries likely experience a subsequent lift, too. For more, see our 10/24/2013 cover story, “Spain Imports Growth.”
|By Staff, Reuters, 10/30/2013|
MarketMinder's View: Though not gangbusters, employment is still tepidly improving—rather like the broader economic expansion. Perhaps, once the Fed stops flattening the yield curve through quantitative easing’s long-term bond purchases, growth will speed up and businesses will hire at a swifter pace.
|By Na Jeong-ju, Korea Times, 10/30/2013|
MarketMinder's View: In other words, South Korean credit is poised to tighten: Increased “oversight” of loan recipients likely requires tougher lending standards and incentivizes banks to take less risk in general. This typically limits loan growth—a slight headwind for Korean Financials and for the economy overall.
|By James Glynn, The Wall Street Journal, 10/30/2013|
MarketMinder's View: Australian new home sales grew at their fastest in 11+ years in September. Add in rising dwelling investment, turnover and prices, and it seems Australia’s housing market is improving, a tailwind for broader economic growth.
|By Jeff Black, Bloomberg, 10/30/2013|
MarketMinder's View: It’s not terribly surprising a small uptick in unemployment would follow Germany’s rather lackluster recent data. But rising unemployment doesn’t signal future weakness. Likely, these dips will even out over time as the country and eurozone continue slowly improving.
|By Staff, EUbusiness, 10/29/2013|
MarketMinder's View: Coincidentally, as the EU-Ukraine free-trade deal neared reality, Russia hit Ukraine with a nearly $1 billion gas bill and threatened trade sanctions. Though the likelihood of this squabbling turning into a full blown trade war is next to nil, it’s illustrative of something with surprise power investors should look out for when assessing market risks.
|By Carol Matlack, BusinessWeek, 10/29/2013|
MarketMinder's View: Though Italy may struggle economically for a while longer, to suggest it threatens “Europe’s fragile recovery” overlooks that the eurozone has returned to growth even with a contracting Italy. Yes, the eurozone would benefit from a growing, more competitive Italy, but the region needn’t be perfect for stocks to do fine—even “just ok” should exceed investors’ low expectations.
|By Shobhana Chandra, Bloomberg, 10/29/2013|
MarketMinder's View: It seems pre-shutdown “uncertainty” didn’t cause quite the economic destruction widely feared, though we’d suggest this piece gives the so-called wealth effect rather too much credit for firm consumer demand—typically, discretionary income is a far bigger driver of spending.
|By Kosaku Narioka, The Wall Street Journal, 10/29/2013|
MarketMinder's View: Japanese consumption levels are rising—good news! But, as this article suggests, folks could be pulling forward big-ticket purchases in anticipation of the April 2014 sales tax hike. Whether higher spending is sustainable remains to be seen.
|By Staff, Xinhua, 10/29/2013|
MarketMinder's View: As this article notes, despite China’s hefty R&D spending, its innovation has trailed. Why? Governments can’t drive innovation from the top down—true innovation generally comes where people have an incentive to create something new, and that incentive is profits. China’s state-run firms—the biggest recipients of R&D money—don’t have the same incentives entrepreneurs in capitalist countries like the US do. That’s a big reason those who say the US economy’s best days are behind it—and China will take over the world—likely end up surprised.
|By Amy Kazmin, Financial Times, 10/29/2013|
MarketMinder's View: India’s confusing monetary policy continues—raising key interest rates (25 bps to 7.75%) further inverts India’s yield curve, which is typically an economic negative.
|By Matt Day and Francesca Freeman, The Wall Street Journal, 10/29/2013|
MarketMinder's View: “Gold, which yields nothing and can be costly to hold, also is looking less attractive compared with more mainstream investments.” It also isn’t a stable store of value, reliable inflation hedge or terribly useful long-term investment—since gold began trading freely in 1973, it has underperformed the S&P 500 and US Treasurys with more volatility.
|By Staff , Reuters, 10/28/2013|
MarketMinder's View: US industrial production recorded its largest increase in seven months—on top of already steady improvement—another indication US economic growth continues.
|By Binyamin Appelbaum, The New York Times, 10/28/2013|
MarketMinder's View: Higher inflation can be desirable if deflation is rampant, but we don’t have deflation today. We have relatively tame inflation and a growing economy. Frustrations over the pace of headline GDP growth don’t justify policy like this, in our view. What’s more, the slow growth we’ve seen is arguably due to the Fed’s QE bond buying, as it makes lending less profitable for banks, and hence, less common.
|By Staff, Reuters, 10/28/2013|
MarketMinder's View: Though we always suggest watching what politicians do and not what they say, we laud the idea of making important economic reforms that boost any country’s prospects for long-term growth—particularly China, which will have to find ways to shift from a government-directed, infrastructure-based economy to a consumption- and private investment-driven one. For more on China, see our 07/16/2013 cover story, “Cracks in the China?”
|By Rana Foroohar, Time, 10/28/2013|
MarketMinder's View: Briefly: probably not. Though it is undoubtedly adapting—as all human progress or evolution does. But overall, we’d actually suggest global trade is still growing at a healthy pace. And despite pockets of protectionism, sentiment seems to be largely shifting toward freer trade. Overall, globalization is forging ahead in irregular fits and starts—believing that’s over and humans will somehow fail to adapt and progress this time is likely far too pessimistic.
|By Alfred Romann, China Daily, 10/28/2013|
MarketMinder's View: Freer trade, even on a smaller scale, likely creates a nice economic tailwind—not only for the ASEAN countries mentioned here, but globally as well—by increasing the flow of goods and services throughout the region. Though reaching these agreements often takes time, events here bear watching.
|By Victoria McGrane, The Wall Street Journal, 10/28/2013|
MarketMinder's View: We don’t have major quibbles with the notion of setting rules to govern policy but this theory operates on the notion QE is stimulative. That’s why you get notions like, “The Fed needs to do ’everything we can to ensure that this difficult transition is implemented in as transparent and predictable a manner as possible.’” In our view, the sooner the Fed dials down this disinflationary, contractionary policy, the better.
|By Josef Joffe, The Wall Street Journal, 10/28/2013|
MarketMinder's View: While we always caution against long-term forecasts—seeing clearly out past 12-18 months in markets is near-impossible—the bigger takeaway here is centrally planned economies have repeatedly failed to enhance their citizens’ economic prosperity. The chances China proves the exception this time seem exceedingly low, in our view. “History does not bode well for authoritarian modernization, whether in the form of ‘controlled,’ ‘guided’ or plain state capitalism. Either the system freezes up, or turns upon itself, devouring the seeds of spectacular growth and finally producing stagnation … ”
|By Paul Krugman, The New York Times, 10/25/2013|
MarketMinder's View: A few quibbles aside, this piece makes a key point: Few (if any) of the doom-and-gloom prophesies splashed across the headlines have factual support—they’re opinions without evidence. Perhaps because evidence inconveniently disproves their apocalyptic hypothesis.
|By Christopher Lawton, The Wall Street Journal, 10/25/2013|
MarketMinder's View: Higher demand for Italian and Spanish sovereign debt suggests investors are increasingly moving past eurozone worries—and is another sign the region is finding its footing.
|By Patti Domm, CNBC, 10/25/2013|
MarketMinder's View: Euphoric sentiment would be a concern, but it’s a ways off—the indicators listed here tell a very incomplete picture (and some, like margin debt, aren’t necessarily reliable gauges of investors’ emotions). Other confidence surveys, headlines, TV news and others suggest investors remain doggedly skeptical. Reality is far better than most folks appreciate.
|By Grace Zhuy, Liyan Qi and Richard Silk, The Wall Street Journal, 10/25/2013|
MarketMinder's View: Another step toward market-driven interest rates and China’s overall financial modernization—key to China’s becoming a global market force.
|By Philip Aldrick, The Telegraph, 10/25/2013|
MarketMinder's View: While the UK’s accelerating economy is gaining notice, folks aren’t yet making the connection between faster growth and the end of the BoE’s quantitative easing—it remains underappreciated, giving US QE tapering plenty of potentital positive surprise power.
|By Jeff Macke, Yahoo! Finance, 10/25/2013|
MarketMinder's View: Not only is gold not “still” a safe haven—it never was one in the first place! No asset is. Gold is just a commodity—a commodity that just went through a bear market.
|By Erin McCarthy, The Wall Street Journal, 10/25/2013|
MarketMinder's View: Beware the temptation to chase heat. Frontier markets may look attractive, but they’re a tiny fraction of global markets. Concentrating your portfolio there could introduce undue risk.
|By Youkyung Lee, Associated Press, 10/25/2013|
MarketMinder's View: The global acceleration gathers steam!
|By Nina Adam and Todd Buell, The Wall Street Journal, 10/25/2013|
MarketMinder's View: Uneven economic recoveries aren’t abnormal—and in a region like the eurozone, with so many pockets of strength and weakness (not to mention diverging competitiveness), it’s to be expected. What matters is the eurozone’s recovery needn’t be robust for markets to do fine—even fitful growth exceeds investors’ dour expectations.
|By Jason Lange, Reuters, 10/25/2013|
MarketMinder's View: Actually, we’d suggest they don’t indicate anything other than plain old monthly data variability and investors’ long-running skepticism. Washington bickering just isn’t a logical reason for firms to shelve long-term business plans—not when private businesses are growing apace. Given how little economic activity the government is actually responsible for, the impact hypothesized here seems quite overstated.
|By Staff, Associated Press, 10/25/2013|
MarketMinder's View: While it’s notable “core core” inflation (which excludes food and energy prices) finally stopped falling, this doesn’t mean Japan’s 15 years of deflation and slow growth are over. To find lasting improvement, the country likely still needs significant economic reform. For more, see our 10/22/2013 cover story, “Japan’s Quantitative Easy Button.”
|By Eric Morath, The Wall Street Journal, 10/24/2013|
MarketMinder's View: Trade deficits tell you nothing about a country’s underlying health—total trade (exports plus imports) is a much better measure. That said, no need for investors to freak out over falling total trade—even with a bit of volatility, exports and imports remain near all-time highs, and the longer-term trends remain positive.
|By Caroline Baum, Bloomberg, 10/24/2013|
MarketMinder's View: A friendly reminder for investors: Economies and markets don’t follow “natural” or “scientific” laws. Those who suggest they do—or that any “X” automatically follows “Y” forget conditions and variables change near-constantly. Theory doesn’t move stocks—real-world happenings do. Knowing and identifying these factors is key to long-term investing success.
|By Steven Goldberg, Kiplinger, 10/24/2013|
MarketMinder's View: We’ve seen this before: “Buy Stocks on Yom Kippur,” “Sell in May,” “Beware the Mondays of October” … the list goes on. And the “Halloween Indicator” is no different. That no specific time period is inherently good or bad for stocks it’s likely fruitless to buy or sell based on an arbitrary day, month or holiday. We expect stocks to do well moving forward (though corrections are always possible), but not because the calendar is turning.
|By Staff, The Telegraph, 10/24/2013|
MarketMinder's View: This report, coupled with accelerating Q3 GDP, is further evidence Chinese hard landing fears are overwrought. For more, see our 10/21/2013 cover story, “China’s Reacceleration.”
|By Marcy Gordon, Associated Press, 10/24/2013|
MarketMinder's View: Efforts to do the impossible—remove risk from the Financial sector—continue. Shoring up the system is a benign goal, but larger liquidity buffers aren’t fix-alls, and ordering banks to hoard capital could hamstring lending. Positively, banks have only a $200 billion shortfall and three years to build bigger buffers.
|By Brian Bremner, BusinessWeek, 10/24/2013|
MarketMinder's View: The shale boom is real! Production and efficiency are flying high, and the entire US economy is poised to benefit. The economic activity stemming from shale boom towns is a tailwind to growth, and cheaper energy lowers costs for consumers and businesses coast to coast!
|By Catherine Bosley, Bloomberg, 10/24/2013|
MarketMinder's View: Slower growth is still growth, and recoveries rarely move in straight lines. That headlines are taking this development as a material negative suggests investor sentiment around the region is still pretty dour, giving even slight improvements the ability to surprise investors—and boost stocks.
|By Staff, Associated Press, 10/24/2013|
MarketMinder's View: An important economics lesson: The more you tax something, the less you get of it—and, as a result, the less revenue you get over time. High taxes are an affliction facing many deficit-trimming eurozone countries. Less onerous tax rates would keep more money moving throughout the real economy, providing a tailwind to the recovery.
|By Paul Krugman, The New York Times, 10/23/2013|
MarketMinder's View: Here’s an excellent breakdown showing the dollar for what it really is: one of the world’s many currencies. That it’s widely used in foreign exchange reserves and an intermediary in many forex transactions doesn’t determine how much or cheaply the US can borrow, and its use abroad doesn’t boost GDP much—though it may help liquidity. Even if another currency took the dollar’s lead (unlikely for the moment), the dollar, Treasury markets and broader US economy wouldn’t suffer.
|By Mary Anastasia O’Grady, The Wall Street Journal, 10/23/2013|
MarketMinder's View: While paying on excess reserves does limit the amount of bond interest payments the Fed refunds to the Treasury, this vastly overestimates how much those reserve payments will be in the future. The 0.25% return on excess reserves is far from the biggest factor driving banks to park cash at the Fed. A much bigger driver, in our view, is the high regulatory capital requirements under Basel III, which far outstrip the Fed’s (outdated) reserve requirement. Even when the yield curve steepens and bank lending becomes more profitable, banks will have to keep big cash buffers—regardless of how much the Fed pays. Contrast this with 2006, when the BOE paid over 5% on excess reserves but UK banks didn’t take advantage.
|By Margaret Talev and Lorraine Woellbert, Bloomberg, 10/23/2013|
MarketMinder's View: We have a hard time reconciling the (hypothetical) math here, and not just because there isn’t a counterfactual. Hiring an employee is a long-term decision dependent on hard-data factors (like profitability), not confidence surveys or Congress’s habitual brinkmanship. Plus, two weeks’ worth of any data series—shutdown or no—is too short a period to gauge overall economic health.
|By Stephen Gandel, CNN Money, 10/23/2013|
MarketMinder's View: Employment is a lagging indicator—hence investors needn’t much fret seasonal employment swings and what they may mean. Stocks, on the other hand, are forward looking and account for all economic activity, which in the US have been strong and steady.
|By Staff, BBC, 10/23/2013|
MarketMinder's View: Due to an increase in exports, Spain saw 0.1% q/q growth in Q3. Granted, the Spanish economy still faces headwinds as consumer spending and private investment are still falling, but the return to growth is an incremental positive and yet more evidence of a slowly improving eurozone overall.
|By Russell Gold, The Wall Street Journal, 10/23/2013|
MarketMinder's View: Besides allowing oil and gas drillers access to hard-to-reach deposits via new technologies like fracking, the US shale revolution has also encouraged more efficient drilling—single-rig output has noticeably increased recently—as more companies compete to produce.
|By Prashant Gopal, Bloomberg, 10/23/2013|
MarketMinder's View: Another sign the US housing recovery carries on—a small but underappreciated economic tailwind.
|By Mark Thompson, CNN Money, 10/23/2013|
MarketMinder's View: In our view, these stress tests likely say little about economics: They’re based on arbitrary, hypothetical situations, and as this piece shows, they could be influenced by political aims. We’d suggest looking at other eurozone data to gauge economic health instead—which has been slowly improving.
|By Louisa Peacock, The Telegraph, 10/23/2013|
MarketMinder's View: This seems a perfect example of Frederic Bastiat’s broken window fallacy: Funds spent on baby clothes and related items, as discussed here, will have ultimately been re-allocated from other uses—meaning baby boutiques may have higher sales, while other retailers likely see fewer.
|By Larry Elliot, The Guardian, 10/22/2013|
MarketMinder's View: Fears of a UK housing bubble are overwrought, in our view. The UK has plenty of fundamental support (especially as a result of ending QE), and keep in mind, tight home supply can also drive up prices. As the Financial Times documented here, “households’ debt servicing costs were low and the ratio of house prices to earnings was at its level of a decade ago.” Sure doesn’t sound like a bubble to us.
|By Lucia Mutikani, Reuters, 10/22/2013|
MarketMinder's View: Jobs data (among other reports) are a lagging economic indicator—particularly so this time, given the report’s a few weeks late—making it a pretty flawed gauge of stock market direction. Could it influence taper decision making? Sure, we guess. But the Fed isn’t truly a forecastable market force—particularly one that gets basic economics a little backwards. Lowering long rates flattens the yield curve. Flattening the yield curve is stimulus? Not if you asked The Conference Board, the fine folks who publish the Leading Economic Indicators series.
|By Ben Casselman, The Wall Street Journal, 10/22/2013|
MarketMinder's View: While government intervention oftentimes leads to unintended consequences, a conservative estimate shows the percentage of employers shifting their workforces as a result of the ACA is presently less than 1%. For more, see Amanda Williams 10/14/13 column, “Part-Time Employment Part Deux: The Affordable Care Act.”
|By Staff, EUbusiness, 10/22/2013|
MarketMinder's View: This seems to be yet another example of government policy picking winners and losers in the private sector, and it’s worth noting if you’re investing in these areas. But in addition, the whole debate—fighting over which type of private firm the government thinks should win—is quite odd indeed.
|By Staff, Chosunilbo, 10/22/2013|
MarketMinder's View: Following the EU-Canada deal, more FTAs are on the horizon. Even though progress is (typically) slow as Korea, Canada and New Zealand attempt hammering out deals on beef import regulations and agricultural market accessibility (to name a couple), trending towards freer trade permits the freer flow of capital and goods to where they can be most efficiently deployed. Fewer barriers mean lower costs, lower costs mean even more efficiency gains.
|By Brett Arends, The Wall Street Journal, 10/22/2013|
MarketMinder's View: A fair few issues here, in our opinion. For one, the US didn’t truly near default—hitting the debt ceiling doesn’t mean default. It’s overwhelmingly likely it would have meant prioritized payments, with bond interest coming near the top. Markets seemingly knew this—hence, bond yields didn’t spike during the debate. In many ways, hitting the debt ceiling looks a lot like a government shutdown—and history shows shutdowns carry limited impact.
|By Martin Crutsinger, Associated Press, 10/22/2013|
MarketMinder's View: Good news—and further US data illustrating the healthy economy underpinning the ongoing bull market. Though we’re skeptical of the conclusion the economy has struggled this year due to the sequester and fiscal cliff deal. Here’s some proof suggesting just the opposite … growth.
|By Staff, Reuters, 10/21/2013|
MarketMinder's View: Though this is far from final, expanding China’s debt markets would likely be a boon for its economy—local governments would have access to more capital, and investors would have more options with added transparency. (That said, we do believe concerns over China’s debt are a bit overwrought.)
|By Jeanne Sahadi, CNN Money, 10/21/2013|
MarketMinder's View: It wouldn’t be surprising to hear another debt ceiling debate soon—after all, Congress only kicked the can to February 7. But we’d suggest it’s unlikely to be much different than this last go ‘round—or the other 107 times. Further, the US government actually defaulting on its debt (the only true default) is extremely unlikely even if the debt ceiling is hit. To prepare for the next debate, see MarketMinder editor Todd Bliman’s recent contribution to Equities, “Scary Truth or Ghost Story: A Debt Ceiling and Government Shutdown Fact Check.”
|By Jeffrey Dorfman, Real Clear Markets, 10/21/2013|
MarketMinder's View: As the author deftly shows, those putting a big price tag on the US government’s two-week hiatus seemingly commit the Broken Windows Fallacy in reverse. “In the broken window fallacy, people perceive money spent to fix a broken window as a gain to the economy because they do not realize the money would have been spent somewhere else until it had to be diverted to fixing the window. In the current case money that was not spent somewhere during the shutdown gets shifted someplace else, but it still gets spent.”
|By Danielle Douglas, The Washington Post, 10/21/2013|
MarketMinder's View: In our view, the banking industry is posting slow revenue figures largely due to the Fed’s quantitative easing. The Fed’s buying long-term bonds flattens the yield curve. Since loan profitability is basically the difference between banks’ short-term funding costs and their long-term interest revenue, this policy reduces the profitability of bank lending. Lower loan profitability discourages banks from lending more. For more, see our 9/26/2013 cover story, “Underestimated Financials.”
|By Jill Treanor and Hilary Osborne, The Guardian, 10/21/2013|
MarketMinder's View: Take note: After the Bank of England ended its quantitative easing bond purchases in 2012, nearly every segment of the UK economy turned up. Here’s another, very direct example of the fact QE isn’t the stimulus many presume. For more on the UK, see our 7/18/2013 cover story, “A UK Perspective on QE.”
|By Peter Coy, BusinessWeek, 10/21/2013|
Political polarization has been around forever—at times it’s higher than others. However, efforts to quantify this in terms of jobs or output lost struggle from the same weakness: There isn’t a counterfactual. In our view, it’s a stretch to believe polarization is responsible for 1.75 million fewer jobs from 2007-2012. For more, see our 10/16/2013 cover story, “Uncertain About the Costs of Uncertainty.”
|By Staff, Reuters, 10/21/2013|
MarketMinder's View: A one month drop in homes sales doesn’t mean a slowing housing recovery. These data are volatile and, overall, housing has shown steady improvement. September’s dip was also smaller than expected.
|By Ambrose Evans-Pritchard, The Telegraph, 10/18/2013|
MarketMinder's View: The occasional hyperbolic turn and historical misinterpretation aside, this piece pounds home a valid, widely overlooked point: With the US economy still among the world’s most robust and competitive, “the debt antics of 2013 will most likely fade away as fleeting trivia, and we will wonder what all the fuss was about.”
|By Jim Brunsden, Bloomberg, 10/18/2013|
MarketMinder's View: Rushing to meet a self-imposed arbitrary deadline could increase the chance of unintended consequences downstream. Moving slowly toward banking union likely proves more beneficial over time than slapdash policymaking, so we’d urge investors not to fret if further deadlines get pushed back.
|By Matthew Campbell and Aaron Kirchfeld, Bloomberg, 10/18/2013|
MarketMinder's View: It likely isn’t a coincidence UK growth has picked up as corporate taxes have fallen. As this piece highlights, friendlier tax codes attract foreign firms, and those firms bring capital that flows throughout the entire economy.
|By Theophilos Argitis, Bloomberg, 10/18/2013|
MarketMinder's View: Another milestone in the race towards zero protectionism! Markets love it when goods move freely across borders.
|By Don Boudreaux, Café Hayek, 10/18/2013|
MarketMinder's View: America’s trade and current account deficits are often cited as jobs killers, but as this piece shows, it’s the opposite! Foreign investment—widely accepted as a key source of US job growth—adds to the gap. Another reason looking at these measures alone doesn’t tell you much about the state of the economy and labor markets.
|By Dexter Roberts, BloombergBusinessweek, 10/18/2013|
MarketMinder's View: Data suggest it isn’t—state-directed fixed investment remains robust, and evidence of a shift to consumption-led growth is scarce. These shifts typically take time, and in China’s case, a successful rebalance will require significant economic reform. Plans are afoot, but implementation slow. What officials do, not what they say, will remain key looking forward.
|By Jeremy Warner, The Telegraph, 10/18/2013|
MarketMinder's View: The notion of “good growth” vs. “bad growth” is all in the eye of the beholder—growth is growth. And data suggest recent UK growth is far more sustainable than hypothesized here. Businesses are starting to invest again, banks are working through regulatory headwinds, consumers are spending, manufacturers can’t produce fast enough to keep pace with demand, and corporations are overall profitable.
|By Isabel Reynolds, Bloomberg, 10/18/2013|
MarketMinder's View: Once again, it seems Prime Minister Abe’s third arrow is struggling to take flight. Labor market reforms are likely necessary for a renaissance in Japanese business investment—and necessary for future growth to match investors’ heightened expectations.
|By Nicole Blackmore, The Telegraph, 10/18/2013|
MarketMinder's View: While UK lending isn’t out of the woods, this is another example of the country’s ongoing acceleration—those concerned about the US economy and housing markets once the Fed ends QE should take note.
|By Zhong Nan, China Daily, 10/18/2013|
MarketMinder's View: It seems China’s long-running agricultural policies—aimed at boosting domestic farmers—have created artificially high prices and supply shortages. Lowering rice import caps should help the market function more freely and reduce prices for consumers nationwide. A timely lesson in the ills of protectionism!
|By Staff, Reuters, 10/18/2013|
MarketMinder's View: Portugal has a long way to go, but this is an encouraging sign for its journey back from 2011’s bailout.
|By Sudeep Reddy, The Wall Street Journal, 10/17/2013|
MarketMinder's View: This seems wildly overstated. One, all the furloughed workers get backpay. Two, consumer confidence doesn’t predict consumer behavior—household spending grew during the period of weak confidence cited here. Three, government spending cuts have detracted from GDP in 12 of the past 16 quarters, and the private sector has more than compensated for these losses. For further evidence of this growth, see Elisabeth Dellinger’s column, “34 Numbers to Make You Believe in Growth.”
|By Hans-Werner Sinn, Project Syndicate, 10/17/2013|
MarketMinder's View: This article fundamentally misunderstands what the US debt ceiling does. It doesn’t limit spending—or even the amount of outstanding debt, considering how often it gets raised. Which seems about right, considering it “caps” gross debt without factoring in its size relative to the economy. It only has value for politicians, who use it as a bargaining chip.
|By Staff, Eubusiness, 10/17/2013|
MarketMinder's View: As the Ukraine nears a landmark trade deal with the EU, it moves further away from Russia—and Russia is already threatening to punish its former satellite with trade restrictions. While not certain, a potential Crimean trade war would be a negative for global commerce, making this a situation worth following.
|By Katie Holliday, CNBC, 10/17/2013|
MarketMinder's View: Err, it seems headscratching to call options contracts in an “index” that imperfectly measures volatility—investors’ erratic emotions!—and vacillates wildly a “safe haven.” Those seeking an investment safe haven might as well buy oceanfront property in Arizona.
|By Philip Aldrick, The Telegraph, 10/17/2013|
MarketMinder's View: More solid economic data from the UK and further evidence of the post-quantitative easing acceleration.
|By Chen Jia, China Daily, 10/17/2013|
MarketMinder's View: While recognizing the need to protect investors’ rights is a necessary step, fixing the system is an entirely different issue. Doing so will require the government to release its grip on most publicly traded shares—a herculean task when you’re dealing with crony communism.
|By Kathleen Madigan, The Wall Street Journal, 10/17/2013|
MarketMinder's View: Granted, these are just surveys, but it’s noteworthy businesses have “solid plans” for capex. It seems alleged uncertainty over fiscal and monetary policy isn’t holding back corporate America.
|By Rebecca Kaplan, CBS News, 10/16/2013|
MarketMinder's View: If this passes, it would be yet another can-kick—three months for the shutdown and nearly four for the debt ceiling. So the circus in Washington probably continues. But that shouldn’t keep corporate America from marching forward.
|By James O’Toole and Charles Riley, CNN Money, 10/16/2013|
MarketMinder's View: First, “what technically constitutes default is” NOT “a little murky.” A default is only missing bond interest or principal payments—ratings agencies know this because they determine it. Second: US default is improbable, agencies’ ratings historically have had little impact on economies, the US private sector is strong, and Treasurys are still the most coveted bonds globally. S&P’s 2011 US downgrade didn’t change these factors, and neither should a Fitch downgrade (if it happens).
|By Christopher Matthews, Time, 10/16/2013|
MarketMinder's View: Figuring out a potential US default’s date seems moot, as its probability is microscopic. Interest payments are a fraction of daily tax revenue, and the Treasury can (and, per the Supreme Court’s interpretation of the Constitution’s public debt clause, MUST) prioritize interest payments above all else. And, if need be, they can prioritize entitlement payments just underneath debt service.
|By Scott Hamilton, Bloomberg, 10/16/2013|
MarketMinder's View: UK jobless claims dropped again in September while payrolls and the labor force rose—more evidence the UK economy is likely doing better than most expect.
|By Staff, Der Spiegel, 10/16/2013|
MarketMinder's View: As widely expected, Angela Merkel’s CDU party won’t form a coalition with Germany’s Green party, which leaves the Social Democrats (PSD). While a CDU-PSD coalition isn’t a guarantee, this development perhaps removed some uncertainty in German politics.
|By Andrew Frye and Lorenzo Totaro, Bloomberg, 10/16/2013|
MarketMinder's View: While Italy’s labor tax and public spending cuts may be incremental positives, they don’t do much to address the country’s long-running economic inefficiencies. What Italy would really benefit from are electoral reforms, without which Italy likely can’t pass many meaningful economic reforms.
|By Staff, EU Business, 10/16/2013|
MarketMinder's View: The main takeaway here is overall trade (and, hence, economic activity) grew in the eurozone—an underlying positive for the area’s slow recovery.
|By Diana Olick, CNBC, 10/16/2013|
MarketMinder's View: The shutdown may slightly impact the housing market short term—some related federal agencies are furloughed—but housing shouldn’t materially suffer. A number of private and public housing agencies are still up and running. Stronger fundamentals underlie the sector’s recovery.
|By Howard Schneider, The Washington Post, 10/16/2013|
MarketMinder's View: It’s true the Fed’s tapering quantitative easing (whenever it happens) will have a global impact—no matter how gradually QE’s phased out. We’d argue the impact will be positive, as a steepening US (and global) yield curve(s) will encourage more economic activity and growth, which are rarely confined within one country’s borders in a global economy.
|By Felix Salmon, Reuters, 10/15/2013|
MarketMinder's View: No it hasn’t—the sequester wasn’t a default. Nor is the shutdown. Nor is missing spending “obligations” in general, unless those obligations refer to bond principal and interest payments. The 1935 Supreme Court decision compelling Congress to pay our debt above all else makes actual default highly unlikely. The remaining arguments here are theory, assumption and opinion without factual backing—facts show the sequester and every other shutdown in history haven’t caused a recession, bear market or global socioeconomic collapse.
|By Merissa Marr, The Wall Street Journal, 10/15/2013|
MarketMinder's View: Another sign corporate America is in better shape than many think—struggling firms don’t boost ad spending, they cut back. Our strong private sector is what’s driving this bull market, and that doesn’t appear likely to change any time soon.
|By Phil Izzo, The Wall Street Journal, 10/15/2013|
MarketMinder's View: The Gallup poll can help illustrate the emotional journey of investors this year, and that journey does include some debt ceiling jitters. But markets aren’t mirroring last week’s sentiment freefall—the S&P 500 is less than 2% below its all-time high, and 10-year Treasury yields are still well under their most recent high on September 5. Near-term sentiment swings just aren’t predictive for stocks.
|By Chris Edwards, Cato at Liberty, 10/15/2013|
MarketMinder's View: “But falling down bridges isn’t the central problem, and hiking gas taxes and boosting federal spending isn’t the solution. Instead, we can spur growth and improve the efficiency of America’s infrastructure by moving as much of it as we can to the private sector.”
|By Matthew Philips, BusinessWeek, 10/15/2013|
MarketMinder's View: But corporations are investing! In Q2, nonresidential fixed investment hit an annualized $1.97 trillion. Record-high profits of $1.7 trillion annualized allowed businesses to invest without spending down cash balances (currently at $1.8 trillion, per the Fed). That said, business spending has been a touch slow to recover—you can thank the Fed for that. Flattening the yield curve limited business loan growth. For more, see Elisabeth Dellinger’s 9/30/2013 column, “34 Numbers to Make You Believe in Growth.”
|By Allie Jones, The Atlantic, 10/15/2013|
MarketMinder's View: It seems a bit odd to say forward-looking markets won’t deal with an event until after it happens—that isn’t how markets work. They also don’t tend to respond to politicians and media trying to whip them into a frenzy. If markets are “calm” (and, actually, they’ve been a touch choppy), that’s likely a good indication the debt ceiling hype is overwrought
|By Staff, BBC News, 10/15/2013|
MarketMinder's View: A positive for both countries—this arrangement will likely streamline trade, investment and business opportunities between the UK and China. It’s also another key step in China’s financial modernization.
|By Mark Perry, AEIdeas, 10/14/2013|
MarketMinder's View: “Compared to the recessionary low of $29.1 trillion in February 2009, the total world stock market capitalization has more than doubled (increases of 109%) over the last 4.5 years to the current level of $60.7 trillion, recapturing almost all of the global equity value that was lost.” A testament to markets’ resilience indeed!
|By Charles Kenny, BusinessWeek, 10/14/2013|
MarketMinder's View: We’d suggest a default is highly unlikely in the first place, leaving the question of survival largely moot. After all, a default refers only to missing bond principal and interest payments, which are more than covered by tax revenue. For the latest, see our 10/8/2013 cover story, “Defaulty Logic.”
|By Matthew Phillips, BusinessWeek, 10/14/2013|
MarketMinder's View: A byproduct of the US shale oil boom, lower gas prices for consumers (and businesses, for that matter) are a boon for markets and the economy because they leave more money in their pockets to spend as they wish.
|By John Glover, Bloomberg, 10/14/2013|
MarketMinder's View: We find much to quibble with here. For one, the chances of a default are slim to none. Further, the US isn’t Germany, France, Russia, Argentina or Greece, so we’re hard-pressed to see the connections made here.
|By Staff, Reuters, 10/14/2013|
MarketMinder's View: Positive news for Ireland as its finances are faring well enough it won’t need to access bailout funds—at least for now. Though Ireland and the eurozone aren’t out of the woods yet, it’s another sign the region is faring better than expected.
|By Paul Kane, The Washington Post, 10/14/2013|
MarketMinder's View: To us, this is politicking as usual. Political squabbles of any sort have held back agreements since … forever—they’re nothing new. And also per usual, they likely continue—at least for now.
|By Fiona Maharg-Bravo, Reuters Breakingviews, 10/14/2013|
MarketMinder's View: We agree with the overall takeaway here: Perhaps Spain collects lower tax revenue because of its high tax rates. Incentives matter, and lowering tax rates overall is likely a better way to boost economic growth—thereby increasing tax revenues over time.
|By Telis Demos, The Wall Street Journal, 10/11/2013|
MarketMinder's View: This is rather reminiscent of how many investors viewed Tech IPOs in 1999 and 2000—and we all know how that worked out. Thankfully, viewpoints like this are few and far between and IPOs still at very low levels—sentiment remains overall skeptical, and stock supply is constrained.
|By James Grant, The Washington Post, 10/11/2013|
MarketMinder's View: No it isn’t. Nor did America default when FDR monkeyed with the gold standard to keep debt service affordable. Ditto for when Nixon dumped the post-Bretton Woods currency system. Default only means missing bond interest or principal payments. It doesn’t mean bond payments losing value over time due to inflation—a risk massively overstated here considering the Treasury doesn’t need Fed funny money to keep servicing debt.
|By Jeremy Warner, The Telegraph, 10/11/2013|
MarketMinder's View: Call us Pollyanna, but we see no shadow. Here are the facts: Government debt in the US and UK is plenty affordable; corporate balance sheets are the healthiest they’ve been in years; so are US bank balance sheets; yield spreads are widening globally, including in Emerging Markets. In other words, this alleged financial crisis perma-risk is massively overstated, and the global economy is poised to reaccelerate once the Fed stops jacking with the world’s capital markets pricing mechanism.
|By Anita Orban and Vaclav Bartuska, The Washington Post, 10/11/2013|
MarketMinder's View: Exporting shale gas to Europe would benefit both sides tremendously. US producers would get a new revenue source, and destination countries would enjoy lower prices. Though, if it happens, the ensuing Russian angst—and its potential impact on global trade—will bear watching.
|By Ezra Klein, Bloomberg, 10/11/2013|
MarketMinder's View: No. Bubbles happen when sky-high expectations are detached from reality. Considering Congress’s approval rating is 7% and most Americans expect gridlock, deadlock, bickering and can-kicks, it looks like expectations are right on track with reality. And that, folks, is a big reason why Treasury markets largely aren’t fussing over the debt ceiling.
|By Paul Krugman, The New York Times, 10/11/2013|
MarketMinder's View: This argument rests on a fundamental fallacy: That the US must pay its bills in the order received. False! A 1985 memo from the Government Accountability Office confirms the US can prioritize payments. The Constitution says US debt is sacrosanct. The Supreme Court’s ruling on 1935’s Perry V. United States says the Treasury must pay debt before all else. And after paying interest, Social Security, Medicare, Medicaid and unemployment benefits, the Treasury has about $600 billion in tax revenue left over for discretionary items.
|By Mark Drajem and Lucia Kassai, Bloomberg, 10/11/2013|
MarketMinder's View: If this happens, it would be a welcome development. The ethanol mandate diverts corn from food to fuel, limiting edible supply—for people and livestock—and pushing food prices higher. It would likely also make fuel pricing more efficient—another benefit.
|By Michael Calia, Dow Jones Newswires, 10/11/2013|
MarketMinder's View: And they're right! Lapses in paying contractors and employees the government dubs nonessential is not a default. Period. Missing bond interest is. If the backward-looking ratings agencies get it, everyone should. Now, for the second half of this article, consider that the US has ample tax revenue to cover bond interest. ‘Nuff said.
|By Ambrose Evans-Pritchard, The Telegraph, 10/11/2013|
MarketMinder's View: Shale gas could be an economic boon for the UK, just like it is for the US. That EU regulations beyond the UK’s control could stymie it adds a twist to the upcoming referendum on the UK’s continued EU membership—one of the key economic and political issues on the horizon across the pond.
|By Joe McDonald, Associated Press, 10/11/2013|
MarketMinder's View: Another sign of China’s economic stabilization—and good news for Japanese exporters.
|By Roxana Tiron, Richard Rubin and Terry Atlas, Bloomberg, 10/11/2013|
MarketMinder's View: The latest from Washington. Will Congress compromise before October 17? Or after the deadline? For stocks, it shouldn’t much matter. The Treasury has the means—and arguably, a legal requirement—to keep servicing debt until Congress inevitably kicks the can for the 108th time. For more, see our 10/8/2013 cover story, “Defaulty Logic.”
|By Alanna Petroff, CNN Money, 10/10/2013|
MarketMinder's View: Another step forward in the yuan’s internationalization—part of China’s ongoing financial modernization.
|By Staff, The Wall Street Journal, 10/10/2013|
MarketMinder's View: “… One benefit of the shutdown is that it has reminded the country that it can function well without the dozens of federal bodies that exist solely to layer more burdens on the private economy.” Indeed!
|By Staff, Associated Press, 10/10/2013|
MarketMinder's View: The trade spat on the Crimean Peninsula continues. While not likely for now, a full-blown trade war among Russia, former Soviet satellites and the EU would be a potential negative for global markets, making this a saga worth watching.
|By Phil Wahba, Reuters, 10/10/2013|
MarketMinder's View: This near-perfectly exemplifies today’s sentiment backdrop: The economy continues growing, boosted by the private sector, but investors remain quite skeptical. This disconnect is typically a powerful force for future stock returns.
|By Jennifer Ryan, Bloomberg, 10/10/2013|
MarketMinder's View: Some headlines speculated yesterday’s small drop in industrial production might spur the BoE to relaunch quantitative easing, but it seems there wasn’t much temptation. This decision should benefit the UK economy, which has accelerated markedly since the BoE stopped purchasing assets last June—a powerful precedent for a post-QE US.
|By Staff, China Daily, 10/10/2013|
MarketMinder's View: A US default would have global ramifications. However, the chances of actually defaulting—not meeting bond interest payments—is low. The government has many tools at its disposal to meet its obligations, which some may argue are Constitutionally bound. For more, see Todd Bliman’s column, “Detonate Your Debt-Ceiling Fears.”
|By Roxana Tiron, Kathleen Hunter and Richard Rubin, Bloomberg, 10/10/2013|
MarketMinder's View: It seems Congress is nearing compromise over the debt ceiling—a good old-fashioned can-kick. While both sides might continue taking a hard line publicly, backroom dealing likely wins out at some point, just as it has 107 times before.
|By Dexter Roberts, BusinessWeek, 10/10/2013|
MarketMinder's View: While the forecast reported here is backward-looking, the thesis—that economic reform is a key driver of China’s long-term economic progress—seems on target. In the meantime, for investors, what matters is China still contributes considerably to global GDP and corporate revenues even if it grows at a somewhat slower pace.
|By Ambrose Evans-Pritchard, The Telegraph, 10/09/2013|
MarketMinder's View: To paraphrase former Fed head William McChesney Martin, when you become Fed chief, you take a pill making you forget everything you ever knew, and the effects last the whole time you’re in office. Yellen, like Bernanke before her, likely takes Martin’s little pill—so trying to game her policies based on all of her alleged “qualifications” isn’t much use. Like all Fed heads, we’ll see her true feathers once she’s in the big chair.
|By Lori Montgomery and Zachary A. Goldfarb, The Washington Post, 10/09/2013|
MarketMinder's View: For one, the chance of defaulting is close to zero—if push comes to shove, the US can and will prioritize interest payments. Uncertainty lingers thanks to politicians on both sides, but reality likely surprises positively—and at some point, Congress likely raises the ceiling just as it has 107 other times.
|By Brian Bremner, Bloomberg Businessweek, 10/09/2013|
MarketMinder's View: Well, yes, the US’s fiscal situation could be “epically worse”—but not because we could be Japan. Debt affordability, not size, is what matters—even with the shutdown and debt ceiling debates, the US is not a real default risk. As for Japan, its public finances aren’t in as bad shape as this suggests—there, too, interest payments remain manageable, though the country would likely benefit longer term from more fundamental economic reforms than fiscal stimulus.
|By Staff, Reuters, 10/09/2013|
MarketMinder's View: While only a snippet of the housing industry, rising MBA applications show the US private economy likely continues chugging along—regardless of what’s happening on Capitol Hill.
|By Rich Miller and Shobhana Chandra, Bloomberg, 10/09/2013|
MarketMinder's View: IF the debt ceiling isn’t raised, there is little evidence less government spending would cause a recession soon (or ever). Exhibit A is the sequester—the economy grew at virtually the same rate before and after the cuts took effect. The government is only part of the economy, and the private sector is strong. Less public spending opens up potential for resources the private sector can use more efficiently.
|By Szu Ping Chan, The Telegraph, 10/09/2013|
MarketMinder's View: Three years of virtually no business investment appear to have hurt UK GDP much more than austerity. This isn’t surprising considering public spending never fell year over year—what’s more striking is the evidence implying the private sector’s the true economic growth engine.
|By Jana Randow, Bloomberg, 10/09/2013|
MarketMinder's View: Though small, this data point (among others) alludes to Germany’s continued economic growth—more evidence of a global acceleration, which should be a tailwind for global equities.
|By Rebecca Clancy, The Telegraph, 10/09/2013|
MarketMinder's View: A positive sign, but we’d take it with a grain of salt since lending has fluctuated wildly lately. Further, while the government schemes mentioned here likely played a role, the end of QE likely helped, too, as it allowed the yield curve to steepen, boosting banks’ potential operating profits.
|By Martin Crutsinger, Associated Press, 10/08/2013|
MarketMinder's View: In our view, that consumers are financing fewer purchases with high-interest bearing credit cards isn’t necessarily a sign they’re cautious about spending—considering consumer spending is still rising, it just means they’re using more cash thanks to rising incomes. Household balance sheets are improving—a positive.
|By Ira Stoll, Reason, 10/08/2013|
MarketMinder's View: An interesting take on the government shutdown: “If there’s an upside to this shutdown, it is the opportunity it provides to take federal government services that are assumed to be necessary and put them under scrutiny. Can we do without them? Are these things that can be done better, or as well, by state or local government or by the private sector, either for-profit or not-for-profit?”
|By Nick Summers, BusinessWeek, 10/08/2013|
MarketMinder's View: Our guess is if investors were seeking a shelter from US debt default, they’d pick assets other than US Treasurys. Rather than bonds being “propped up” by default threats, we’d suggest investors don’t really see a risk, so they’re still purchasing Treasurys.
|By Sudeep Reddy, The Wall Street Journal, 10/08/2013|
MarketMinder's View: While we don’t give much weight to sentiment surveys like this, to us this illustrates something bigger: People are still largely skeptical—a sign this bull market has room to run.
|By Thomas Catan, The Wall Street Journal, 10/08/2013|
MarketMinder's View: US political gridlock has been a staple in global economic fears since the beginning of time—it’s nothing new. And historically, global economies have fared just fine, largely brushing off these squabbles. We’d suggest now is no different.
|By Stefan Riecher, Bloomberg, 10/08/2013|
MarketMinder's View: More positive news for Germany and a sign the eurozone is faring better than many realize.
|By Brian Bremner, BusinessWeek, 10/08/2013|
MarketMinder's View: Evidently, if “nothing changes,” US debt will hit 100% of GDP in 2038. One, a 100% debt-to-GDP isn’t inherently awful. Two, things always change! Too many factors can and likely will change too many times over the next 25 years—and in ways we can’t even imagine—for anyone to predict the US’s fiscal situation with certainty. What matters more is that in the near term—where stocks are looking—US debt is quite affordable and overall manageable. For more, see our 10/8/2013 cover story, “Defaulty Logic.”
|By Seima Oki and Makoto Miyazaki, Yomiuri Shimbun, 10/08/2013|
MarketMinder's View: Prime Minister Shinzo Abe and the LDP appear willing to rethink some “sacred” tariffs in order to seal the Trans-Pacific Partnership—and political pushback is already starting. While the tariffs in question are only an incremental move toward free trade, Abe’s willingness to take on entrenched interests in the name of economic reform is notable (though it doesn’t guarantee the third arrow takes flight).
|By Connie Cass, The Christian Science Monitor, 10/07/2013|
MarketMinder's View: While some work might be stacking up, in our view, it doesn’t pose an overwhelming threat to the US economy—the government is still handling all essential functions, and some furloughed employees are already back to work. For further perspective, see Todd Bliman’s 10/1/2013 column, “The Government Shuts Down.”
|By Szu Ping Chan , The Telegraph, 10/07/2013|
MarketMinder's View: While we’d agree accelerating global growth is likely an overall positive, we’d caution against putting too much stock in such forecasts—they’re typically based on backward-looking data, and they’ve rarely proven terribly accurate, making them less than helpful in making a forward-looking forecast.
|By Nam Hyun-woo, The Korea Times, 10/07/2013|
MarketMinder's View: As economist Henry Hazlitt would explain (and we would largely agree), such “spread-the-work schemes” have little, if any, overall economic benefit. Combined with measures like mandated wage increases, such plans also frequently have unintended consequences—like increasing unemployment and even possibly putting some firms out of business as their costs increase faster than their profits. In our view, it’s far preferable to let the market make such decisions as the “appropriate” level of wages or hours—markets tend to allocate resources far more efficiently than any government body we’ve encountered, and the chances that changes anytime soon seem slim at best.
|By Kathleen Madigan, The Wall Street Journal, 10/07/2013|
MarketMinder's View: We agree we aren’t completely in the dark without an “official” government jobs number. But whether it’s official or not, the monthly unemployment rate is backward looking—and highly volatile—making it a dubious gauge of forward-looking economic health. Investors would be better served considering data collectively—i.e., the yield curve, forward-looking inflation expectations, jobs, trade data, LEI, etc.—when formulating their economic and market expectations. For more, see our 10/7/2013 cover story, “Non-Essential Data.
|By Lefteris Papadimas and George Georgiopoulos, Reuters, 10/07/2013|
MarketMinder's View: An even-handed take on Greece’s optimistic forecast: While Greece is showing incremental signs of recovery, it’s far from out of the woods just yet. Greece still needs to dramatically and fundamentally reform its economy in order to become more globally competitive.
|By Tom Mitchell, Gina Chon, Geoff Dyer, Ben McLannahan and Paul J Davies, Financial Times, 10/07/2013|
MarketMinder's View: Fears a US government shutdown and possible debt ceiling inaction have the ability to materially impact global markets are likely quite overwrought. Even if the government is forced to prioritize its payments (not default), it’s a near certainty debt interest is paid before anything else—seemingly making it a further stretch to assume US inaction will compromise China’s investments or Japan’s yen.
|By Jason Zweig, The Wall Street Journal, 10/07/2013|
MarketMinder's View: Another reason it’s important for investors to do their due diligence when choosing a professional to manage their assets: “…financial planners aren’t policed as closely as brokers and investment advisers are, since no government entity specializes in regulating them.”
|By Kim Tae-Gyu, The Korea Times, 10/07/2013|
MarketMinder's View: More countries showing interest in finalizing a free trade agreement—a positive step toward globally freer trade and a potential boost to investor sentiment—though negotiations, which have been ongoing since 2005, likely drag on a while longer.
|By Martin Crutsinger, Associated Press, 10/04/2013|
MarketMinder's View: Default would be bad! But it’s extremely unlikely. Hitting the debt ceiling and prioritizing payments isn’t default. Default refers only to missing bond payments, which the Treasury can easily afford with daily cash on hand. For more, see Todd Bliman’s column, “Detonate Your Debt-Ceiling Fears.”
|By Philip Aldrick and Steve Hawkes, The Telegraph, 10/04/2013|
MarketMinder's View: Or one of the fastest rates, anyway—more evidence the end of quantitative easing isn’t disastrous as many fear.
|By Josh Hicks, The Washington Post, 10/04/2013|
MarketMinder's View: Congress is heavily incentivized to make furloughed workers whole, which would further water down the shutdown’s (already minimal) economic impact. For more, see Todd Bliman’s 10/1/2013 column, “The Government Shuts Down.”
|By Richard Barley, The Wall Street Journal, 10/04/2013|
MarketMinder's View: Portugal isn’t out of the woods, but recent reforms are starting to bear fruit. Yields are down, debt appears to be peaking and the economy appears to be stabilizing—and the troika has once again given the nation high marks (though haggling over 2014’s deficit target continues).
|By Paul Wiseman and Scott Mayerowitz, Associated Press, 10/04/2013|
MarketMinder's View: Kick back, relax and enjoy a Friday! Just kidding. Economists—and anyone wondering about the health of US labor markets (or any other segment of the economy)—can look at the many other reports generated by private firms. For more, see today’s cover story, “‘Non-Essential’ Data.”
|By Sudeep Jain and Ashutosh Joshi, The Wall Street Journal, 10/04/2013|
MarketMinder's View: While it’s a refreshing change of pace to see something claiming the shutdown won’t be disastrous for a given country, the reasoning here is utterly flawed. One, the shutdown shouldn’t have the negative impact on US growth posited here. Two, quantitative easing isn’t propping up India. The rupee’s late-summer spiral appeared more tied to erratic Indian monetary policy—like deliberately inverting the yield curve—than US monetary policy. Yes, taper talk swirled at the time, but coincidence isn’t causality.
|By Katherine Rushton, The Telegraph, 10/04/2013|
MarketMinder's View: Or maybe they don’t care because they know it just isn’t that significant for the economy or markets. Stocks have weathered previous shutdowns just fine, and the economy has grown despite falling government spending for most of this expansion.
|By Matthew Dalton, The Wall Street Journal, 10/04/2013|
MarketMinder's View: It seems the fiscal compact—hailed as The Answer when passed in early 2012—isn’t the panacea many presumed. In our view, its bureaucracy-driven fecklessness isn’t surprising. On the bright side, the EU shouldn’t need coordinated economic policy in order to continue stabilizing—increasingly competitive domestic economies should do the trick, and Europe appears to have enough of these to keep pushing forward.
|By Tracy Alloway and Michael Mackenzie, Financial Times, 10/04/2013|
MarketMinder's View: Considering US regulators have already addressed the issue causing bank asset “fire sales” to freeze repo transactions—namely, the misapplication of mark-to-market accounting rules to these illiquid assets—layering on new rules seems a solution in search of a problem. The added compliance costs and liquidity requirements could make bank funding more difficult and expensive, creating unnecessary headwinds for Financials stocks.
|By Danielle Douglas, The Washington Post, 10/04/2013|
MarketMinder's View: In the latest Dodd-Frank news, regulators have released the megabanks’ so-called living wills—their self-drafted guide on how to let them fail if they, well, fail. However, this doesn’t necessarily decrease the likelihood of taxpayer-funded bailouts. Governments could always feel compelled to intervene if they believe it necessary to prevent outright panic. What matters more than resolution plans is that bank balance sheets are in their best shape in years.
|By Lucy Meakin, Bloomberg, 10/04/2013|
MarketMinder's View: Whether the eurozone’s forthcoming financial transactions tax will cover currency swaps isn’t clear—mostly because the draft legislation isn’t clear and officials are still haggling over the details. But if it did happen, we have a tough time seeing how they can enforce it. The tax applies to securities domiciled in the participating 11 states. How do you determine this when the currency is international, like the euro?
|By Staff, Xinhua, 10/03/2013|
MarketMinder's View: Expansion in both non-manufacturing and manufacturing (announced Tuesday) PMIs suggest growth is just fine in China—and investor concerns about the Middle Kingdom too dour.
|By Peter Coy, BusinessWeek, 10/03/2013|
MarketMinder's View: One of a few reasons we find GDP a far-from-perfect measure of economic growth. Looking beneath the hood, the US private sector remains quite strong—and GDP has been rising despite shrinking government spending much of this expansion. For more, see Elisabeth Dellinger’s column, “34 Numbers to Make You Believe in Growth.”
|By Russell Gold and Daniel Gilbert, The Wall Street Journal, 10/03/2013|
MarketMinder's View: Another side effect of the US’s shale oil and natural gas boom: The world benefits from cheaper energy; the US benefits through increased output and the jobs that follow.
|By Jeanne Sahadi, CNN Money, 10/03/2013|
MarketMinder's View: Default is a very specific thing: The US government’s missing an interest or principal payment due to bondholders—that’s it! And the probability that happens, whether Congress raises the debt ceiling for the 108th time or not, is darned near zero—particularly given the current level of interest payments relative to tax revenues. For more, see Todd Bliman’s column, “Detonate Your Debt-Ceiling Fears.”
|By Staff, EUbusiness, 10/03/2013|
MarketMinder's View: While the eurozone still has quite a ways to go, an increase in business activity—particularly in peripheral countries like Ireland and Italy—can indicate the gap between investors’ perception and reality. And even if the reality is only marginally less grim than perception, that can be a positive surprise for markets.
|By Chikako Mogi, Keiko Ujikane and Toru Fujioka, Bloomberg, 10/03/2013|
MarketMinder's View: Abenomics’ three arrows—one of which has yet to be released—have amounted primarily to rather confused policy, in our view. Exhibit one is unleashing fiscal stimulus to counteract increased taxes. Exhibit two: deliberately weakening the currency of a domestic economy heavily reliant on imports. Until the yet-to-be-seen third arrow’s meaningful reforms break up stagnant industries and increase competition, investors would be better off seeking more attractive opportunities. For more, see our 9/10/2013 cover story, “Tracking the Third Arrow.”
|By Ellen Brown, The New York Times, 10/02/2013|
MarketMinder's View: No, they aren’t. They’re key to inefficiency, broken financial systems and misallocation of capital. There isn’t one shred of evidence putting lending decisions in the hands of politicians is preferable to the current system—but there is plenty of evidence the desire to run a healthy, profitable business motivates private bankers to allocate capital to productive, useful endeavors. This argument holds true in countries with vaunted “postal banks.” Two words: Japan Post.
|By Suzanne McGee, The Fiscal Times, 10/02/2013|
MarketMinder's View: There are a number of misperceptions here—like assuming the government shutdown will hurt stocks—but we take most issue with the argument this year’s stock rally is bearish. Stocks’ growth despite headwinds doesn’t signal complacency. Rather, it signals stocks are climbing the wall of worry—the norm for bull markets—as too-dour sentiment remains detached from the many positive fundamentals at work.
|By Jacquelin Simmons, Francois de Beaupuy and Marie Mawad, Bloomberg, 10/02/2013|
MarketMinder's View: Here’s some puzzling protectionism: This new measure hampers foreign firms putting capital to work in France—but French firms can acquire foreign businesses, meaning their capital gets deployed abroad. Ultimately this seemingly creates a system where money leaves France but doesn’t come in, potentially hurting the workers and businesses the legislation was designed to protect—unintended consequences at play.
|By Richard McGregor, Stephanie Kirchgaessner and Michael Mackenzie, Financial Times, 10/02/2013|
MarketMinder's View: This is overall too dour to us. The US Treasury’s potentially prioritizing payments hardly seems an extraordinary measure—especially as interest payments (priority #1) make up only about 9% of current tax revenues. And ultimately, if the debt ceiling isn’t raised before the deadline, its impact likely isn’t much different than the government shutdown’s—limited.
|By Paolo Biondi, Reuters, 10/02/2013|
MarketMinder's View: Italy’s government may stay intact for now, but gridlock remains and likely will until the electoral laws are modernized. Italian politicians likely won’t pass meaningful (and economically necessary) legislation for a while—a drag on the country’s growth, but likely not for the eurozone overall.
|By Staff, Reuters, 10/02/2013|
MarketMinder's View: Another underappreciated sign the US economy is better off than many fear.
|By Philip Aldrick, The Telegraph, 10/02/2013|
MarketMinder's View: In our view, this likely hurts UK banking more than helps. For one, “reckless misconduct” appears up to regulators’ interpretation, creating the uncertainty stocks don’t like. Further, bank managers’ compensation likely increases to offset the increased risk—the opposite of what other pieces of the Bank Reform bill aim to achieve. In our view, measures like this could make UK banking less competitive, potentially creating economic (and market) headwinds in the long run.
|By Keith Johnson, The Wall Street Journal, 10/02/2013|
MarketMinder's View: Not only has the shale revolution helped reduce US households’ and businesses’ energy costs, it has helped increase foreign investment in the US—likely an economic tailwind.
|By Annalyn Kurtz, CNN Money, 10/02/2013|
MarketMinder's View: Private sector hiring may not be gangbusters, but it’s still growing. Plus, employment data are backward looking—plenty potential for more improvement remains as the US economy (specifically Corporate America) continues strengthening.
|By Jeanna Smialek, Bloomberg, 10/01/2013|
MarketMinder's View: Continued improvement in US manufacturing is just another tailwind for healthy economic improvement.
|By Staff, Yomiuri Shimbun, 10/01/2013|
MarketMinder's View: Rather than implementing another stimulus package to offset a sales tax increase, in our view it makes more sense to simply not increase the sales tax at all—leaving more funds in the pockets of consumers to spend as they please. For now, this announcement has been widely expected for some time, so market impact is likely minimal. For more, see Emily Dunbar and Mary Holdener’s 9/4/2013 column, “Doing it Wrong.”
|By Mark J. Perry, The Hill’s Congress Blog, 10/01/2013|
MarketMinder's View: An interesting take on the Renewable Fuel Standard’s apparent lack of efficacy: “To understand the public’s deeply-rooted opposition to the government’s renewable fuel standard, consider the multiple web sites that list ethanol-free service stations.” Read more: Such measures create winners and losers, a factor to consider when assessing the investment impact of regulation.
|By Nouriel Roubini, Project Syndicate , 10/01/2013|
MarketMinder's View: While we agree the eurozone still has many improvements to make (i.e. structural reforms), we disagree implementing things like quantitative easing or additional bank regulations will do much to bolster growth. In fact, there is little evidence suggesting QE has been stimulative anywhere it’s been tried. And with growth returning, proposing a policy we believe available evidence suggests is contractionary is a real headscratcher.
|By Staff, EUbusiness, 10/01/2013|
MarketMinder's View: EU-US trade talks are making headway—even though progress is slow, they are still trending towards freer trade (and likely boosting investor sentiment along the way) creating an additional tailwind for global stocks. Such big FTAs tend to take plenty of time and haggling to complete, but should this come to pass, consumers could see their choices rise and costs fall, and businesses could find easier-to-access customer bases.
|By Kathleen Madigan, The Wall Street Journal, 10/01/2013|
MarketMinder's View: We agree, we’ve seen government shutdowns before—nothing new. However, we’re skeptical the very short-lived shutdown in 1995 did much to growth—after all, what drove Q2 1995’s dip, as displayed herein? Besides, when the short shutdown passed, Congress hopped on their time machine, went back and spent the money retroactively. Any harm from this was ultra-short term and likely reparable. In addition, this discounts private-sector strength presently—the economy’s grown for most of this expansion with little aid from government. For more on that, see our 9/30/2013 cover story, “34 Numbers to Make You Believe in Growth.”
|By Michael Heath, Bloomberg, 10/01/2013|
MarketMinder's View: One data point alluding to continued Australian economic growth—a nice tailwind for global equities. Not the biggest story, but worth considering as many fret an Aussie downturn led by its large Materials and Mining sector.
|By Stephanie Kirchgaessner, Financial Times, 10/01/2013|
MarketMinder's View: What happens if the debt ceiling isn’t raised? Payments will most likely be prioritized—tax revenue is sufficient to service debt, and debt payments are almost certainly prioritized as #1. So the probability of default is de minimis—probably why interest rates haven’t moved much. After that, the impact would likely be more or less equal to a government shutdown. Though, in our view, the government will probably just raise the ceiling for the 108th time. For more, see Todd Bliman’s 10/1/2013 column, “The Government Shuts Down.”