|By Jonathan Fahey, Associated Press, 12/31/2013|
MarketMinder's View: It’s a common misperception that energy use correlates with economic growth—as this shows, however, electricity use has fallen even as the US economy has grown to new heights. So the next time anyone tells you falling electricity or oil usage means a recession is nigh, remind them of the many efficiency gains we’ve achieved.
|By Phoebe Sedgman and Debarati Roy, Bloomberg, 12/31/2013|
MarketMinder's View: We recommend investors not get wrapped up in what gold is or isn’t doing: Gold isn’t wealth protection, an inflation hedge, a safe-haven investment or taper victim—it’s a commodity! Its price is driven primarily by supply and demand, and other drivers are limited. Hence returns are volatile and unpredictable (plus, gold has been in a bear since 2011). Better options likely exist for long-term growth investors.
|By Staff, EUBusiness, 12/31/2013|
MarketMinder's View: Another positive for the eurozone: Spain still faces headwinds (slow growth, bank deleveraging, etc.), but that its financial system successfully exited its aid program suggests pockets of improvement exist—a positive many don’t expect.
|By Aaron Eglitis, Bloomberg, 12/31/2013|
MarketMinder's View: It’s easy to see why Latvians aren’t jazzed about having to contribute to eurozone bailout mechanisms, but “on balance, euro adoption is good for Latvia”—and the eurozone! Both likely see reduced barriers to trade, increased economic activity and more opportunity for growth overall—benefiting everyone, even if Latvia’s inflation rises some in the process. For more, see our 3/14/2013 commentary, “Latvia Likes the Euro (Lats).”
|By Carlo Piovano and Elaine Kurtenbach, Associated Press, 12/31/2013|
MarketMinder's View: In our view, investors appear overconfident in Prime Minister Shinzo Abe’s stimulus efforts and economic policy plans. The weak yen hasn’t provided a net benefit, and Japan’s economy likely won’t be a world leader unless meaningful structural reform passes. Investors seem to have high hopes on this front, but looking at current politics, sweeping reform seems unlikely—a probable disappointment for Japan’s investors moving forward.
|By Staff, Bloomberg, 12/31/2013|
MarketMinder's View: How this plays out remains to be seen—too many new IPOs without a corresponding increase in demand could create a supply glut, creating headwinds for overall Chinese stock performance. But a successful reintroduction of IPOs in Chinese markets, boosting the private sector and funding options for businesses, is likely a positive for the country long term. Dropping the IPO ban and streamlining the process of going public should also help China be more of a global market force.
|By Stephen Gandel, CNN Money, 12/31/2013|
MarketMinder's View: This is short, but it includes a number of misperceptions and groundless assumptions, like claiming the gradual wind-down of a program that didn’t boost the economy or financial markets will cause a new financial crisis. It won’t: Rising long-term interest rates likely encourage more bank lending, business activity and, consequently, economic growth. What this gets right, though, is investors are nervous—with one foot in skepticism and one in optimism, leaving plenty of room for a healthy economic environment to beat too-dour expectations.
|By Staff, The Guardian, 12/30/2013|
MarketMinder's View: While London’s high home prices hog headlines, real estate throughout the UK is recovering. As with the US, housing continues to be a positive economic tailwind across the pond. For more, see Akash Patel’s 11/27/2013 Research Analysis, “Heating Up—A Look at UK Housing.”
|By Randall Woods, Bloomberg, 12/30/2013|
MarketMinder's View: Raising the tax on Brazilians’ debit card transactions abroad is just a form of protectionism and one step away from capital controls—two items that helped create the very “problem” this tax hike aims to “solve.” Brazil would likely benefit far more from a government that lowers trade barriers, avoids the temptation to monkey with foreign investment caps and intervenes less overall.
|By Catherine Boyle, CNBC, 12/30/2013|
MarketMinder's View: While France would benefit from competitiveness-enhancing reforms, these aren’t necessary for France’s economy to grow or its markets to do well—cyclical can trump structural. If anything, the lack of reform combines with items like the titular tax on high earners to lower expectations, making it easier for reality to surprise to the upside as big French multinationals continue benefiting from the global expansion. For more, see Emily Dunbar’s 12/9/2013 column, “Great French-Pectations.”
|By Richard Davies, ABC News, 12/30/2013|
MarketMinder's View: In our view, this doesn’t so much present evidence of an “economic divide” as it does Americans’ popular misconceptions about the state of the economy. Facts say all Americans have benefited from continued growth and cheaper energy costs—that not everyone feels this is the case doesn’t mean it isn’t true, it just means sentiment is out of sync with reality.
|By Simon Nixon, The Wall Street Journal, 12/30/2013|
MarketMinder's View: While some risks remain for the eurozone, the region has done better than most expected this year. Looking ahead, many folks expect a Japan-style funk of deflation and stagnation, yet economic fundamentals suggest otherwise, and the region seems poised to keep surprising the herd—a positive force for markets. For more on the eurozone, see our 12/17/2013 cover story, “French Dip, Irish Cream.”
|By Robert J. Samuelson, The Washington Post, 12/30/2013|
MarketMinder's View: Four and a half years into this cycle—and two years after GDP surpassed its previous high—it seems a bit late to be waiting for a recovery to take hold. The US is well past recovery and into expansion! Looking ahead, we agree continued business spending and the housing recovery likely keep providing tailwinds, though this doesn’t depend on “confidence.” Wariness isn’t self-fulfilling—people frequently tell consumer sentiment pollsters one thing and do another.
|By Staff, EUbusiness, 12/30/2013|
MarketMinder's View: This would certainly be a noteworthy step forward, but considering Greece is also lobbying for a third sovereign default, it may be a touch premature.
|By Katie Little, CNBC, 12/30/2013|
MarketMinder's View: While pending home sales disappointed, this isn’t a sign of weakening housing—it seems mostly tied to tight supply and lousy weather in the Northeast and Midwest, where weak results were concentrated. Looking ahead, with supply still low and demand still high, the housing recovery should continue—and keep providing an incremental economic tailwind.
|By Jim Tankersley, The Washington Post, 12/27/2013|
MarketMinder's View: Low savings rates didn’t cause the financial crisis in 2008—and they aren’t unsustainable. The savings rate is wacky. It doesn’t include 401k contributions or investments in brokerage accounts, and it subtracts “owner-imputed rent”—an estimate of what homeowners would pay to rent their own homes, aka, money not actually spent.
|By Alexandra Scraggs, The Wall Street Journal, 12/27/2013|
MarketMinder's View: One, stocks don’t need new buyers to keep rising. It’s an auction marketplace—stocks rise when buyers are willing to bid up the value of a company’s future earnings. Two, a “modest level of individual-investor enthusiasm” isn’t a ceiling on stocks. It’s the opposite! It simply means there is still plenty of wall of worry for stocks to climb.
|By Staff, Reuters, 12/27/2013|
MarketMinder's View: And core-core, which excludes food and pricey energy, hit a 13-year high of 0.6% y/y. However, this doesn’t mean Japan is in the clear. Higher prices pinch if wages and salaries don’t rise, and we’ve yet to see a broad increase. Firms still face a rather unfavorable business climate, and without structural reform, it will be difficult for them to make the adjustments needed to boost investment overall, not just in employees.
|By Christopher Thompson, Financial Times, 12/27/2013|
MarketMinder's View: This is a good sign sentiment remains detached from reality. Many investors still don’t appreciate this bull market’s fundamental drivers, instead thinking it’s artificially propped up by Fed policy. That sets the stage for more positive surprises—and more bull market.
|By Szu Ping Chan, The Telegraph, 12/27/2013|
MarketMinder's View: A 7.6% growth rate for the world’s second-largest economy would be a-ok. Sure, it’s slower than in recent years, but in dollar terms, it’s still a big contribution to global GDP.
|By Murray Coleman, The Wall Street Journal, 12/27/2013|
MarketMinder's View: For many investors, having significant equity exposure during retirement does increase the likelihood they don’t run out of money. However, most folks’ “Achilles’ heel” isn’t a bear market early in retirement—it’s making emotional portfolio decisions during any market environment at any point. Having a long-term strategy based on your long-term goals—and staying disciplined through the market’s ups and downs—seems far more fruitful than trying to get cute with asset allocation changes over time. The strategy described here—dialing back equity exposure early in retirement, then gradually increasing it—ignores the power of compound growth.
|By Wang Yiqing, China Daily, 12/27/2013|
MarketMinder's View: While financial reform hogs headlines, agricultural reform speaks more directly to the huge political challenges China’s leaders face as they try to modernize the economy. Peasant farmers number in the hundreds of millions, and they’re increasingly unhappy with their lot in life. Modernizing production, raising incomes in the agricultural sector and creating jobs for displaced farmers occupies significant attention in Beijing, which is one reason financial reform progress hasn’t quite matched expectations this year.
|By Chikako Mogi and Takashi Hirokawa, Bloomberg, 12/27/2013|
MarketMinder's View: Don’t get us wrong, Japan would benefit tremendously from a broad, deep corporate tax cut. But applying it selectively within special economic zones likely just creates winners and losers without doing much for Japan’s overall competitiveness. Incremental, localized reforms alone won’t put Japan at the forefront of the global economy, and investors who expect otherwise likely end up disappointed.
|By Staff, Reuters, 12/27/2013|
MarketMinder's View: The new system is a bit weird—new, private mobile providers will have to buy service in bulk from the state-run providers, then resell it to consumers. But competition is competition, and the preliminary effort to open the market is noteworthy.
|By Pierpaolo Barbieri and Niall Ferguson, The Wall Street Journal, 12/27/2013|
MarketMinder's View: As this shows, Mexico is poised to benefit tremendously from this year’s many free-market reforms. All levels of society see improvements in their standard of living, and global trade partners and foreign investors should gain many new opportunities.
|By Staff, Jiji Press, 12/27/2013|
MarketMinder's View: We wouldn’t get too jazzed over Japan’s retail sales numbers—they look good, but they’re likely due to Japanese consumers making major purchases ahead of next April’s sales tax increase.
|By John Wasik, Reuters, 12/26/2013|
MarketMinder's View: Hot funds rarely stay hot for long, and deciding to buy or sell a fund based on its past performance alone is sheer folly. But that doesn’t mean indexing is the best way to avoid “performance chasing”—many investors who use index funds fall prey to the same behavioral errors that drive investors to swap mutual funds. Fear and greed make drive bad timing. For more investing tips, see Mary Holdener’s recent column, “Gut Check.”
|By Szu Ping Chan, The Telegraph, 12/26/2013|
MarketMinder's View: Like many long-term forecasts, this extrapolates current trends and policies decades into the future, without considering the many changes and unknown variables almost certain to surface. For example, in the late 1990s, Germany was called the “sick man of Europe”; now, it’s the eurozone powerhouse. What matters more for investors is what happens over the next 12-18 months relative to expectations.
|By Sarah Portlock and Josh Mitchell, The Wall Street Journal, 12/26/2013|
MarketMinder's View: While it’s certainly true business investment and housing have picked up steam lately, capex hasn’t been anywhere near the drag this piece suggests. The biggest detractor from headline economic growth is falling government spending. Private sector components, including business investment, have long looked far healthier, and they’re still chugging right along. For more, see our 12/20/2013 cover story, “Fruitful Fundamentals.”
|By Staff, Xinhua, 12/26/2013|
MarketMinder's View: A strong Chinese push for free trade is welcome news—the more freely goods and services flow worldwide, the more global economies and markets tend to benefit. However, this likely isn’t a near-term economic driver. Announcing plans to broaden trade ties with the rest of Asia is different from reaching actual agreements—trade talks tend to develop slowly as countries negotiate over various special interests.
|By John Gittelsohn, BloombergBusinessweek, 12/26/2013|
MarketMinder's View: Markets are forward-looking—the eventual tapering of quantitative easing has been widely discussed ever since the Fed first mentioned it in May, and interest rates have risen in anticipation.
|By Matthew C. Klein, Bloomberg, 12/26/2013|
MarketMinder's View: The definition of a “monetary phenomenon” is simple: too much money chasing too few goods and services. Inflation is falling because, as this points out, broad money supply isn’t rising quickly, and what money there is isn’t doing much chasing. The reason isn’t employment—decades of evidence show employment and prices aren’t linked. Rather, monetary aggregates are weak because Fed bond buying flattened the yield curve, discouraging bank lending. As the program ends and the yield curve steepens, banks should become more eager to lend, giving businesses access to more capital and stimulating growth—with modest inflation a side effect. For more, see our 12/18/2013 cover story, “The Fed’s Deflated Logic.”
|By Joel Rosenblatt, Bloomberg, 12/26/2013|
MarketMinder's View: The Volcker Rule’s unintended consequences are starting to surface. When regulators decided to take aim at the biggest banks by banning proprietary trading, they might not have anticipated the rule would cause near-term losses for small community banks. While this issue is nowhere near sweeping enough to have a broad market impact, it likely isn’t the last wrinkle we’ll see as banks interpret and adopt the new rules.
|By Paulo Trevisani, The Wall Street Journal, 12/26/2013|
MarketMinder's View: While Brazil’s tax hikes probably create winners and losers within the country, fiscal policy moves in one Emerging Market shouldn’t much impact global growth or markets.
|By Simon Rabinovitch, Financial Times, 12/24/2013|
MarketMinder's View: Yes, the People’s Bank of China did step in and inject liquidity, bringing rates down some. But the recent tight conditions aren’t rare in China. In fact, they happen with some regularity and are basically China’s communist rulers attempting to assert greater control over the financial system. They’re politically motivated and typically noise for investors. For more, see our 12/24/13 article, “China Credit Crunch Redux?”
|By Josh Mitchell and Sarah Portlock, The Wall Street Journal, 12/24/2013|
MarketMinder's View: While it’s only one month of data, the rise in durable goods is another data point alluding to increased business investment and, ultimately, a growing US economy.
|By Editorial Staff, Bloomberg, 12/24/2013|
MarketMinder's View: It is no real surprise there are (and have always been) competitive differences in the 18-nation euro bloc. The suggestion Germany needs to collectively foot the bill via fiscal transfer and the like to pull along the periphery is, in our view, missing the point. Germany’s growth and the country’s investment in other eurozone nations pulls them along—and would do so more effectively over time once competitiveness-enhancing reforms take root in countries in need (e.g., Greece).
|By Quoctrung Bui, NPR, 12/24/2013|
MarketMinder's View: True—GDP is imperfect for a host of reasons (among them, government spending is always considered a plus, imports a drag and inventory change is subject to interpretation). And the calculation is often tweaked. In our view, though, there are plenty of other indicators—and some forward-looking indicators such as Leading Economic Index trends and PMI new orders surveys—to help people better gauge current and future economic growth. Ultimately, that the economy is growing—and is likely to continue growing—is vastly more important than the exact rate.
|By Perry Chiaramonte, Fox News, 12/24/2013|
MarketMinder's View: An interesting story profiling one small town at the epicenter of North Dakota’s oil and gas-led economic boom. The money flowing from Williston’s oil and gas fields, in turn, spills over to its construction, sales and service industries, strengthening its overall economy.
|By Danielle Demetriou, The Telegraph, 12/24/2013|
MarketMinder's View: “Abe vows to seek both growth and fiscal consolidation, but the focus now needs be on stimulus. Hasty fiscal tightening could derail the economy and foil the sales tax plan in 2015.” But … the sales tax plan was part of Japan’s “fiscal tightening.” Taken in concert, it seems the sales tax and stimulus amounts to Abe substituting private sector spending for public—not a great recipe for economic efficiency.
|By Nicole Blackmore, The Telegraph, 12/24/2013|
MarketMinder's View: And all the while, QE’s been over and rates have edged up. Just goes to show slightly higher rates won’t kill borrower demand and they encourage banks to lend, boosting supply.
|By Jared Bernstein, The New York Times, 12/24/2013|
MarketMinder's View: For one, “Potential GDP” has very little real world meaning or impact for investors. Further, slow growth rates seen overall in the current expansion are heavily influenced by a few factors: government spending cuts treated by GDP as an automatic negative; in some quarters, rising imports (a sign of healthy demand) have greatly detracted from headline GDP growth; and the Fed’s bond buying, which depressed the yield spread, making bank lending less profitable and therefore less plentiful.
|By Raymond Zhong, The Wall Street Journal, 12/23/2013|
MarketMinder's View: While the commentary on interest rates and sovereign debt valuations misses the mark—there is no government bond bubble—the broader thesis is quite sensible and one many regulators seem not to grasp. Responding to past events with thousands of pages of complex regulations often reduces transparency, creates big compliance burdens without much improving the financial system, and can create unintended consequences. Simple, straightforward, transparent rules likely better benefits the financial system—and markets—in the long run.
|By John Ficenec, The Telegraph, 12/23/2013|
MarketMinder's View: “Profit-taking” isn’t a wise tactic, in our view—it takes into account how companies have performed, not how they will perform. If a company has swelled to a large share of your portfolio, raising company-specific risk, that’s one thing, but arbitrarily taking profits off the table and holding them in cash isn’t. Especially if the outlook for equities overall remains positive. This piece suggests the end of quantitative easing (QE) makes things iffy, but evidence overwhelmingly shows markets have risen despite QE, not because of it, and its end should be an economic positive (as it was in the UK).
|By Joe Light, The Wall Street Journal, 12/23/2013|
MarketMinder's View: Well, it’s probably because many of them rely on past performance and other backward-looking data, but that’s beyond the point. For investors, what matters isn’t whether a forecast gets the exact return correct—it’s getting the general direction correct so you can position portfolios properly.
|By Leslie Shaffer, CNBC, 12/23/2013|
MarketMinder's View: We think they do! But not because the Fed is still creating massive amounts of new reserves. This bull market isn’t growing on Fed funny money. It’s up because companies are overall more profitable than many expect—despite, not because of, Fed policy. Considering how guarded expectations remain and how backward most view Fed bond buying, we’d expect stocks to keep rising as reality continues outpacing investor expectations.
|By Staff, Associated Press, 12/23/2013|
MarketMinder's View: Defying all those “weak Black Friday” fears, consumer spending rose at its fastest pace in five months in November. Expectations were too dour, and the forward-looking takeaways in this piece seem more of the same.
|By Staff, Reuters, 12/23/2013|
MarketMinder's View: Forecasts like this are almost always backward looking, and this one is no different. We agree the US likely picks up next year, but not because of Congress’ recently approved budget deal or faster Q3 GDP growth. Rather, the yield curve spread is widening, which should boost bank lending—fuel for business investment.
|By Kim Tae-jong, Korea Times, 12/23/2013|
MarketMinder's View: Some form of a ban on cross-shareholding—where chaebol conglomerates’ affiliates own controlling stakes in each other—has been likely ever since it surfaced as a central theme of last year’s presidential campaign. Now, it seems, businesses are finally about to get clarity on what the new rules look like, it appears forced restructuring isn’t in the cards, which could help ease some of the regulatory overhang in Korea.
|By Matt Jarzemsky, The Wall Street Journal, 12/20/2013|
MarketMinder's View: When assessing the IPO market, scale and context are important. While a few high-profile IPOs have done very well, most have had rather lackluster openings—and many planned IPOs were pulled before they debuted. Plus, while IPO activity is up, it’s up off a very low base and still nowhere near 1999 levels.
|By William Kazer, The Wall Street Journal, 12/20/2013|
MarketMinder's View: This is an important step toward modernizing China’s financial system and, particularly, removing government-set interest rate floors and ceilings. As described here, it probably does create some winners, losers and downstream unintended consequences for Chinese banks, but overall, it’s a likely beneficial reform and one markets have long awaited.
|By Neil Irwin, The Washington Post, 12/20/2013|
MarketMinder's View: We agree the future looks bright, but not because of anything contained in today’s Q3 GDP revision—too backward looking. More forward-looking indicators like LEI, new manufacturing and service orders and the wider rate spread, in our view, give a more reliable signal of what’s to come (and all look good). For more, see today’s cover story, “Fruitful Fundamentals.”
|By Szu Ping Chan, The Telegraph, 12/20/2013|
MarketMinder's View: And without a drop of alleged stimulus from the BoE! The UK was largely stagnant while quantitative easing was in force. Since it ended, all areas of the economy have accelerated, and forward-looking indicators suggest the party continues. This is a powerful precedent for the US once the Fed stops buying bonds, in our view. For more, see our 12/19/2013 cover story, “Taper On.”
|By Jeff Kearns and Catarina Saraiva, Bloomberg, 12/20/2013|
MarketMinder's View: This is pure speculation—a rather fruitless endeavor, in our view, considering all the unpredictable inputs into Fed decisions. What matters more is that quantitative easing eventually will end, allowing the rate spread to widen, which should boost bank lending and overall growth—an outcome almost no one expects, which should be good for stocks.
|By Ryan Tracy, The Wall Street Journal, 12/20/2013|
MarketMinder's View: While banks have a 12-day deadline to determine whether they need to write down collateralized debt obligations under the Volcker Rule, the impact of writedowns shouldn’t be too widespread—many banks already have the majority of these assets designated as “for sale” on their balance sheets, so they already are marked to market.
|By Ezra Klein, The Washington Post, 12/20/2013|
MarketMinder's View: Setting aside all of the political debates here, we’d simply point out one thing: Full employment is mostly myth. Employment typically peaks after recessions start—it’s that lagging—and then firms cut headcount again. So the thesis here that an economy running at full employment for a sustained period can carry great benefits for all seems a touch wide of reality.
|By Jeremy Warner, The Telegraph, 12/20/2013|
MarketMinder's View: The alleged albatross of monetary union isn’t what’s holding eurozone nations back—a common currency fostering cross-border trade is a positive. Nor are policy “needs,” like labor reform, a huge drag. The biggest weight, in our view, is bank deleveraging. Banks are shedding assets, and they aren’t lending, which weighs on money supply and overall growth. A clearer, less punitive regulatory environment would likely enable banks to better fill their core role, improving the region’s growth prospects.
|By Staff, Taiwan News, 12/20/2013|
MarketMinder's View: The last few decades have seen countless threats of conflict, whether from North Korea, the Middle East or elsewhere. Sabre-rattling can spook investors for short periods, but history overwhelmingly shows it isn’t bearish.
|By Staff, EUbusiness, 12/20/2013|
MarketMinder's View: Progress is progress, but the US and EU still have plenty of hang-ups to get past. Much as this deal would benefit both sides if eventually consummated, we wouldn’t suggest getting terribly excited about its near-term prospects—other fundamentals and developments are likely to carry the US and EU economies in 2014.
|By Tom Fairless and Peter Nurse, The Wall Street Journal, 12/20/2013|
MarketMinder's View: The EU credit rating matters even less than individual countries’ credit ratings, in our view—the EU’s debt issuances are tiny and confined mostly to bailout facilities. We suspect markets are already aware of the risks associated with bailout loans. Any lengthy discussion of this is simply noise.
|By John O’Donnell and Martin Santa, Reuters , 12/19/2013|
MarketMinder's View: In principle, banking union progress likely helps shore up confidence in the eurozone’s financial system—a positive. However, the deal could also introduce unintended consequences downstream, and many questions remain. Chief among them: How will officials determine when a bank should be closed and/or depositors bailed in? Will a bank be treated as bankrupt simply for failing a stress test, even if it’s nowhere near immediate trouble? Could regulators erroneously wind down a bank that could still stand on its own? As the final legislation takes shape, this will bear close scrutiny.
|By Chris Farrell, BusinessWeek, 12/19/2013|
MarketMinder's View: This wildly misperceives what deflation is and isn’t. Deflation isn’t a fall in certain prices because of technological developments or competition. It is a broad fall in the prices of most goods and services, and it’s always and everywhere a monetary phenomenon. If monetary policy were functioning properly, competition and innovation would enable more and more commerce, a rising money supply would fuel that commerce, and prices would rise in kind as a healthy side effect of growth. But because of the Fed’s bond buying, the yield curve spread has flattened, dampening money supply and velocity, and as a result prices have fallen or stagnated (and the economy has lacked fuel). For more, see our 12/18/2013 cover story, “The Fed’s Deflated Logic.”
|By Scott Hamilton and Jennifer Ryan, Bloomberg, 12/19/2013|
MarketMinder's View: While some bemoan November retail sales’ rising only 0.3% after falling 0.9% in October, look at the longer trend—UK retail is up 2.0% y/y. Further evidence of the UK’s ongoing recovery.
|By Ambrose Evans-Pritchard, The Telegraph, 12/19/2013|
MarketMinder's View: The notion quantitative easing (QE) has lifted the US, UK and Japan, while the lack of it has set back the eurozone seems off base, in our view. One, QE sedated the US, UK and Japan. Two, the eurozone’s primary economic weight is bank deleveraging, not monetary policy—banks are shedding assets and cutting lending to prepare for a much tougher regulatory environment. Add QE to the mix, and you’ll likely get banks doing the same thing US and UK banks did: Using the funds to build bigger buffers instead of lending off them.
|By Staff, BBC News, 12/19/2013|
MarketMinder's View: While Ireland isn’t out of the woods quite yet, its growing GDP—notably driven by domestic demand in Q3—is another sign of its recovery and return from the bailout brink. For more, see our 12/17/2013 cover story, “French Dip, Irish Cream.”
|By Francesca Freeman and Matt Day, The Wall Street Journal, 12/19/2013|
MarketMinder's View: Beyond our regular quibbles with gold—not a financial safe haven, not a reliable inflation hedge—the thesis here claims the shiny metal is presently “on track to end a 12-year bull run.” But that golden bull already ended over two years ago—the precious metal has been in a bear market since 2011. Investors wondering what to do about gold now are best off thinking not about recent price movement, but their long-term goals and objectives. In doing so, chances are they’ll find gold’s long-term risk/return tradeoffs don’t quite match their needs.
|By Victoria McGrane and Jon Hilsenrath, The Wall Street Journal, 12/18/2013|
MarketMinder's View: About seven months after taper-talk began, the Fed has finally announced it will scale back its QE bond purchases, from $85bn to $75bn a month. The change isn’t huge, but it does help clear up some uncertainty. Looking ahead, over time, less (and eventually no) QE should push long-term rates higher—steepening the yield curve—which should encourage more bank lending, and as a result, more economic activity and growth.
|By Lawrence Summers, Reuters, 12/18/2013|
MarketMinder's View: Yes, this recovery has been the slowest since World War II, but this doesn’t mean the US has entered a perma-slump of structural decline only unconventional monetary policy can combat. Fed policy is the reason for slow growth, not the solution. By reducing long-term rates while short rates stay near zero, the Fed shrank the rate spread, which represents banks’ loan margins, discouraging loan growth and squashing the money supply. Once the Fed ends unconventional monetary policy (QE), global growth likely only accelerates, putting to rest many concerns listed here.
|By Staff, The Associated Press, 12/18/2013|
MarketMinder's View: Despite worries over rising rates and prices, US housing continues improving—an incremental positive for the broader economy.
|By Mark J. Perry, AEIdeas, 12/18/2013|
MarketMinder's View: An important lesson for any data-reliant argument: “When people talk about changes in income over time, make sure you know what measure of income they are citing.” As this shows, adjusting pay-per-household for household size, taxes (and tax cuts) and other benefits likely tells a more complete picture of income growth than the common measure of income per tax unit—and how much better off US citizens actually are from 30 years ago.
|By Emily Gosden, The Telegraph, 12/18/2013|
MarketMinder's View: Having seen shale exploration and fracking’s positive economic impact in the US, politicians are seeking to do the same across the pond. If shale development moves forward, the benefits are likely big, both in terms of added industry and reduced energy costs for people and businesses.
|By Robert Frank, CNBC, 12/18/2013|
MarketMinder's View: It really isn’t—it hasn’t much benefited any income bracket or segment of our society. QE hasn’t much increased the amount of money in the real economy, and data don’t support the notion of a massive increase in equity demand since Fed bond buying began. Investors are simply willing to bid stocks higher because the US economy and corporate earnings are growing despite subdued money supply growth—and the tens of millions of Americans owning stocks all benefit.
|By Ryan Tracy, The Wall Street Journal, 12/18/2013|
MarketMinder's View: Earlier this week, it seemed the Volcker Rule could force smaller banks to take writedowns on—and eventually sell—collateralized debt obligations. However, it seems regulators are working to clarify this passage and limit its unintended consequences. That flexibility is a positive, though it also speaks to how much of the rule remains open to interpretation—something regulators (and markets) likely deal with some time.
|By Staff, EUbusiness, 12/18/2013|
MarketMinder's View: Interestingly, Cyprus wasn’t the blueprint for Slovenia’s hybrid bank bailout/bail-ins. Shareholders and junior bondholders will take haircuts, but depositors and senior bondholders are spared. In our view, this speaks to EU officials’ ongoing flexibility with peripheral nations and should ease Slovenia’s recovery.
|By Staff, Financial Times, 12/18/2013|
MarketMinder's View: While we wouldn’t necessarily call these five countries fragile, all would benefit from freer markets—but this is so regardless of QE, and QE’s eventual end doesn’t make reforms any more or less urgent. Though, in the near term, tapering QE could actually help boost growth some! Yield curves in the developed and developing world are highly correlated, so a steeper US curve post-QE should help curves steepen throughout Emerging Markets—a widely accepted economic positive.
|By Robbie Whelan, The Wall Street Journal, 12/18/2013|
MarketMinder's View: In our view, toughening reporting requirements for non-traded REITs would be a welcome development. These securities are notoriously illiquid, costly and opaque, but many buyers aren’t aware of these drawbacks. It can take years for investors to learn of changes in share prices, and fees are typically very high. The proposed rule would help investors uncover these issues sooner than they may under current rules—ideally helping them make more informed (potentially better) investment decisions. For more, see our 11/25/2013, “The Perils of Non-Traded REITs.”
|By Staff, BBC News, 12/17/2013|
MarketMinder's View: More proof the eurozone is faring better than many expect. In addition to Ireland exiting its bailout on Saturday, Portugal passed its latest evaluation with flying colors—with intentions to leave the bailout program on schedule in mid-2014. For more, see our 12/17/13 cover, “French Dip, Irish Cream.”
|By Szu Ping Chan, The Telegraph, 12/17/2013|
MarketMinder's View: Will US inflation skyrocket once quantitative easing ends and the money supply and velocity finally pick up? Not necessarily. Take the UK’s inflation—it has fallen even after the UK stopped its bond purchases and money supply growth accelerated, and low long-term UK sovereign yields suggest runaway inflation isn’t likely to materialize any time soon.
|By Sylvester Eijffinger and Edin Mujagic, Project Syndicate, 12/17/2013|
MarketMinder's View: Credit ratings usually aren’t telling of a country’s economic health—they’re often based on arbitrary assessments or misinterpretations of the recent past. So even if Germany is downgraded, markets likely yawn—markets, unlike raters, are forward-looking. That said, we don’t see much (if any) rational reason to call Germany’s debt into question considering its public finances are in good shape and its outlook is overall better than hypothesized here.
|By Andrew Ackerman and Katy Burne, The Wall Street Journal, 12/17/2013|
MarketMinder's View: This is the latest instance of a trend we’ve noticed lately—regulatory protectionism. With more and more rules threatening to apply across borders, the risk of retaliatory measures increases, which could impede global commerce. Though not a huge risk at present—the Volcker Rule’s exemption for foreign sovereign debt is a notable positive—it bears watching.
|By Andrew Taylor, MSN, 12/17/2013|
MarketMinder's View: The budget bill moves closer to reality. Politicians continue to surprise the masses! But, in our view, this deal is neither negative nor positive for markets—it’s just politics as usual. For more, see our 12/12/2013 cover, “Budgetary Surprises.”
|By Ed Crooks, Financial Times, 12/17/2013|
MarketMinder's View: Though the projection is three years out, it’s still a testament to the shale boom’s progress—advances in horizontal drilling and hydraulic fracturing techniques have enabled more and more oil and gas reserves to be commercially viable.
|By Morgan Housel, Motley Fool, 12/17/2013|
MarketMinder's View: Even many supposed experts fall victim to assuming past performance determines future returns. Extrapolating recent trends into the future doesn’t work—stocks aren’t serially correlated, and there is a 50/50 chance trends continue or reverse. Forward-looking fundamental factors determine future returns. Resisting the temptation to trade based on past price movement is key to long-term investing success.
|By Eric Morath, The Wall Street Journal, 12/17/2013|
MarketMinder's View: If the Fed continues its bond purchases to combat “weak inflation,” policymakers likely end up disappointed. Quantitative easing is the cause of disinflation, not the solution. Bond buying flattens the yield curve spread, discouraging bank lending and reducing the velocity of money. When money isn’t chasing goods and services, prices tend to fall.
|By Staff, Associated Press, 12/16/2013|
MarketMinder's View: This is evidence of still-dour sentiment more than anything else—86% of investors expect markets to be flat or down next year. Stocks love doing something different than the herd expects, and in our view, stocks have many fundamental reasons to defy expectations by rising.
|By Jason Zweig, The Wall Street Journal, 12/16/2013|
MarketMinder's View: No investor is immune to biases or emotional decision making, like letting fear and greed drive buys and sells. But by being aware of tendencies and shortcomings—and forcing yourself to look them in the eye and critically assess whether each transaction you consider is influenced by emotion or bias—you can battle them. Objective checklists are one way to do this.
|By Pedro Nicolaci Da Costa and Jon Hilsenrath, The Wall Street Journal, 12/16/2013|
MarketMinder's View: Will the Fed start slowing bond purchases this week? We’d wager not even the Fed members know. Sure, Ben Bernanke’s forward guidance lists certain conditions, but Fed members seem divided over whether recent data match the given criteria—and that assumes those criteria even carry much weight in the debates on Constitution Ave. That said, we’d welcome the program’s swift end as data show it has weighed on lending and overall growth. For more, see our 12/9/2013 cover story, “Taper in December?”
|By Staff, The Telegraph, 12/16/2013|
MarketMinder's View: While PMIs can be a useful near-term indicator, they don’t move in lockstep with GDP—so many more variables impact the total economy. Hence why Leading Economic Indexes use only one or two data points from PMI surveys. So to say this report indicates a “two-speed eurozone” seems a touch premature—more likely, the eurozone recovery just stays uneven, with occasional temporary weakness in some areas. For more on France, see Emily Dunbar’s 12/9/2013 column, “Great French-Pectations.”
|By Dhara Ranasinghe, CNBC, 12/16/2013|
MarketMinder's View: While it’s noteworthy that businesses see more favorable economic conditions and plan to boost capex over the next few months, this doesn’t mean Japan’s economy and markets shoot straight up—especially while reform plans remain shelved and the weak yen isn’t providing a net benefit. For the latest on Japan, see our 12/13/2013 cover story, “Shinzo’s Stalemate.”
|By Lucia Mutikani, The Globe and Mail, 12/16/2013|
MarketMinder's View: US manufacturing is growing and accelerating—rather the opposite of what many expect for the broader economy. With the US chugging along and expectations still muted, markets should see more positive surprises looking ahead.
|By Editorial Staff, The Wall Street Journal, 12/16/2013|
MarketMinder's View: Here’s an interesting take on what the US would gain from removing the current crude oil export ban. We agree: “Opponents of exporting oil claim that lifting the ban would raise US gasoline prices, but that misunderstands that oil is a global market. US pump prices would continue to rise or fall with world oil prices regardless of exports. But lifting the ban would lead to more domestic production, which means more jobs in oil drilling and services and everything that goes with such growth. See the booming Williston Basin in North Dakota or the Eagle Ford Formation in South Texas.”
|By Jia Lynn Yang, The Washington Post, 12/16/2013|
MarketMinder's View: Stock buybacks don’t “signal low hopes for economic growth.” If companies truly had a dreary outlook, they wouldn’t spend—whether on buybacks or new equipment, technology and employees. They’d hoard cash. Sure, corporate cash balances are up, but only because firms are making money marginally faster than they can spend it. Plus, with business investment a hair away from all-time highs and buybacks only around 2005 levels, it seems a big stretch to say companies are choosing buybacks over growth-oriented investment.
|By Ambrose Evans-Pritchard, The Telegraph, 12/13/2013|
MarketMinder's View: While China’s financial system has its issues, the notion of a global financial meltdown stemming from a country with $3.5 trillion in forex reserves, strict capital controls and a history of repeatedly recapitalizing its banks seems a touch overwrought. Credit trends there bear watching, but China’s financial system is heavily insulated.
|By Harriet Agnew, The Wall Street Journal, 12/13/2013|
MarketMinder's View: Investors’ biggest enemies are their own emotions and biases. Here’s a snapshot of some of the biggest—knowing and recognizing them is key to winning the fight against them.
|By Lucia Mutikani, Reuters, 12/13/2013|
MarketMinder's View: Actually, they point to deflation—they’re down three straight months. Some blame falling energy prices, but inflation is always and everywhere a monetary phenomenon, and monetary policy is the culprit here. Quantitative easing flattened the yield curve, dropping the velocity of money. When money isn’t doing any chasing, prices tend to fall. More bond buying will keep the yield curve flatter, not push inflation up.
|By Adam Williams, Eric Martin and Nacha Chattan, Bloomberg, 12/13/2013|
MarketMinder's View: The final bill went farther than initial expectations—a nice surprise. Under the new rules, foreign and private firms get the green light to develop Mexican energy resources, including vast untapped shale fields. That in turn should bring Mexico significant investment and cheaper energy costs, benefiting all areas of society and the real economy.
|By Eamon Quinn, The Wall Street Journal, 12/13/2013|
MarketMinder's View: Returning to capital markets doesn’t mean Ireland is out of the woods, but it does speak to how far Ireland has come since its 2010 bailout. Austerity programs might continue, but so does growth—a testament to Ireland’s competitive economy.
|By Victoria McGrane, The Wall Street Journal, 12/13/2013|
MarketMinder's View: Whether or not the Fed switches its benchmark rate from the fed funds target to the reverse repo rate, one shouldn’t overestimate the significance of paying interest on excess reserves (IOER). As Milton Friedman taught, IOER’s purpose is to help keep the effective benchmark rate in line with the Fed’s target—correctly applied, it would always be at the same level as the benchmark rate. It isn’t a lever for money supply control, and it isn’t a factor in banks’ lending decisions.
|By Chikako Mogi and Masaaki Iwamoto, Bloomberg, 12/13/2013|
MarketMinder's View: While these measures should improve rice production, they’re more significant for their political implications. Pushing this through will rankle the all-powerful agriculture lobby, one of the Liberal Democratic Party’s biggest power bases. Whether this is emblematic of PM Shinzo Abe’s broader willingness to tackle vested interests in the name of economic reform remains to be seen, but it’s a noteworthy development.
|By Staff, The Telegraph, 12/13/2013|
MarketMinder's View: No shock here. If raters downgraded the UK based on arbitrary, backward-looking criteria, it stands to reason they’ll need lots of time to gather lots of arbitrary data to look back on before they’ll upgrade.
|By Staff, Associated Press, 12/13/2013|
MarketMinder's View: This doesn’t mean a Chinese hard landing is nigh. While Chinese steel and other industries are wrestling with excess capacity, Chinese leaders have a heavy political incentive to make these issues sound much worse than they are—it’s how they goad other party members into carrying out reforms. China has grown at a fine rate all year despite these issues and can keep doing so as reforms slowly play out.
|By Damian Paletta and Siobhan Hughes, The Wall Street Journal, 12/13/2013|
MarketMinder's View: Ordinarily, we’d cheer legislation enabling free trade agreements, but it seems Congress has duct taped some protectionist measures to this bill. Since Congress won’t write and introduce the bill until January, we won’t know for a while whether this is a net benefit.
|By Staff, EUbusiness, 12/13/2013|
MarketMinder's View: While Portugal might seek a precautionary EU credit line to help smooth its return to capital markets next June, that it likely doesn’t need a full second bailout is a much better outcome than many expected. This is another sign eurozone reality, though not perfect, is still better than too-dour investors believe.
|By Victoria Stilwel, Bloomberg, 12/12/2013|
MarketMinder's View: “I wouldn’t put too much stock in the ups and downs of initial jobless claims over the next several weeks because seasonal volatility is pretty high this time of year.” This—and the fact employment numbers are a late-lagging indicator—show the importance of looking to multiple economic indicators.
|By Mitsuru Obe, WSJ, 12/12/2013|
MarketMinder's View: Seeing how PM Shinzo Abe’s Liberal Democratic Party and coalition partner New Komeito are this divided over a sales tax hike that was passed by the previous administration, it’s exceedingly difficult to imagine them finding common ground on much more politically difficult items, like the many structural economic reforms necessary for Japan to regain competitiveness. Investors broadly seem to expect otherwise and likely end up disappointed.
|By Jesse Solomon, CNN Money, 12/12/2013|
MarketMinder's View: Just like “Sell in May” or the “January effect,” the “Santa Claus rally” is a seasonal myth lacking grounding in reality. Markets move on many factors, but seasonal considerations aren’t among them.
|By Staff, EUbusiness, 12/12/2013|
MarketMinder's View: This formalizes the plans laid out in July, which essentially establish Cyprus as a precedent for future EU bank failures. While simply having plans in place might help shore up confidence in EU banking, it also introduces a number of unintended consequences. Like, for example, a repeat of Cyprus. For our views on this topic, see our 06/28/2013 cover story, “The EU-turn on Banks.”
|By Matthew Yglesias, Slate, 12/12/2013|
MarketMinder's View: We largely agree the Volcker Rule doesn’t much address the causes of 2008’s financial panic—but not because it doesn’t address banks’ “excessive optimism about the trajectory of house prices.” Rather, it has nothing to do with the $2 trillion of exaggerated and in many cases unnecessary writedowns. FAS 157 (mark-to-market accounting) was the culprit, and this was addressed in 2009. For more, see our 12/11/2013 cover story, “Introducing the Volcker Rule.”
|By Robert Wood, The Telegraph, 12/12/2013|
MarketMinder's View: We agree with the broader notion that central banks shouldn’t try to preemptively pop asset bubbles—but more because they’re notoriously terrible at spotting them. If central banks went back to basics, simply serving as lender of last resort and monitoring the money supply, while letting market function a bit more freely, the global economy would likely benefit.
|By James Saft, Reuters, 12/12/2013|
MarketMinder's View: To assume the end of quantitative easing (QE) equates to “credit tightening” ignores the supply side of the equation. By reducing long-term interest rates, QE has perhaps boosted demand for credit, but it has also reduced supply—because the spread between short and long rates is smaller, lending is less profitable, so banks are less apt to do it. When rates rise, lending profitability rises, and banks are more eager to lend. And consumers and businesses will still borrow—rates will remain near historic lows, and cost is only one variable borrowers consider.
|By Staff, Associated Press, 12/12/2013|
MarketMinder's View: Along with solid corporate earnings, a rising LEI and improving employment numbers, chalk up rising retail sales as further evidence the US economy is on solid footing moving forward. It’s also further evidence a perhaps lackluster Black Friday doesn’t determine an entire season.
|By Lori Montgomery, The Washington Post, 12/11/2013|
MarketMinder's View: Tuesday’s proposed bipartisan budget deal would kick the next budget debate to 2015. But little has likely changed: It doesn’t address the debt ceiling whatsoever, overall spending isn’t projected to be much different, and there’s plenty of time to amend the legislation—assuming it even clears the House, Senate and Mr. Obama’s desk as is.
|By Martha C. White, Time, 12/11/2013|
MarketMinder's View: Here’s a relatively sensible take on the expiring farm bill—and why $8-per-gallon milk in 2014 is a highly unlikely scenario. Congress is just extraordinarily unlikely to decide it’s a good political move to allow consumers to pay orders of magnitude more for a basic dietary staple in a midterm election year. Or any year for that matter. But even if you assume they’ve collectively lost their minds, a number of factors have to line up for milk prices to materially increase if Congress doesn’t (even retroactively) renew the bill. And the $8 magnitude often quoted is a sketchy guesstimate. Unless you’re buying organic, in which case milk may run you nearly that much, farm bill or no.
|By Gina Chon, Financial Times, 12/11/2013|
MarketMinder's View: Here’s one unintended consequence of this week’s Volcker rule: It’ll be expensive for regulatory bodies to implement. That may mean more tax dollars flowing to the regulators’ building out a technology base and away from other priorities. Or seeking more funding. All for legislation that does little in the end. For more, see our 12/11/2013 commentary, “Introducing the Volcker Rule.”
|By Michael J. Casey, The Wall Street Journal, 12/11/2013|
MarketMinder's View: Stocks’ rising amid general skepticism doesn’t signal markets are broken—it’s normal. As Sir John Templeton once said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” Investors are almost always wary for the first parts of bull markets—which usually signals there’s more to come. Further, stocks aren’t rising due to QE, which has mostly created a lot of idle excess reserves, or the Fed’s low rates. Markets are growing on strong fundamentals. Finally, wealth isn’t a fixed pie. If one business fares better than another, it doesn’t mean both can’t grow, and if some investors buy stocks chasing yields, bonds overall don’t have to suffer.
|By Staff, Reuters, 12/11/2013|
MarketMinder's View: This is more a marker to take in concert with the development of the Volcker Rule. It just shows how far ahead the US is in the financial reform process versus Europe. And moreover, the wind-down mechanisms being discussed are far from optimal. This is a factor to consider when reviewing global Financials firms and aspects of this (bail-ins) are worth watching. Progress has been amazingly slow—a plus, as it helps firms digest even the good changes—and all of this is a long way from being done.
|By Joshua Zumbrun and Caroline Salas Gage, Bloomberg, 12/11/2013|
MarketMinder's View: Lowering the interest rate paid on banks’ excess reserves (IOER) as a placebo for investors fearing the taper seems bizarre and misguided. It likely won’t loosen credit: IOER’s already at 0.25%—with QE continuing and liquidity ratios increasing, lowering the already low rate more likely won’t encourage banks to lend over holding excess reserves. Key to that is making long-term lending more profitable for banks, which tapering QE should help accomplish.
|By Juan Montes, The Wall Street Journal, 12/11/2013|
MarketMinder's View: Good news for Mexico’s Energy sector, private sector and overall economy: Competition among different companies likely drives more oil production and business activity and creates more wealth that should eventually spread across the country. Globally, however, impact is likely muted—this is a longer term plus, not necessarily one in the immediate offing. For more see Elisabeth Dellinger’s commentary, “What to Do About Mexico’s Energy Reforms.”
|By Staff, Bloomberg, 12/11/2013|
MarketMinder's View: Chinese lending was up big in November—including non-government-funded shadow bank lending—while money supply grew at a strong 14.2% y/y. Add that to last month’s healthy retail sales, exports, manufacturing and services, and the long-discussed Chinese hard landing seems ever less likely.
|By Steve Liesman, CNBC, 12/10/2013|
MarketMinder's View: Yep, unemployment is down, the economy is healthier and fiscal uncertainty appears to be reduced—hitting three conditions the Fed has offered in its comments on when QE will end. Though, we’d not put too much faith in that guidance—words aren’t set in stone, and various Fed members seem to interpret recent developments differently. For more, see our 12/9/13 cover, “Taper in December?”
|By Emma Charlton, Bloomberg, 12/10/2013|
MarketMinder's View: UK industrial production recorded another strong month, with manufacturing leading the charge—another indication UK economic growth continues, and an interesting counterpoint to those who insist the UK expansion can’t be more broad-based without radical reform to boost factories. As the UK moves further past quantitative easing and the rate spread continues widening, capital should become more abundant, giving businesses much more room to invest in capital equipment and other industrial goods.
|By Scott Patterson, Shayndi Raice and Katy Burne, The Wall Street Journal, 12/10/2013|
MarketMinder's View: After three years, the Volcker Rule is finally here—all 1,000 pages of it. But whether you love or loathe the rule, it likely doesn’t much change matters for better or worse. It’s largely a solution seeking a problem, considering proprietary trading losses weren’t the issue in 2008. But it also shouldn’t be a huge compliance headache, given the exemptions for market making and underwriting as well as the long implementation timeline. Plus, its drawn-out negotiations have given stocks plenty of time to digest the rule—now that it’s here, that last bit of uncertainty is fading.
|By Christopher S. Rugaber, Associated Press, 12/10/2013|
MarketMinder's View: October’s rise in job openings is more confirmation US businesses are chugging along—with corporate earnings on the rise and loan growth improving, businesses have more latitude to invest in equipment and employees.
|By Staff, Jiji Press, 12/10/2013|
MarketMinder's View: While markets would no doubt like a swift TPP trade accord, the slow progress doesn’t surprise—large trade deals with over a dozen nations in the mix take time and don’t always come to fruition. All the competing interests impede a quick agreement. But the world doesn’t need big deals for trade to get freer. Several recent and pending smaller deals have many potential benefits. For more, see our 12/10/13 cover, “We Are the World.”
|By Matt Levine, Bloomberg, 12/10/2013|
MarketMinder's View: “But the biggest conceptual objection to the Volcker rule is that its central premise makes no sense. Proprietary trading had basically nothing to do with the financial crisis, and banking is about taking ‘proprietary’ risk with depositor money. This is mostly called ‘lending,’ but calling it ‘lending’ doesn't make it safer than calling it ‘prop trading.’” On the bright side, regulators addressed 2008 four and a half years ago, when they removed mark-to-market accounting requirements from illiquid assets, drastically reducing the likelihood of another $2 trillion write-down spiral. For more, see our 10/2/13 cover story, “Writing Down the Volcker Rule.”
|By Staff, Associated Press, 12/10/2013|
MarketMinder's View: Another month of double-digit gains—more evidence China is on stronger footing than many believe. Demand wouldn’t be so strong if a hard landing were nigh.
|By Murray Coleman, The Wall Street Journal, 12/09/2013|
MarketMinder's View: So it seems even the originator of the cyclically adjusted price-to-earnings ratio (CAPE) is skeptical of its utility outside of the US. In our view, though, what’s true overseas is true globally. The CAPE—which uses a 10-year average of earnings—is just too backward looking to be of any material use in forecasting stocks’ future direction.
|By Paul Vigna, The Wall Street Journal, 12/09/2013|
MarketMinder's View: First, let’s be clear: There is a substantial difference between a sharp deflationary spiral and slowing inflation (disinflation) or even modest deflation. But what’s more, this article would have you believe deflation is occurring in spite of the Fed’s actions—that there is a persistent drag weighing on prices. Yet, that drag is actually emanating from one place: the white building at 20th and Constitution in Washington, DC. The Fed’s bond buying is actually slowing lending—and hence is the major reason inflation rates are low.
|By Mark J. Perry, AEIdeas, 12/09/2013|
MarketMinder's View: “It’s highly likely that most of today’s high-income, college-educated, married individuals who are now in their peak earning years were in a lower-income quintile in their prior, single years, before they acquired education and job experience. It’s also likely that individuals in today’s top income quintiles will move back down to a lower income quintile in the future during their retirement years.... Because the key income-determining demographic variables change over a person’s lifetime, income mobility and the American dream are still ‘alive and well’ in the US.”
|By John Carney, CNBC, 12/09/2013|
MarketMinder's View: Though we agree Quantitative Easing (QE) isn’t inflationary, we rather disagree with the notion it has no effect. We’d argue that effect, while bond buying is underway, is disinflation or deflation. QE’s bond buying pushes up the prices of long-term securities, reducing yields. This flattens the yield curve, making bank lending less profitable. Banks are therefore discouraged from lending, meaning cash on banks’ bolstered balance sheets doesn’t end up reaching the broader economy. For the latest on QE, see Mary Holdener’s 12/3/2013 column, “Q the End.”
|By Adam Williams, Nacha Cattan and Ben Bain, Bloomberg, 12/09/2013|
Though the proposals still need formal legislative approval, allowing foreign firms to compete with Mexico’s state-run Energy monopoly likely bodes well for the economy—domestically and perhaps even more broadly. For more, see our 11/27/2013 cover story, “Mexico’s Quiet Reform.”
|By Annalyn Kurtz, CNN Money, 12/09/2013|
MarketMinder's View: Fundamentally, this article seems emblematic of widespread skepticism. The economy has long been growing, though many are frustrated by the pace of recovery. For stocks, this is a near perfect backdrop for continued bull market. Even a modestly growing economy is a tailwind for profitability, and folks’ skeptical expectations are a low bar for reality to exceed.
|By Staff, Japan Times, 12/09/2013|
MarketMinder's View: While growth is growth, this is a far from stellar report. The larger-than-estimated downward revision to Japan’s Q3 GDP showed the primary driver behind the rise was government consumption. Business investment was flat and consumer spending rose a meager 0.2%. This is not exactly a ringing endorsement of Abenomics—slow private sector growth has long plagued Japan’s economy. For more, see our 10/22/2013 cover, “Japan’s Quantitative Easy Button.”
|By Mohamed A. El-Erian, Project Syndicate, 12/09/2013|
MarketMinder's View: This gives government too much credit for economic results in the US. Whatever you think of the two parties in Washington, the private sector has driven economic growth for more than four years now. And gridlock is actually bullish, not bearish! Gridlock effectively means big, sweeping legislation that could materially impact markets negatively is unlikely to pass. In a country with a highly competitive economy—like the US—gridlock is the bee’s knees.
|By Klaus Schwab, The Telegraph, 12/06/2013|
MarketMinder's View: “Spurred by economic liberalization, Sub-Saharan Africa is now, according to the IMF, second only to developing Asia as the fastest growing region in the world. This shift would be difficult to envisage without the inspiring leadership of a man who believed in openness over isolation, humour over hubris, and reconciliation over bitterness.”
|By Scott Patterson, The Wall Street Journal, 12/06/2013|
MarketMinder's View: In our view, this rule likely increases banks’ regulatory burdens without ensuring everyone behaves perfectly. In any profession, rules aren’t guaranteed to prevent naughty behavior—values matter more. At the same time, bank execs already have a powerful incentive to keep their troops in line—profits!—and many of the mechanisms for compliance with this new rule likely exist already thanks to Sarbanes-Oxley. (Not that we’d ever call the dastardly SarbOx a positive).
|By Janet Hook, The Wall Street Journal, 12/06/2013|
MarketMinder's View: In a rare change of page, it seems the House and Senate are nearing a budget compromise a few weeks early—on a two-year deal! Sure, differences persist—Harry Reid and John Boehner aren’t holding hands and singing “Kumbaya”—and this doesn’t guarantee a deal gets done. But it does suggest the incentives to compromise are powerful, which is something investors fearing budget battles might not appreciate.
|By Anthony Mirhaydari, MarketWatch, 12/06/2013|
MarketMinder's View: True, human behavior is a key factor in markets and doesn’t change much over time. But the historical comparison between today and Great Depression (that begins in earnest in paragraph 5) is beyond flawed. There was no quantitative easing in the 1920s, the Fed didn’t overstimulate leading up to the crash, the depression’s deflation was not all productivity driven (it was tied to a more than 30% contraction in the money supply), Dow chart patterns aren’t predictive, and the US economy is growing just fine. Finally, bears are not “capitulating left and right” presently, with Exhibit A being this article.
|By Ylan Q. Mui and Zachary A. Goldfarb, The Washington Post, 12/06/2013|
MarketMinder's View: One, we’ve already had a recovery. It started four and a half years ago. We’re well into expansion now. Two, while slower government spending has dragged on headline growth, a bigger reason for the slow recovery is the Fed’s quantitative easing (QE), which discouraged lending and flattened M4 money supply growth. This made capital difficult for businesses to obtain, hindering investment and growth. QE’s end should be a more powerful force for growth than a few budget tweaks, which won’t much impact the private sector.
|By Staff, Associated Press, 12/06/2013|
MarketMinder's View: What’s telling here is auto lending is still rising even as interest rates drift higher. Incrementally higher borrowing costs haven’t hit demand, and consumers should be able to weather further rises moving forward. Many other variables influence borrowing decisions.
|By Staff, Xinhua, 12/06/2013|
MarketMinder's View: While it remains to be seen how much Chinese shale booms, the industry is perhaps a new source of growth for China—more evidence its economy should remain on better footing than many believe.
|By Joseph Stiglitz, The Guardian, 12/06/2013|
MarketMinder's View: If you define “worst” as a high risk of the region splintering within the hour, sending currency values all over the map and perhaps cancelling all the aid promised to Greece and Portugal, we reckon any rational person would agree it’s over. Does the region have long-term political issues to resolve? Do millions of Greeks and Spaniards need to find work? Does Greece need to reclaim the quarter of its economy that vanished over the past six years? Yes, yes and yes—no question. But investors have long been aware of all these issues and more, leaving stocks plenty of room to grow on slow economic improvement.
|By Dessianing Ariyanti, Associated Press, 12/06/2013|
MarketMinder's View: Freer trade is freer trade—markets love it—but we wouldn’t suggest this is the be all, end all for unrestricted global commerce. Many bilateral and regional free trade agreements have taken effect since this round of WTO negotiations began 12 years ago, and many more are pending. These, rather than the WTO’s clunky bureaucracy, likely have a bigger impact on trade growth over time.
|By Jeremy Warner, The Telegraph, 12/06/2013|
MarketMinder's View: Leaving politics aside, the thesis that the UK can’t continue growing over time without radical reform is flawed. If the UK’s recovery can gain traction with certain regulations and taxes in place, it can keep growing against that backdrop. There isn’t a tipping point where things must change—especially not in an economy as free and competitive as Britain’s. In our view, the relatively quiet Autumn Statement is a positive—fewer changes create fewer winners and losers.
|By Chris Dieterich and Kaitlyn Kiernan, The Wall Street Journal, 12/06/2013|
MarketMinder's View: We see no evidence folks are any less fearful of quantitative easing’s end—headlines show jitters aplenty. The simple truth is markets have already dealt with that fear. Long-term Treasury rates have risen amid taper talk, digesting the likelihood of the program’s impending end. That’s how markets work—they always look forward. Though, as ever, volatility could accompany the eventual taper announcement.
|By Jeffrey Sparshott, The Wall Street Journal , 12/05/2013|
MarketMinder's View: The general reaction to today’s GDP revision seems overly dour, in our view. Sure, economies can’t grow forever on inventories, but this is just one quarter. Considering many other recent positive data (higher home sales, total trade and manufacturing), the overall US picture looks better than many give it credit for.
|By Simon Kennedy, Bloomberg, 12/05/2013|
MarketMinder's View: While fewer public sector cuts globally might be a tailwind for headline global GDP, this isn’t necessary for growth to continue or even accelerate. Globally, most LEIs—which generally track private sector activity—are high and rising. Add in near-record highs in US business investment, robust UK activity and expanding eurozone manufacturing, and the private sector appears more than capable of leading global growth.
|By Robert Samuelson, Real Clear Markets, 12/05/2013|
MarketMinder's View: The notion stocks are “disconnected” from the real economy—and can’t stay that way—is flawed. It assumes stocks track the economy—but they don’t! Stocks reflect the earnings and growth of publicly traded companies. Headline GDP growth might be slow, but businesses are growing and investing at a healthy clip, and earnings hit new highs well before stocks did. Headline GDP growth needn’t turn stellar for this to continue. For more, see our 12/04/2013 cover story, “Pricking the Stock Market Bubble Debate.”
|By Phil Wahba, Reuters, 12/05/2013|
MarketMinder's View: That a handful of retailers had disappointing Novembers doesn’t automatically mean the industry overall did badly—none of these companies is inherently a bellwether. Then again, even if retail sales did pull back in November, it doesn’t necessarily imply future weakness or a fall in total consumer spending. Especially with disposable incomes rising. For more, see our 12/2/2013 cover story, “Doorbusters! Discounts! Ka-ching!”
|By Daniel Gros, Project Syndicate, 12/05/2013|
MarketMinder's View: While we agree with the sentiment here—Germany has taken misplaced flack for its trade surplus—the notion all of northern Europe should increase domestic demand seems misplaced. What matters more is for less competitive nations to become more efficient and exploit their comparative advantages so they, too, can enjoy higher exports. “Trade adjustments” aren’t necessary for global growth to continue.
|By Ayesha Bhatty Clough, BBC News, 12/05/2013|
MarketMinder's View: Between shale and the tar sands, Canadian energy production is booming, driving economic growth and creating jobs in all segments of the economy. As a result, the country has been importing workers from the UK and Ireland—growth in one country can create widespread opportunities.
|By Graham Ruddick, The Telegraph, 12/05/2013|
MarketMinder's View: While the UK economy has grown nicely this year, businesses have still battled headwinds. Among them were high taxes on commercial real estate—e.g., rented storefronts. Plans to relax and perhaps eventually streamline this burden is an incremental tailwind for UK businesses heading into 2014.
|By Per Liljas, Time, 12/05/2013|
MarketMinder's View: Fewer restrictions and tariffs mean more profits for South Korean steel companies and Australian ranchers, lower prices for consumers and more world trade—something markets like!
|By Caroline Baum, Bloomberg , 12/05/2013|
MarketMinder's View: It seems awfully difficult to claim we need permanent fiscal stimulus to boost growth in a country where private-sector innovation still creates massive opportunities for growth and development. Exhibit A: the shale boom. What would benefit the US most, at this point in the cycle, would be a freer flow of capital so businesses can invest and grow—basically, more bank lending. With more money moving throughout the real economy, headline growth figures would likely look much different.
|By Staff, Der Spiegel, 12/05/2013|
MarketMinder's View: Negative interest rates, additional bank aid and quantitative easing aren’t cure-alls for slow eurozone lending and could very well increase the risk of monetary policy blunders. Eurozone lending is slow because changing regulatory standards and upcoming stress tests give banks a big incentive to hoard capital and not take additional risk. Until the regulatory horizon clears, it’s difficult to envision banks lending enthusiastically.
|By Lucia Mutikani, Reuters, 12/04/2013|
MarketMinder's View: US private payrolls soundly beat expectations, and overall trade grew. In our view, the discussion of these positive data points’ potential influence over the Fed’s decision to taper is a red herring—more important is they are more evidence of a healthy, ongoing US expansion.
|By Jamie Smyth, Financial Times, 12/04/2013|
MarketMinder's View: The Bank of Ireland’s repaying the state accomplishes two things as the country exits its bailout: It contributes to state funding (supporting the country’s decision to decline more credit from the EU/ECB/IMF troika) and waters down the relationship between the Irish banking sector and government—why Ireland’s financial crisis resulted in a troika-delivered sovereign bailout. Perhaps most importantly, though, improvement in the financial system likely boosts investors’ confidence in Ireland. Headwinds still remain, but the country seems on the right track.
|By David Parkinson, The Globe and Mail, 12/04/2013|
MarketMinder's View: In our view, this gives forward guidance too much credit. In the short term, markets may see higher or lower prices, interest rates, currencies, etc., based on investors’ reactions to politicians’ announcements. But in the long term, it’s what politicians do and how it impacts fundamentals that drives markets. Hence, talking about a rate change without any follow through likely doesn’t have much material impact. For one, inflation is always and everywhere an actual monetary phenomenon.
|By Neil Irwin, The Washington Post, 12/04/2013|
MarketMinder's View: The US dollar’s role in neither trade, finance nor as a reserve currency grant our economy an “exorbitant privilege” lowering interest rates and making our debt affordable. In fact, our deep, liquid capital markets do that—and make the dollar attractive as a medium of exchange. This reverses causes and effect. What’s more, the dollar’s share of global reserves has been declining for some time. Gradual shifts do not threaten markets much. Finally, China’s economy is largely closed and its currency’s use is highly controlled—which present big headwinds to its replacing the dollar as the world’s favorite forex reserve. For more, see Elisabeth Dellinger’s column, “The Tale of the Dollar’s Demise.”
|By Staff, Reuters, 12/04/2013|
MarketMinder's View: Rising mortgage rates may have deterred a few fringe home buyers, but ultimately, rates are historically low and prices are recovering from a low base. The discussion here is much too skeptical of the data—October’s strong home sales suggest the housing recovery has staying power—an incremental tailwind for the broader economy.
|By Al Yoon, The Wall Street Journal, 12/04/2013|
MarketMinder's View: In the wake of Detroit’s bankruptcy and higher borrowing costs for some municipalities, concerns over state governments’ solvency have been circulating, but most seem unfounded. States’ finances are overall improving and are in good order, and those whose aren’t, like Illinois, are working to improve their ledgers. That’s likely much more meaningful for muni markets than a bad egg or two.
|By Scott Paterson, The Wall Street Journal, 12/04/2013|
MarketMinder's View: While we’d argue this largely seems a solution in search of a problem—and potentially makes banks’ achieving profits a bit more difficult, a negative—the rule’s (finally) passing likely won't impact US Financials much. The long debate period (about three years) has given stocks and banks ample time to adapt: “Because the rule was widely anticipated, most banks already have done away with operations focused on proprietary trading.” Further, the rule is expected to be implemented in 2015, granting another full year to consider specifics. All in all, this may not be the safeguard some presume, but it likely doesn’t present a huge risk in the here-and-now either.
|By Staff, BBC, 12/04/2013|
MarketMinder's View: The eurozone may not have grown as much as previous months, but growth is growth, and the majority of the area still did fine—German and Spanish PMIs were especially notable—even as weaker spots remain. Overall, this seems more in line with the eurozone’s uneven recovery than a loss in momentum. This coverage is a good example of highly negative sentiment regarding the eurozone, and for stocks, this creates a fairly low bar for reality to exceed—fuel for more bullish surprises ahead.
|By Staff, Reuters, 12/03/2013|
MarketMinder's View: When small firms can borrow more, they can invest more in growth-oriented endeavors. We’d expect business borrowing to continue increasing as quantitative easing (QE) ends and long-term interest rates normalize—a wider spread between short- and long-term interest rates makes lending more profitable, encouraging banks to lend more.
|By Aaron Smith, CNN Money, 12/03/2013|
MarketMinder's View: While this is nice to see, it’s just one day—just as a lackluster Black Friday was just one day. Seasonal totals matter more, and yearly matters more than seasonal. Over the season and year, the highs and lows should average out, and with disposable incomes rising, overall consumer spending should keep growing. For more, see our 12/2/13 cover story, “Doorbusters! Discounts! Ka-ching!”
|By Jude Webber, Financial Times, 12/03/2013|
MarketMinder's View: Mexico’s energy reform plans are moving closer to reality, and with the leftist Party of the Democratic Revolution abandoning the multiparty Pact for Mexico, the two main parties have more bandwidth to pursue more sweeping change than President Enrique Peña Nieto first outlined, including allowing private firms to enter production-sharing or outright concession agreements. For more, see Elisabeth Dellinger’s column, “What to Do About Mexico’s Energy Reforms.”
|By Alison Sider and Kristin Jones, The Wall Street Journal, 12/03/2013|
MarketMinder's View: The benefits of shale fracking aren’t limited to energy markets—the boom creates opportunities throughout the economy. In this case, it has driven demand for sand, one of the key ingredients in hydraulic fracturing, and firms are lining up to mine, process and transport it.
|By David Biller, Bloomberg, 12/03/2013|
MarketMinder's View: Brazil’s contraction is an example of how misguided policies can hurt growth. The government’s attempts to stimulate certain sectors created headwinds for others, and policies aimed at containing fuel and food prices weighed on investment. However, it’s important to scale: One country’s gross domestic product decline over one quarter likely isn’t enough to derail global reacceleration.
|By Kay Johnson and Dessianing Ariyanti, Associated Press, 12/03/2013|
MarketMinder's View: The “Doha round” of World Trade negotiations has been in the works for 12 years now, and it has been more or less stalled for over five—which is largely to be expected when you have over 100 countries with competing interests trying to agree on trade policies. But regional and bilateral trade agreements have popped up in droves since the Doha round started, helping global trade get significantly freer even as the global deal stalled. Many more deals are in the works.
|By Staff, BBC News, 12/03/2013|
MarketMinder's View: The hot construction PMI comes on the heels of a gangbusters manufacturing PMI and another rise in retail sales—all further evidence the UK’s expansion is gaining speed. Plus, more construction should mean an increase in home supply over time, which should help keep that widely feared housing bubble deflated.
|By Jason Zweig, The Wall Street Journal, 12/02/2013|
MarketMinder's View: Thanks to innovation and technological advancements over the years, overall, investing has become more efficient, less expensive and more transparent. That doesn’t necessarily translate to “easier,” but it does mean the market is much more accessible for individual investors than in past decades.
|By Neil Irwin, The Washington Post, 12/02/2013|
MarketMinder's View: This ignores one very important fact: Stocks are forward looking—not backward. They’ve priced in an eventual slowing to the Fed’s bond buying since Bernanke alluded to it last May. And the fact is markets could be pricing in the reality of QE—that a taper will actually be economic stimulus. For more, see Brad Pyles’ 10/31/2013 article, “Why This Bull Market Has Room to Run.”
|By Staff, Reuters, 12/02/2013|
MarketMinder's View: US manufacturing continues to improve—a nice tailwind for the economy and markets.
|By Nouriel Roubini, The Guardian, 12/02/2013|
MarketMinder's View: We have much to quibble with here. First, the biggest contributor to the 2008 financial crisis was the implementation of FAS 157’s fair value accounting. The housing bubble was part of the backdrop, but losses associated with bad loans amount to about $300 billion—insufficient to drive a financial crisis. However, FAS 157 required the paper destruction of around $2 trillion in banks’ capital. Additionally, housing prices aren’t artificially inflating because of monetary policy—overall, they’re rising due to increased demand and restricted supply. If monetary policy were such a huge inflater of housing bubble 2.0, why is loan growth sluggish in the current expansion?
|By Charles Stein, BusinessWeek, 12/02/2013|
MarketMinder's View: For every seller, there is a buyer—the market is an auction, which means cash flowing into stocks from bonds (to the extent that is even measurable) isn’t necessary for stocks to rise. Fund flows may be illustrative of prevailing sentiment, but they are not predictive of market direction. Late 1999 and early 2000’s big fund inflows were one facet alluding to overoptimistic sentiment, but just that. And they followed years of positive inflows. Assuming 2013’s inflows—one year after massive outflows—means a bear is surely on the horizon not only misunderstands fund flows, it gives one data point much too much credence.
|By John Redwood, The Telegraph, 12/02/2013|
MarketMinder's View: Yes, they can—but not for the reasons mentioned here. The explanation here is the theory the Fed’s operating on—attempting to stimulate the economy by increasing loan demand. However, the supply of loans is much reduced—in our view due to the Fed’s QE bond buying. The lower long-term rates relative to short term, the less profitable a long-term loan. QE is a weight on the economy—markets have risen despite it thanks to healthy fundamentals in the overall robust private sector.
|By Michael McKee, Bloomberg, 12/02/2013|
MarketMinder's View: Here’s a pithy, two-minute video explaining why all the handwringing and celebrating over what a weekend’s retail sales might be is overdone.
|By Archie Norman, The Telegraph, 12/02/2013|
MarketMinder's View: Well-intended as some regulation may be, “regulation has a ratchet effect. It is imposed but rarely repealed, resulting in ‘archaeology of regulation,’ layers upon layers occurring over decades.” These so-called ‘layers’ of regulations are often solutions in search of problems, and can often cause headwinds for markets down the road.
|By Katrina Bishop, CNBC , 12/02/2013|
MarketMinder's View: November eurozone manufacturing PMI beat expectations and expanded for a fifth straight month. Yes, there is still variance from nation to nation, but that’s to be expected in a diverse, 18-nation bloc and doesn’t indicate anything about future fundamentals. In our view, though the rate may be slow, conditions in the eurozone overall seem to be better than many appreciate.
|By Neil Irwin, The Washington Post, 11/29/2013|
MarketMinder's View: There isn’t much of a discernable relationship between one day’s sales and an entire year’s worth of economic growth. Black Friday deals are nice to score and a fun tradition, but investors should look much more broadly to see how the US economy is doing.
|By Xavier Rolet, The Telegraph, 11/29/2013|
MarketMinder's View: While many bemoan the slow recovery in UK manufacturing and exports, many positives are going largely unnoticed. Here’s a look at some of the highlights—a timely example of reality exceeding perception.
|By Spencer Jakab, The Wall Street Journal, 11/29/2013|
MarketMinder's View: None of these alleged signs of “froth” mean stocks are overvalued. Nor are investors “downplaying other danger signs.” They’re doing the opposite: ignoring the many positives underpinning this bull market. A growing—and potentially reaccelerating—global economy, rising corporate revenues and earnings and a relatively calm political environment, combined with still-skeptical investor sentiment, create a nice backdrop for this bull market to continue.
|By Staff, Jiji Press, 11/29/2013|
MarketMinder's View: While this news seems nice, it isn’t necessarily a sign Japan is getting stronger. Many Japanese consumers likely pulled big-ticket purchases forward to beat the sales tax hike that takes effect next April.
|By Lydia DePillis, The Washington Post, 11/29/2013|
MarketMinder's View: We’ll not weigh in on whether getting a loan from a pawnshop is a viable business strategy. But that this is even an issue shows you just how much quantitative easing (QE) has limited the supply of loans. By reducing long-term interest rates, the Fed flattened the yield spread, shrinking banks’ profits on lending. Creditworthy borrowers can get loans just fine, but iffier prospects—many small businesses—can’t. Many thus turn elsewhere, to more expensive lenders. This is a big reason growth has been slow during this expansion.
|By Heribert Dieter, The Wall Street Journal, 11/29/2013|
MarketMinder's View: The European Commission and others complaining about Germany’s trade surplus overlook an important fact: Germany’s high exports are the result of high foreign investment. Most German goods are produced abroad. If Germany cuts back, German investment in Eastern Europe, developing nations and even the US would fall, introducing unnecessary economic headwinds.
|By Ambrose Evans-Pritchard, The Telegraph, 11/29/2013|
MarketMinder's View: While soil degradation is an issue, it isn’t guaranteed to cause global famine—and it probably won’t. Since the dawn of civilization, human ingenuity (aided by free markets) has proven quite adept at allocating scarce resources and overcoming difficulties like these. For more, see Todd Bliman’s classic column, “A Common Thread Between Horse Manure and Peak Oil.”
|By Ben Sills and Lucy Meakin, Bloomberg, 11/29/2013|
MarketMinder's View: Once again, investors demonstrate ratings agencies’ fecklessness. The world has long known the Netherlands has some economic headwinds, and markets started dealing with these long before S&P announced its decision.
|By Gregory J. Millman, The Wall Street Journal, 11/29/2013|
MarketMinder's View: A pending regulatory change requiring banks’ boards “to approve contracts involving ‘critical activities’” could expose board members to greater liability, potentially hollowing out the pool of people willing to serve as directors. Big banks with big legal and compliance resources likely don’t see a talent drain, but community banks could come under pressure, potentially resulting in more M&A and limiting competition over time.
|By Harry Wilson, The Telegraph, 11/29/2013|
MarketMinder's View: UK banks get some more breathing room, which could ease some of the pressure on lending—a long-awaited positive.
|By Staff, EUbusiness, 11/29/2013|
MarketMinder's View: With Georgia and Moldova signing association agreements with the EU, global trade just got a bit freer—something markets like.
|By Mark J. Perry, AEIdeas, 11/27/2013|
MarketMinder's View: Using Thanksgiving dinner as an example, data here prove: “Relative to our income and relative to food prices in the past, food in America has been more affordable in recent years than at any time in history.” This couldn’t have happened without competitive markets and long-term economic growth.
|By Ylan Q. Mui, Washington Post, 11/27/2013|
MarketMinder's View: It’s true rising rates may deter some potential home buyers, but rates are still at historical lows—meaning housing is and will remain very affordable for some time, even as rates continue rising and QE eventually ends. Plus, cost is just one variable homebuyers consider—income growth, job security and folks’ confidence in the future all play vital roles.
|By Andrew Frye, Bloobmerg, 11/27/2013|
MarketMinder's View: One of Italy’s biggest headwinds is political gridlock and uncertainty. With Berlusconi (who opposed many proposed economic reforms) out of the picture—and his PdL party split into two factions, one of which supports the current governing coalition—the Italian political scene has become a little clearer for investors, a small positive. Sweeping reform still remains unlikely, but incremental changes may be more possible, including much-needed electoral reforms.
|By Alex Rosenberg, CNBC, 11/27/2013|
MarketMinder's View: First, stocks aren’t in a bubble, which is partly evident by how many pundits and investors believe they are. Bubble fears are self-deflating—if we were in bubble trouble, no one would suspect it. Plus, Fed policy is hardly helping stocks rise. Second, the reserves created through QE haven’t bled over into broad money supply growth. Firms have found ways to grow and profit anyway, which is why stocks have risen so far.
|By Staff, The Conference Board, 11/27/2013|
MarketMinder's View: “The US LEI [one of the most forward-looking economic indicators next to stocks] has increased for four consecutive months … Overall, the data reflect strengthening conditions in the underlying economy,” like a widening yield spread and rising new orders. Plus, there hasn’t been a recession following a rising LEI trend in the last 50 years—recessions typically only appear after LEI has fallen for some time, which is clearly not the case today.
|By Szu Ping Chan, The Telegraph, 11/27/2013|
MarketMinder's View: The UK’s economic recovery continues gathering steam, with notable growth in inventories, consumption and business investment. Many worry weak foreign demand may hold back the economy some, but exports are volatile on a quarterly basis, and as areas like housing and business investment likely continue growing—and global demand improves—we expect the UK will accelerate.
|By Michelle Jamrisko, Bloomberg, 11/27/2013|
MarketMinder's View: First, the government shutdown probably didn’t have a huge impact on business investment. Businesses plan far ahead to invest, grow and hire—any plan too easily foiled by politics likely wouldn’t have succeeded anyway. Moreover, one month’s data isn’t a trend. Economies regularly grow in fits and bursts with intermittent softness. Consider September’s durable goods orders grew +4.1% y/y, while employment, housing and retail sales are improving, too.
|By Claire Jones, Sam Fleming and Robin Harding , Financial Times, 11/27/2013|
MarketMinder's View: The end of US quantitative easing (QE) shouldn’t hurt the eurozone—it could actually help promote overall growth. Yield spreads globally tend to be highly correlated, so as the US yield spread continues widening post-QE, so should eurozone spreads—a universally accepted bullish feature. Markets may rock on sentiment in the meantime, but longer term, stocks should get a nice boost as reality exceeds expectations.
|By Gabriel Casillas, Bloomberg, 11/26/2013|
MarketMinder's View: “By increasing access to banking services, this ‘stealth reform’ has the potential to increase the productivity of small and medium enterprises and help workers to smooth their consumption patterns, changing Mexico’s patterns of social mobility and income distribution for the better.”
|By Staff, The Wall Street Journal, 11/26/2013|
MarketMinder's View: If France follows through with proposed “comprehensive tax reform” next year, it could help streamline the system, making tax preparation less confusing and costly and potentially reducing many households’ and businesses tax burdens—all of which economies and markets tend to like. But, whether officials follow through remains to be seen.
|By Victoria Stilwell, Bloomberg, 11/26/2013|
MarketMinder's View: Despite fears of rising mortgage rates curbing housing demand, housing permits jumped to a five-year high—a sign the housing recovery is chugging along.
|By Kathleen Madigan, The Wall Street Journal, 11/26/2013|
MarketMinder's View: Consumer confidence surveys don’t predict economic activity—they reflect how people feel at the time they take the survey, which doesn’t necessarily predict how they’ll actually behave. Retail sales and overall spending numbers often diverge from confidence numbers.
|By Bruno Waterfield, The Telegraph, 11/26/2013|
MarketMinder's View: While we take all long-term forecasts with a massive grain of salt, even if these estimates are off target, it seems clear European economies could benefit tremendously if they embrace shale.
|By John Wasik, Reuters, 11/26/2013|
MarketMinder's View: As this piece points out, if folks want to reduce their portfolio’s expected volatility, there are likely more efficient, less costly ways to accomplish this than buying “managed volatility funds” that blend long and short equity positions. Though, this doesn’t necessarily provide a “downside cushion”—all investments have the risk of loss.
|By Aya Takada and Chikako Mogi, Bloomberg , 11/26/2013|
MarketMinder's View: For four decades, Japan has paid farmers to produce less rice, keeping prices artificially high. In addition to making production more efficient, phasing out this system helps pave the way for Japan to overcome TPP obstacles, though anything could change between now and the 2019 end-date. In the meantime, that PM Shinzo Abe approved a change that was unpopular with a key vested interest group could bode well for future politically unpopular (but necessary) changes.
|By Scott Patterson, The Wall Street Journal, 11/25/2013|
MarketMinder's View: The Volcker Rule—a regulatory effort to wall off banks’ deposit-taking businesses from their proprietary trading desks—remains unwritten by the CFTC and bank regulators, and as a result, it seems some are considering passing their own version to meet the self-imposed end-of-year deadline. This is a matter worth watching in the sense regulatory confusion over the issue would be far from ideal. After all, a clearly defined Volcker Rule doesn’t seem likely to be even as strict as the Glass-Steagall Act, which banks operated just fine under for 60-plus years, but messy rulemaking is a factor worth considering. Lastly, even if no rule results—possible—remember the Volcker Rule is largely a solution seeking a problem: Proprietary trading was not a significant factor in 2008’s financial panic. For more, see our 11/20/2013 cover story, “Vexed by the Volcker Rule.”
|By Zachary Karabell, The Washington Post, 11/25/2013|
MarketMinder's View: While we don’t agree with everything here, we do agree with the notion the Fed’s quantitative easing funny money isn’t what’s propping up markets—or the economy. Markets are growing because economic fundamentals are improving, which QE hasn’t stimulated much since the Fed’s bond buying depresses long-term interest rates making lending less profitable and, hence, less common.
|By Catherine Rampell, The New York Times, 11/25/2013|
MarketMinder's View: We’d argue this piece misses an important aspect of economics—supply. It’s true demand for turkeys increases leading up to the Thanksgiving holiday, but this theory doesn’t account for producers ramping up production to meet that demand. Increased supply counteracts increased demand—likely contributing to lower prices. Especially since turkey has an expiration date—excess supply has no value
|By Matthew Philips, BusinessWeek, 11/25/2013|
MarketMinder's View: While the tone of this is a little off in our view—focusing so much on the “pain” at the pump implies rising gasoline prices are a weight on the economy, which lacks historical support—we find the balance quite interesting. It says something about regulation that it’s one-third as expensive to ship refined products from Houston to Sao Paolo, Brazil or Lagos, Nigeria, than it is Houston to Miami.
|By Matthew Philips, BusinessWeek, 11/25/2013|
MarketMinder's View: While the tone of this is a little off in our view—focusing so much on the “pain” at the pump implies rising gasoline prices are a weight on the economy, which lacks historical support—we find the balance quite interesting. It says something about regulation that it’s one-third as expensive to ship refined products from Houston to Sao Paolo, Brazil or Lagos, Nigeria, than it is Houston to Miami.
|By Matthew Philips, BusinessWeek, 11/25/2013|
MarketMinder's View: While the tone of this is a little off in our view—focusing so much on the “pain” at the pump implies rising gasoline prices are a weight on the economy, which lacks historical support—we find the balance quite interesting. It says something about regulation that it’s one-third as expensive to ship refined products from Houston to Sao Paolo, Brazil or Lagos, Nigeria, than it is Houston to Miami.
|By Paul Hannon, The Wall Street Journal, 11/25/2013|
MarketMinder's View: Global total trade was up in Q3—illustrating the globe’s economic acceleration in the quarter. Further fuel for markets.
|By Staff, The Economist, 11/25/2013|
MarketMinder's View: Carving up the global financial system likely is a negative factor. However, the extent to which that actually happens remains to be seen—there are regulatory bodies arguing both sides even just within the US.
|By Samuel Lee, Morningstar, 11/25/2013|
A spot-on critique of hypothetical or back-tested performance. We have little to add beyond, “A skeptic might conclude back-tests are to induction what Richard Simmons' hair is to the category of things that can be burned for fuel.” For more, see Todd Bliman’s 08/29/2013 column, “Nobody’s Fool.”
|By Tom Braithwaite, Stephen Foley and Robin Harding, Financial Times, 11/25/2013|
MarketMinder's View: We have much to quibble with here. The argument for lower interest rates paid on banks’ excess reserves on deposit at the Fed operates on the notion banks need to be spurred to action by a slap on the wrist. We’d suggest there’s a more effective, time-tested means to spur bank lending: End quantitative easing. By no longer flattening the yield curve through long-term asset purchases, banks would have a greater incentive to lend—likely providing the same stimulus the Fed would be seeking to find with another interest rate cut. For the latest on QE, see our 11/13/2013 cover story, “Timing the Taper.”
|By Jeremy Warner, The Telegraph, 11/22/2013|
MarketMinder's View: This rests on the notion oil prices and growth are somehow intrinsically linked—data show otherwise. High oil prices alone don’t cause recessions. Rather, they more often incentivize firms to develop new technology to increase supply or find cheaper alternatives. High oil prices in mid- to late-2000s are a major reason why we have a shale boom today.
|By Katy Burne, The Wall Street Journal, 11/22/2013|
MarketMinder's View: While corporate bond issuance has risen in recent years, liquidity is down—they’re traded largely over the counter, and dealers’ inventories have dwindled some. If banks join together to create an exchange platform, it could increase liquidity, reduce trading costs and enhance fixed-income investors’ options.
|By Staff, Xinhua, 11/22/2013|
MarketMinder's View: This is only an incremental step toward market-set deposit rates, but progress is progress. Over time, this and other financial reforms should modernize China’s banking sector, aiding development and helping the nation become more of a market force.
|By Alexandra Scraggs, The Wall Street Journal, 11/22/2013|
MarketMinder's View: Evidence overwhelmingly shows the Cyclically Adjusted P/E (CAPE) ratio doesn’t predict future returns. Stock prices don’t move on past performance, and the average of the last 10 years of profits says nothing about how firms fare moving forward. For more, see Michael Birnbaum’s 10/08/2013 column, “Smoothed O‘PE’rator.”
|By Steve Rothwell, Associated Press, 11/22/2013|
MarketMinder's View: If the S&P 500 hits the “perfect 10” in 2013, it will be a pleasant but meaningless (and pretty arbitrary) milestone. Whether or not all 10 sectors finish the year up 10% or more says nothing about how stocks do looking forward.
|By Moorad Choudhry, CNBC, 11/22/2013|
MarketMinder's View: Ordinarily, headlines like this would be alarming. But in this case, it’s just a twist on the backward notion of Fed policy being this bull’s driving force. The perception of economic reality remains too-dour—to us, this piece seems as skeptical as they come.
|By Timothy B. Lee, The Washington Post, 11/22/2013|
MarketMinder's View: In the here and now, Bitcoin isn’t ready for primetime—it’s too volatile and too limited to be useful as a broad medium of exchange. But in the long-term, anything is possible. Innovative folks can build off the platform in ways we can’t even imagine today, potentially creating entire new industries and investment opportunities along the way. This is just the latest example of why those touting the end of growth or “secular stagnation” are far off the mark.
|By Luke Baker, Reuters, 11/22/2013|
MarketMinder's View: While this is an interesting idea and worth watching, it likely isn’t a fix-all for the region. Offering subsidized loans as an incentive for economic reform bears marked resemblance to the Structural Adjustment Programs used widely in the developing world in the 1980s, which didn’t bear much fruit over time.
|By Staff, EUbusiness, 11/22/2013|
MarketMinder's View: This smacks of protectionism—something markets typically don’t like. So far, the EU and China have avoided a full-blown trade war, and both sides are pressing for further economic cooperation on other fronts. But the looming threat of protection bears watching.
|By Graham Ruddick, The Telegraph, 11/22/2013|
MarketMinder's View: A look at how the UK’s overly complicated commercial real estate tax makes life difficult for small shop owners and big retailers alike—and incentivizes against investment. Moving to a simpler system would likely benefit the entire country.
|By Andrew Peaple, The Wall Street Journal, 11/22/2013|
MarketMinder's View: This nicely sums up why negative deposit rates likely won’t do much to spur the eurozone. Given all the regulatory and economic reasons banks are holding cash at the central banks, it’s difficult to see how charging them for the privilege does anything other than incentivize them to park cash elsewhere.
|By Simon Kennedy and Rich Miller, Bloomberg, 11/21/2013|
MarketMinder's View: When a bunch of folks think bubbles are inflating, that’s generally a sign fear, not euphoria, is still rampant. In an actual bubble, a poll like this one should register few frothy responses. For more, see our 11/12/2013 cover story, “Bubblicious?”
|By Staff, EUbusiness, 11/21/2013|
MarketMinder's View: This seems a bit too dour, in our view. Yes, pockets of the eurozone still struggle—and likely will for the foreseeable future. But overall, its services and manufacturing PMIs grew in November, indicating the region may be better off than many investors may believe.
|By Jeffrey Frankel, Project Syndicate, 11/21/2013|
MarketMinder's View: While we agree the US dollar is in no danger of losing its status as the world’s top reserve currency, fears of its demise—particularly due to the rise of other currencies—also seem exaggerated, in our view. Diversified forex pools are an economic positive, facilitating global trade. For more, see Elisabeth Dellinger’s column, “The Tale of the Dollar’s Demise.”
|By Jeanna Smialek, Bloomberg, 11/21/2013|
MarketMinder's View: Excluding 2008-2009, there is little if any evidence quantitative easing has stimulated the economy at all. In fact, there’s much more evidence it has weighed on it: The UK economy accelerated after the Bank of England stopped QE; Japan’s first round of quantitative easing (2001-2006) didn’t result in material acceleration; Leading Economic Indicators around the world picked up when the Fed talked up the taper in May. While no one necessarily knows what history will have to say, we’d suggest the evidence in the present is clear: QE slows economic growth due to its reducing the spread between banks’ short-term borrowing costs and their long-term loan revenues. For more, see our 11/13/2013 cover story, “Timing the Taper.”
|By Doug Bandow, Cato at Liberty, 11/21/2013|
MarketMinder's View: Incentives matter: “Some inventors just love to create. Others hope for money, glory, or something else. Whatever their motives, the rest of us gain.” Investing in stocks harnesses this innovative, creative force to better your financial future, too.
|By Staff, The Telegraph, 11/21/2013|
MarketMinder's View: The UK economy continues showing signs of increasing strength, all after the Bank of England ceased its quantitative easing (QE) bond buying last year. Both a positive for the UK and a noteworthy precedent for those fearing the US Fed slowing or stopping its bond buying.
|By Staff, EUbusiness, 11/21/2013|
MarketMinder's View: While negotiations just started, facilitating investment between two of the world’s largest economies would be a positive for global trade. In fact, considering their recent history of frequent, albeit minor, trade spats, just talking is a development worth noting.
|By Russ Roberts, Café Hayek, 11/20/2013|
MarketMinder's View: When determining the vast amount of growth and innovation the US has seen throughout the years, price and inflation aren’t the only factors to keep in mind. Quality is equally important and speaks volumes to innovation’s overall progress—and how it benefits everyone—as this article shows. It’s not just how much you pay for a computer now vs. 30 years ago—it’s also how much more a computer does today. Thanks to countless advancements, we pay far less for far more!
|By Staff, Reuters, 11/20/2013|
MarketMinder's View: Time will tell, but the supposed disconnect between inventory and sales growth could simply mean firms are gearing up for holiday demand—a more relevant forward takeaway, in our view, than grousing over potentially slower inventory growth in Q4. Plus, inventories were tight all summer, suggesting businesses could hardly keep up with growing demand—which could also account for a large part of September’s restocking.
|By Laura Stampler, Time, 11/20/2013|
MarketMinder's View: Many worries over lackluster holiday sales seem based on past (read: not forward-looking) economic data and the fact some stores are having aggressive sales. But overall, quarterly and monthly retail sales are growing, and because they’re supported by a strong economy, we expect that trend to continue.
|By Keiko Ujikane, Bloomberg, 11/20/2013|
MarketMinder's View: We recommend looking at imports and exports both, not simply a country’s trade deficit. And here, the underlying data highlight one of Japan’s key struggles. Japan relies heavily on energy imports, which a weak yen makes more expensive, creating broad economic headwinds. Additionally, while export values have been off the charts, volumes have only just started growing—the economy still isn’t seeing a net benefit from the weak yen.
|By Neil Irwin, The Washington Post, 11/20/2013|
MarketMinder's View: October’s better-than-expected retail sales are “a reminder that consumer confidence surveys have a quite poor track record of predicting actual economic activity.” What people do, not what they say, is a far more meaningful gauge of economic health.
|By James Fontanella-Khan and Roman Olearchyk, Financial Times, 11/20/2013|
MarketMinder's View: Buying oil from Slovakia means lower energy prices and more stable supply for Ukraine, more business activity for the EU and potentially brings the two areas closer to a free-trade agreement. Russia, however, likely increases pressure on its former Soviet satellite as it loses more business from it—a trade war is far from likely but developments (and tensions) in the Crimean are worth minding.
|By Ralph Atkins, Financial Times, 11/20/2013|
MarketMinder's View: While French yields probably do rise some as QE winds down, it isn’t because France is a basket case, nor does it signal tough times ahead. Rather, yield spreads worldwide tend to move in sympathy with each other, overall and on average. Developed and Emerging Markets’ yield spreads shrank along with the US’s, and they should widen with the US’s, too, to varying degrees. This is generally good for growth—it supports higher bank lending (which the eurozone desperately needs) and overall economic activity.
|By Patrick Donahue and Birgit Jennen, Bloomberg, 11/20/2013|
MarketMinder's View: German collation talks have stalled on the SPD and CDU’s disagreeing on how to implement a German minimum wage. Which isn’t entirely surprising—the two parties disagree on much, and the SPD is all too mindful of the dismal election results it suffered following the last SPD-CDU coalition. Ultimately, though, it’s in both parties’ best interest to work out their differences, even if it takes longer than an arbitrary seven-day timeline.
|By Takashi Mochizuki, The Wall Street Journal, 11/19/2013|
MarketMinder's View: One month after confirming Japan would go through with a sales tax hike next April, PM Shinzo Abe is considering cutting taxes on food and “daily essentials.” Japanese citizens will no doubt appreciate this, but the plan seems a touch out of step with the government’s efforts to boost revenues and growth. Since demand for staples doesn’t much hinge on taxes, reducing taxes in this category likely lowers revenues without boosting growth. The larger headwind against discretionary—more expensive—items remains in force.
|By Lydia DePillis, The Washington Post, 11/19/2013|
MarketMinder's View: This terror seems a bit overwrought. Holiday spending is expected to grow 3.7%, slower than last year, but still growth. Plus, expectations aren’t guarantees. US economic activity has surprised forecasters all year. These expectations, too, could very well be too dour—especially since they rest on political squabbling, which hasn’t had the negative impact most feared.
|By Mark J. Perry, AEIdeas, 11/19/2013|
MarketMinder's View: “Put it all together and American consumers have never been better off when it comes to the standard home appliances that we all own and take for granted. Modern home appliances are cheaper, better, and more energy-efficient than ever before. Today’s affordable and energy-efficient household appliances are part of the ongoing, but under-appreciated ‘miracle of manufacturing.’”
|By William Horobin and Paul Hannon, The Wall Street Journal, 11/19/2013|
MarketMinder's View: The weaker forecast appears largely based on the false premise QE money has flooded into the global economy, which will slow once the Fed cuts the drip. But three years of weak foreign investment inflows show otherwise. Plus, QE flattened yield curves globally. They’ve steepened amid taper talk and likely steepen further once bond purchases end—fuel for a global acceleration.
|By Simon Rabinovitch, Financial Times, 11/19/2013|
MarketMinder's View: China’s plans to increase competition to goad state-owned companies into being much more profit-focused and efficient would benefit the economy over time if officials see them through. Given the plan’s broad lack of details and timetables, however—along with China’s tendency to move glacially—these changes might not play out as swiftly and sweepingly as investors seem to expect. For more, see our 11/18/2013 cover story, “Commie Capitalism.”
|By Michael S. Derby, The Wall Street Journal, 11/19/2013|
MarketMinder's View: There is precious little evidence banks relying on wholesale funding markets are any more inherently vulnerable to a crisis than those relying on deposits—see any number of bank runs over the last couple hundred years. Heck, see 2008. Sure, Lehman Brothers and Bear Stearns went under, but so did deposit-rich Washington Mutual. Outsized capital buffers for banks with broker-dealer arms might do less to bolster the financial system than this piece suggests. (Not that bank capital ratios even need a boost, considering how far the sector has come in five years.)
|By Tobias Buck, Financial Times, 11/19/2013|
MarketMinder's View: While the European Commission says Germany’s high exports hurt the eurozone periphery, the periphery says otherwise: Spain’s economy minister says Germany needs to export more! Why? It means more demand for all the intermediate components Spain exports to Germany—a key source of Spanish growth.
|By Tom Stevenson, The Telegraph, 11/18/2013|
MarketMinder's View: “…The person most likely to undermine my investment success is looking back at me from the mirror.”
|By Paul Krugman, The New York Times, 11/18/2013|
MarketMinder's View: We have much to quibble with here. Most notably, the notion the Fed’s easy money is the only thing fueling the economy. Trouble is, the Fed’s policy—quantitative easing—isn’t making money easy to get. Fed bond buying lowers long-term rates, depressing the gap between banks’ short-term funding costs and their long-term revenues from lending. Lower profits make money tighter, not easier. The economy and markets are growing at a healthy pace, underpinned by healthy fundamentals—they’re growing despite quantitative easing (QE), not because of it. In our view, its end would be bullish. For the latest on QE, see our 11/13/2013 cover story, “Timing the Taper.”
|By Staff, EUbusiness, 11/18/2013|
MarketMinder's View: The theory here seems to be that the financial system needed more acute pain to fully purge its excesses. However, while some banks did overextend themselves before the 2008 financial crisis, most of the damage was inflicted due to poor policy choices by regulators—mistakes centered in the US, perhaps explaining why the US saw more failures. Finally, a single regulator and stress tests aren’t a panacea for financial panics. For more on European banking, see our 9/13/2013 cover story, “Banking on the ECB.”
|By Gina Chon, Financial Times, 11/18/2013|
MarketMinder's View: Events here bear watching as the Fed considers delaying the Volcker Rule—an attempt to wall off traditional banking from investment banking—again. As it stands now, the Volker Rule remains unwritten and its year-end implementation deadline approaches. All this, more than three years since the rule’s passage. We guess writing this legislation is more difficult than presumed. For more, see our 10/2/2013 cover story, “Writing Down the Volker Rule.”
|By Staff, The Economist, 11/18/2013|
MarketMinder's View: We’d argue the US shale oil boom has many more indirect positive economic impacts than this piece takes into account. A new well will require equipment and materials like pipes, a drill rig, trucks and transportation equipment and much more. Workers require housing, clothing, medical care options and entertainment. Though cheap gas may negatively impact drillers’ profits today, it also helps keep household and business energy costs lower. Down the road, these positive impacts likely create a nice tailwind for markets and the economy. For more, see our 9/4/2013 cover story, “A Manufactured Buzz.”
|By Staff, EUbusiness, 11/18/2013|
MarketMinder's View: It is a longstanding misperception to suggest “a trade surplus is one of the factors of growth in an economy, whereas a deficit tends to sap growth, and so achieving a trade surplus is of critical importance to economies in crisis.” In fact, many economies in recession have seen deficits fall—like the US in 2008. Why? Because in recession, demand for goods—foreign or domestic—typically falls. The trade balance (surplus or deficit) is a nearly meaningless statistic. Better to focus on total trade—exports plus imports—as this is a better reflection of total economic activity.
|By Ralph Atkins and Kerin Hope, Financial Times, 11/18/2013|
MarketMinder's View: While no one will argue Greece is out of the woods, there are signs of improvement in capital markets—a positive, as capital markets typically move in anticipation of the real economy. An example provided here: Private Greek companies have raised €4 billion this year by way of capital markets. All in all, it’s just more evidence the eurozone is faring better than many appreciate, even in some of the most troubled nations.
|By Malcolm Moore, The Telegraph, 11/15/2013|
MarketMinder's View: The one-child rule is at the heart of China’s recent economic struggles and a big reason why officials feel compelled to shift the economy away from export-led growth. The rule shrank the labor supply, which pushed up costs and has started driving production out of the country. Easing the rule won’t be a panacea or have an immediate impact, but it should put China on a better long-term path.
|By Rich Miller, Bloomberg, 11/15/2013|
MarketMinder's View: Ask yourself: Why did UK excess reserves not skyrocket when the BoE paid over 5% on them? Why are Japan’s excess reserves massive even though the BOJ pays less than half what the Fed does? Answer: The payment isn’t an incentive! To think a measly 0.25% return is why banks park trillions when they could lend it out for a higher return ignores the gigantic regulatory incentives for them to hold higher reserves. And to suggest cutting the payment would prompt a massive influx of cash betrays, in our view, a fundamental misunderstanding of how money markets work.
|By Katherine Rushton, The Telegraph, 11/15/2013|
MarketMinder's View: Sure, in theory, they could! But has the Fed—or any central bank—reliably and repeatedly spotted bubbles in the past? No. That this is potentially on the Fed’s to-do list now introduces the risk of monetary policy blunders—something investors should pay careful heed to.
|By Christopher S. Rugaber, Associated Press, 11/15/2013|
MarketMinder's View: A spot-on interpretation of wholesale inventories’ September rise: It indicates firms expect high demand, and rising sales suggest an inventory overhang is highly unlikely. In other words: More growth ahead!
|By Paul Krugman, The New York Times, 11/15/2013|
MarketMinder's View: A concise, informative look at why last week’s ECB rate cut was so politically contentious—and why investors shouldn’t rely on monetary policy to fix the eurozone. Not that it’s out of tools—there plenty of easy tricks Draghi could deploy to boost the velocity of money—but the political challenges prevent the sweeping action some clamor for. Positively, the region doesn’t need an ECB intervention—the recovery may be uneven, but the region is growing, and growth looks poised to continue.
|By Jeremy Warner, The Telegraph, 11/15/2013|
MarketMinder's View: Nope, it sure isn’t. But the reasons that belief is misplaced aren’t quite captured here. The UK isn’t growing again because quantitative easing (QE) finally started working—it’s because the program stopped! The reason why is the same reason QE didn’t cause bubbles (despite what this piece claims). By depressing the yield spread, it weighed on growth, and the reserves created didn’t circulate through the real economy—or to banks’ trading accounts. Money supply plummeted for two years, so the notion of a fair few folks having “money to burn” seems a touch misplaced.
|By Aaron Back, The Wall Street Journal, 11/15/2013|
MarketMinder's View: China’s latest reform pledge—aka the Third Plenum—said all the right things. Permitting private banks, letting the market set interest rates, lifting capital controls and other plans would bring tremendous benefit over time and help the country be much more of a force. But long-term plans with no implementation dates aren’t enough—action must follow, and there, Beijing’s track record isn’t so good. Which isn’t surprising: The bigger role markets play, the less control the Communist Party has, so they’re incentivized to move glacially and keep heavy state involvement. As this piece sums up, “skepticism is in order.”
|By Stefan Kaiser, Der Spiegel, 11/15/2013|
MarketMinder's View: Two years ago, few (if any) expected Ireland and Spain to stand on their own in the near future. Yet here we are, with Ireland moving on from its 2010 sovereign rescue and Spain no longer requiring an EU credit line for banks. The region isn’t out of the woods—its lingering issues will be part of the conversation for years—but with the acute crisis in the rearview, there is plenty of room for eurozone reality to exceed still-dim expectations.
|By Staff, Associated Press, 11/15/2013|
MarketMinder's View: More Crimean trade sabre rattling. While the threat of a full-blown trade war remains just that—and huge barriers are highly unlikely to materialize—it remains a risk worth watching. For more, see Elisabeth Dellinger’s 10/24/2013 column, “Investing Lessons From the Crimean Trade War.”
|By Staff, EUbusiness, 11/15/2013|
MarketMinder's View: The fallacy here is that failing banks caused the eurozone crisis. Yes, banking sector troubles tipped the scales for Spain and got Ireland’s finances in hot water, but the region’s broader issues are tied to long-deteriorating economic competitiveness throughout the eurozone periphery. So while progressing on a banking union might help improve confidence in the eurozone’s financial system, investors shouldn’t see it as a fix-all—economic reform remains key.
|By Neil Shah, The Wall Street Journal, 11/15/2013|
MarketMinder's View: With markets pricing in the end of QE, yield spreads are rising. So are banks’ net interest margins—and lending! Higher long-term rates have boosted supply without docking demand. We expect this trend to continue.
|By Joshua Zumbrun and Jeff Kearns, Bloomberg, 11/14/2013|
MarketMinder's View: The economy may be performing short of its “potential”—but not because growth is slower than a hypothetical measure of what growth might be at full employment. Which is weird—don’t they realize full employment typically presages recessions? Has the US ever grown at that arbitrary “potential” rate for long? Rather, the Fed’s preferred means of goosing growth—quantitative easing—has weighed on broad money supply, keeping growth slower than it otherwise might be.
|By Hiroko Tabushi, The New York Times, 11/14/2013|
MarketMinder's View: Japan’s easy GDP gains in Q1 and Q2 took some of the focus off of PM Shinzo Abe’s reform progress (or lack thereof), but now, with growth slowing in Q3, investor scrutiny (and skepticism) is growing. More and more folks appear to grasp the importance of reform for Japan’s long-term growth prospects, and the growing list of delays and U-turns suggests investors with lofty expectations may end up disappointed.
|By Chriss Street, American Thinker, 11/14/2013|
MarketMinder's View: A number of misperceptions here, some of them basically cancelling one another. Consider: The theory posited is the Fed’s quantitative easing bond buying program (QE) has driven a tidal wave of capital into Emerging Markets (think India). But the reality is, data show no such tidal wave—including the data in the article, which shows EM stocks have underperformed in the present cycle. Were QE flooding EMs with cash, it’s more likely their markets would be outperforming, not underperforming. Leave currencies aside here: The end of QE should actually help EMs by causing their long-term yields to rise, steepening the yield curve (a big economic plus). For more, see Elisabeth Dellinger’s column, “Inside Indian Taper Terror.”
|By Holly Ellyatt and Catherine Boyle, CNBC, 11/14/2013|
MarketMinder's View: While the eurozone isn’t out of the woods, this paints a too-dour picture, in our view. One, growth is growth. Two, the global economy grew fine during the eurozone’s 18-month recession. Three, the eurozone isn’t a uniform bloc. Germany isn’t Cyprus or Greece. Even slower growth in Germany is more impactful globally than big contractions in tiny Greece and Cyprus.
|By Matt Jarzemsky, The Wall Street Journal, 11/14/2013|
MarketMinder's View: We’d argue that the IPO market was never really smoking hot either, even if recent headlines suggested otherwise. The IPOs we’ve seen to date are trading at non-bubble-like multiples of sales, they are more established and their share prices overall haven’t jumped wildly once hitting the secondary market either. The feared bubble seems more like hype over just a teensy handful of companies rather than broad, dangerous euphoria. For more on IPOs, see our 11/12/2013 cover story, “Bubblicious?” or our 10/29/2013 cover, "Too Much Twitter Over IPOs?"
|By Steven Mufson, The Washington Post, 11/14/2013|
MarketMinder's View: The US’s shale oil boom is a testament to how profit motive drives innovation, which can lead to transformations of whole industries—incentives matter!
|By Eamon Quinn and Paul Hannon, The Wall Street Journal, 11/14/2013|
MarketMinder's View: Ireland announced it won’t implement a precautionary IMF line of credit once it makes its 2014 bailout exit. It appears pressures on the periphery continue easing. Now, not setting up a precautionary credit line doesn’t mean the Irish are without a safety net—among other factors, they’re eligible for the ECB’s Outright Monetary Transactions (OMT) bond-buying program should the need arise.
|By Staff, Associated Press, 11/14/2013|
MarketMinder's View: Rather than focusing on the trade deficit, we suggest investors look at total trade (exports plus imports). While falling exports aren’t great, robust import growth is a sign of healthy demand.
|By Francesco Guerrera, The Wall Street Journal, 11/13/2013|
MarketMinder's View: Capping banker bonuses likely will lead to higher salaries for top talent but not necessarily “less risky” behavior—nor does it mean risky behavior was a problem in the first place. Banks are in the business of making money, else they fail and their customers and shareholders suffer. Delivering a bonus tied to performance would seemingly incentivize successful work and potentially punish poor planning and behavior. A salary blanket compensates regardless of results.
|By Rana Foroohar, Time, 11/13/2013|
MarketMinder's View: It’s true market, land and hukou reform are eventually necessary for a freer-market China. But, remember, China is a communist country, and its leaders are incentivized to keep it that way. This doesn’t mean any steps toward other open-market reforms are completely negligible, but they’re likely slow and small—politicians’ plans merely seem to confirm that.
|By Miriam Wells, The Christian Science Monitor, 11/13/2013|
MarketMinder's View: Venezuela is a prime example of how price and forex controls hurt economies and hinder markets’ growth. Here, with the government’s artificial price setting, seizing some companies and creating uncertainty for others, Venezuela likely sees less business activity (and businesses), as economic and political risks trounce potential reward—a negative for both Venezuela’s markets and citizens’ quality of life. Such arbitrary moves by governments are impediments to development in many parts of the developing world.
|By Mohammad Al Sabban, Financial Times, 11/13/2013|
MarketMinder's View: OPEC still governs much of the world’s oil production, sales and, therefore, prices—the US’s producing oil likely won’t change that for a while (if ever). But the whole debate over who’s number one is a little silly. Saudi Arabia’s continued oil production doesn’t negate the huge economic tailwind from recent developments in the US and global markets—the most important takeaway. Just look at natural gas prices in the US. If we allow for increased exports, the effect will likely be fully globally to an extent.
|By Alanna Petroff, CNN Money, 11/13/2013|
MarketMinder's View: The UK economy has been crushing analysts’ and investors’ expectations for months and seems poised to only get stronger with healthy PMIs, LEI and housing. All this, after the BoE stopped its quantitative easing bond-buying program. Hence, the folly of forward guidance: The folks guiding are still fallible humans who lack perfect insight into the direction of the economy.
|By Virginia Harrison and Mark Thompson, CNN Money, 11/13/2013|
MarketMinder's View: While we agree "the way to deal with the imbalance [of European exports levels] is not to tell the successful chap to please be less successful,” we feel it’s important to note trade deficits are a poor measure of competitiveness. Exporters no more win than importers lose. Germany exports a lot because its industry is competitive, not the other way around.
|By Aaron Sheldrick and Osamu Tsukimori, Reuters, 11/13/2013|
MarketMinder's View: Breaking up decades-old monopolies and abolishing price controls likely improve the Japanese Energy market some, and a national energy grid likely helps with potential energy shortages in remote areas. This was largely low-hanging fruit for Japanese reform, but still a positive. The question remains: Will Abe push more contentious, yet needed, measures?
|By Lucy Hornby, Financial Times, 11/12/2013|
MarketMinder's View: “The Communist party of China reaffirmed its commitment to a strong role for the state in the economy while pledging ‘decisive’ reforms in key areas by 2020.” Confused? So are we. Economic reform can be good, though whether it will actually play out given China’s government-directed structure remains to be seen. But as we’ve said before, China’s transition from a largely infrastructure- and state-driven economy to one more consumer- and market-driven will likely be key to its ongoing growth and development—as well as the well-being of its citizens.
|By Brian Fung, The Washington Post, 11/12/2013|
MarketMinder's View: This is a testament to the ongoing power of innovation—bringing more technologically advanced products (computer chips, in this case) to the marketplace. And stock market investors have the opportunity to reap innovation’s benefits without discovering the next technological advance themselves—all they need to do is believe in the power of the profit motive and invest.
|By Lindsay Gellman, The Wall Street Journal, 11/12/2013|
MarketMinder's View: It’s hard to build much of a case as to why one should buy gold: It is more volatile than stocks with a lower long-term return. It is an ineffective hedge against inflation (take the 1980s and 1990s—inflation rose, gold fell). It also does not necessarily zig when stocks zag, making it a dubious “safe haven” against equity market weakness or volatility. The only real reason, in our view, to invest in gold: speculation.
|By Staff, Taiwan News, 11/12/2013|
MarketMinder's View: If the TPP comes to fruition (still a pretty big “if” at this point), Taiwan could potentially decrease its dependence on China and overall increase its exports, among other positives. Not to mention the benefits all other participating countries will experience. The freer trade is, the greater the (global) benefits.
|By Richard Barley, The Wall Street Journal, 11/12/2013|
MarketMinder's View: Ratings agencies' outlooks are little more forward-looking than their backward-looking ratings—and have historically had little impact on the (forward-looking) market. For example, Standard & Poors just upgraded their outlook on Portugal and Spain—yet bond markets have shown vastly reduced concern over their solvency for more than a year.
|By Darren Goode, Politico, 11/12/2013|
MarketMinder's View: While this is far from a done deal—politics hardly ever is—lowering ethanol mandates to 2012 levels would certainly be a step in the right direction for both food and fuel prices. The fewer the distortions in prices (i.e., incentives impacting decisions that otherwise would be made based on the market), the more transparent they are, and in the long run, the more efficiently resources are allocated.
|By Matthew L. Wald, The New York Times, 11/12/2013|
MarketMinder's View: The International Energy Agency report actually said, “There is a huge growth in light tight oil, that it will peak around 2020, and then it will plateau”—far different from the article’s interpretation of the report suggesting shale’s temporary effect on oil supply. More importantly, predicting long-term energy trends is difficult—especially projections through 2035, in this case. We’d suggest staying focused on the near term (i.e., the next 12-18 months at most)—and over that timeframe, the shale oil boom likely continues thriving (a boon for economic growth and jobs in the US).
|By Warangkana Chomchuen, The Wall Street Journal, 11/12/2013|
MarketMinder's View: The problems identified here are emblematic of most problems with government subsidies. In a nutshell, they create winners and losers—leaving consumers (and investors) with fewer choices—and ultimately drive prices higher. Meaning in this instance, we agree with the IMF’s recommendation Thailand do away with its rice subsidies and instead allow unfettered competition (i.e., supply and demand) to determine the “ideal” price for rice.
|By Daisy Maxey, The Wall Street Journal, 11/11/2013|
MarketMinder's View: An interesting look at “fee-only” versus “fee-based” investment advisers and brokers: While many investors might consider the terms synonymous, they’re actually very different—and it’s important for investors to understand the difference. Fee-based is frequently code for “fee and commission.” An adviser or broker touting they’re fee-based isn’t giving you much real information.
|By Mohamed A. El-Erian, Project Syndicate, 11/11/2013|
MarketMinder's View: While monetary policy can play a role in the economy, its importance is rather overstated here. Quantitative easing’s long-term bond purchases depress the profitability of bank lending (through narrowing the spread between banks’ short-term funding costs and their long-term interest revenues). Capital is critical in capitalism, and lowered profits mean less capital availability. The US is experiencing a healthy economic expansion despite the Fed’s current deflationary and contractionary policy decisions.
|By Donald J. Boudreaux, Pittsburg-Tribune Review, 11/11/2013|
MarketMinder's View: “You enjoy a standard of living that would have been inconceivable to any of our ancestors just nine or 10 generations ago—and, in many ways, jaw-droppingly impressive to our forebears of just two or three generations ago.” Thanks to innovation and technological advancements, people are working less while maintaining a significantly higher standard of living than previous generations.
|By Michael Ivanovitch, CNBC, 11/11/2013|
MarketMinder's View: While we would quibble with parts of this—like laying so much of the blame at the feet of the interest payment on excess reserves—we agree QE has weighed on bank lending. With every bond the Fed buys targeting cheap credit for consumers, banks’ profits on extending the same credit fall. Banks aren’t charitable organizations and, as the author notes, banks will be more willing to take risks and extend loans to consumers and small businesses if such activity is incentivized by profits. For the latest on QE, see our 10/31/2013 cover story, “Taper Ghost Stories.”
|By BusinessWeek, Matthew Philips, 11/11/2013|
MarketMinder's View: Though unemployment is a late lagging economic indicator, October’s better-than-expected jobs report likely puts to rest some fears over the impact of Washington’s political theatrics, boosting short-term investor sentiment some.
|By Steven Mufson, The Washington Post, 11/11/2013|
MarketMinder's View: Government-directed programs seeking to find and harvest the next big energy source are often a bit wide of the mark. In this case, the government mandates targeted increased consumption of cellulosic ethanol—a substance that even now doesn’t exist in a commercially viable form. Simply, cellulosic ethanol hasn’t taken over because the plans didn’t reflect economic reality. For investors, this is a reminder that investing based on policy direction can be a very wrongheaded move.
|By Staff, Bloomberg News, 11/11/2013|
MarketMinder's View: China’s industrial production rose 10.3% y/y, outpacing expectations of 10% y/y—yet another sign China is faring better than many perceive. Events also bear watching here as the country attempts to implement and design economic reforms targeting increased openness.
|By Spencer Jakab, The Wall Street Journal, 11/11/2013|
MarketMinder's View: The thing about exuberant bubble fears is they’re actually self-deflating: actual bubbles aren’t likely to be pricked by media headlines, which tend to get caught up in the greedy fervor. Besides, a bubble by definition would require inflated expectations—beyond reality—of future earnings growth opportunities, often reflected by forward price-to-earnings ratios. Today, forward 12-month P/Es are below their long-term average. For more, see our 10/10/2013 cover story “Confidence is Sentimental.”
|By Ezra Klein, Bloomberg, 11/08/2013|
MarketMinder's View: With 2014 midterm races about to kick off, we’re all about to be hit with a year-long barrage of feverish political hype. As this piece deftly shows, however, most of it won’t matter, and investors shouldn’t let the hoopla impact portfolio decisions. The underlying structure of the election matters most to the outcome and—barring huge blunders—the rest is noise. Not all that different than the stock market in some ways.
|By Neil Irwin, The Washington Post, 11/08/2013|
MarketMinder's View: This nicely captures the Employment Situation Report’s inherent shortcomings—it relies on two surveys, and the inputs aren’t always reliable. This is why we’d suggest investors not use this—or any single report—as their sole measure of economic or labor market health.
|By Jeremy Warner, The Telegraph, 11/08/2013|
MarketMinder's View: For now, there isn’t evidence of a bubble to prick. UK housing is picking up, but off a very low base, and price increases are near-fully tied to a supply shortage in London. National figures remain quite low. The most beneficial strategy at this point would be encouraging supply growth in London via broader reform.
|By Nicolai Kwasniewski, Der Spiegel, 11/08/2013|
MarketMinder's View: The ECB’s toolkit isn’t empty, despite what this piece suggests. Like the Fed, the ECB skipped over some easy, time-honored ways to boost liquidity. For example, Draghi hasn’t yet moved the discount rate below the overnight lending rate so banks can borrow cheaply from central banks and lend to each other more eagerly at higher rates.
|By Jon Hilsenrath, The Wall Street Journal, 11/08/2013|
MarketMinder's View: Government hasn’t dragged down growth for only the past year—total government spending has fallen in 12 of 17 quarters. This is the norm for this expansion, not new news. Nor is goosing spending a cure all, given GDP doesn’t directly equal the economy.
|By James Titcomb, The Telegraph, 11/08/2013|
MarketMinder's View: While the downgrade might not score President François Hollande political points, it likely doesn’t mean much for French markets—all the information cited in S&P’s rationale has long been widely discussed, and France has managed to return to growth despite its long-running competitiveness issues.
|By James Kirkup and Nicole Blackmore, The Telegraph, 11/08/2013|
MarketMinder's View: These changes might accelerate the ongoing shift from defined benefit (pension) retirement plans to defined contribution (like 401(k)s in the US)—it’s always important for investors to be aware of retirement account rule changes so they can plan accordingly.
|By Cassie Werber, The Wall Street Journal, 11/08/2013|
MarketMinder's View: We’d frame the shale boom in a different light—it’s not that other jitters have masked its impact on global oil markets. It’s more that the huge rise in US supply has helped offset production losses from hotspots like Syria and Libya, keeping prices more stable than we might have otherwise seen in recent years.
|By Li Jiabao, China Daily, 11/08/2013|
MarketMinder's View: More evidence of an underappreciated reacceleration in China and the rest of the world.
|By Vincent Cignarella, The Wall Street Journal, 11/08/2013|
MarketMinder's View: A tale of two countries. Japan, despite a much weaker yen, has yet to achieve meaningful export gains—export values are up, but volumes aren’t. Korea, despite a strengthening won, has record-high (and rising) exports. Trade gains depend on so much more than currency values—competitiveness matters.
|By Staff, EUbusiness, 11/08/2013|
MarketMinder's View: While the broader push for banking union is a positive, officials likely don’t need to rush matters. Waiting till the target date (or a bit after) doesn’t prevent officials from crafting a sensible plan the next time banks fail.
|By Josh Mitchell and Sarah Portlock, The Wall Street Journal, 11/07/2013|
MarketMinder's View: We’re a tad confused by the conclusions drawn here. Private investment, not inventory restocking, was the biggest contributor to Q3 growth—but nary a mention is made. Instead, it overfocuses on a small drop in computer/electronics spending—while ignoring a sizable rise in investment in non-residential structures and industrial equipment. Businesses wouldn’t make these huge capital expenditures if they were struggling.
|By Szu Ping Chan, The Telegraph, 11/07/2013|
MarketMinder's View: A bit of a perplexing move by the ECB—and not guaranteed to provide the juice many are hoping for. One, the bank’s transmission mechanism is broken—overnight rate cuts haven’t much passed through to the broader economy. Two, the central rate (the ECB equivalent of the Fed’s discount rate) is still half a percentage point higher than the overnight rate, at which banks lend to each other. Reducing the discount rate below the overnight rate is a time-honored way to increase liquidity—banks borrow cheap from the central bank, lend at slightly higher rates to each other and pocket the spread. An incentive! The current setup limits the flow of capital.
|By Toko Sekiguchi and Mitsuru Obe, The Wall Street Journal, 11/07/2013|
MarketMinder's View: It appears PM Shinzo Abe is trying to implement some of those politically unpopular but economically necessary structural reforms. Not surprisingly, he already faces resistance from the impacted sectors, who see themselves as potential losers. Whether he remains committed to the changes or bows to the pressure remains to be seen—this scenario could be a bellwether for his commitment to reform in general and bears watching.
|By Enda Curran and Shefali Anand, The Wall Street Journal, 11/07/2013|
MarketMinder's View: India has historically been resistant to foreign investment—to its detriment—so new rules making it easier for foreign banks to establish local subsidiaries is a positive development. More capital for the nation, and more banking options for Indian people and businesses. For more on India, see Mary Holdener’s column, “Let Them In(dia)!”
|By A. Gary Shilling, Bloomberg, 11/07/2013|
MarketMinder's View: While this is a touch too dour on manufacturing, considering output is touching all-time highs, the US doesn’t need dynamite manufacturing to keep growing at a healthy clip over time—or for job growth to continue. The service sector, which makes up about 2/3 of output, is a far bigger driver of growth and jobs, and it’s growing apace.
|By Staff, EUbusiness, 11/07/2013|
MarketMinder's View: While this isn’t breaking news—Ireland has been on track for this bailout exit for a while now—its upcoming return to capital markets is an important milestone and illustrates how the periphery can find its footing over time.
|By Staff, Associated Press, 11/07/2013|
MarketMinder's View: Freer trade means more trade—great for markets! (And for these two countries!)
|By Andy Bruce, Reuters, 11/06/2013|
MarketMinder's View: The eurozone recovery is likely slow and uneven, and in theory, an early-stage recovery is typically when an economy would benefit from some monetary juice. But the ECB has previously warned its transmission mechanism—the ability for short-term rate cuts to pass through to the real economy—is effectively broken, which could limit its ability to spur growth. Positively, though, data (like production or factory orders) continue to suggest the region can continue inching back regardless, as stronger individual countries (like Germany) help pull along the area overall.
|By Carmen M. Reinhart, Bloomberg, 11/06/2013|
MarketMinder's View: The argument here makes a number of cognitive leaps—like assuming correlation between growth and debt levels is causation, but it isn’t. High debt alone doesn’t make an economy unhealthy. Many other economic factors weigh, too: business investment, corporate earnings, manufacturing and more. Plus, US debt is still in strong demand and interest payments are a very low 8% of tax revenue, reducing the likelihood US debt becomes problematic anytime soon.
|By Carol Matlack, Bloomberg Businessweek, 11/06/2013|
MarketMinder's View: We fail to see the logic behind the many assertions Germany’s high trade surplus is a drag on global growth. Those focusing on the surplus alone ignore that German exports are at all-time highs and rising—Germany is already helping boost growth elsewhere. Moreover, higher German wages aren’t a guaranteed cure-all for the peripheral eurozone—reforms to boost the periphery’s competitiveness are also key.
|By Anjani Trivedi, The Wall Street Journal, 11/06/2013|
MarketMinder's View: While diversified forex reserves aren’t necessarily a bad idea, the assumption global central banks will need to hedge against the US’s eventually tapering QE is misguided—given investment inflows weren’t abnormally high throughout QE, a sudden exodus seems unlikely. Even if Treasury yields rose some, US debt would still be a liquid, stable option for bond investors. Plus, QE’s end will be good—yield curves should widen, so bank lending, and therefore economic activity, should increase, boosting economic growth at home and globally.
|By Prashant Gopal, Bloomberg, 11/06/2013|
MarketMinder's View: Yet another sign the housing recovery continues—an incremental positive for the larger economy.
|By Ben Schenkel, Bloomberg, 11/06/2013|
MarketMinder's View: Another strong increase for the Leading Economic Index—with a wider rate spread the biggest driver. More evidence the end of the Fed’s quantitative easing should be good for growth!
|By Emily Jane Fox, CNN Money, 11/06/2013|
MarketMinder's View: The underlying fallacy here is a higher minimum wage will boost economic growth. Yes, it likely benefits those who receive it, but businesses, having to allocate more money to wages, will have a harder time investing in growth elsewhere—including hiring—and may have to raise prices to stay afloat. Plus, higher minimum wages don’t necessarily increase broad purchasing power, partly from those higher prices, but also because they price low-skilled workers out of the labor force.
|By Wang Yanlin, Xinhua News, 11/06/2013|
MarketMinder's View: China’s feared “hard landing” seems even less likely as private service firms grow strongly alongside Chinese manufacturing’s ongoing recovery.
|By Gina Chon, Financial Times, 11/06/2013|
MarketMinder's View: Restricting derivatives trading in an attempt to curb “speculation” isn’t guaranteed to improve food and commodity prices for end users. Less liquidity (aka available supply) could lead to higher commodities prices, the opposite of the rule’s intended effect. Though this is only a proposal right now—plenty of time for politicking and watering-down—it merits watching.
|By Mitsuru Obe, The Wall Street Journal, 11/06/2013|
MarketMinder's View: As it stands, Japan’s rice industry costs the government and consumers much more than necessary thanks to measures like rationing production and high subsidies, which create high prices. Should this proposal play out, removing protectionist measures would invite more competition, efficiency and lower prices—positives for the industry and economy (and, perhaps, could be a bellwether for more structural reforms to benefit Japanese stocks).
|By Don Boudreaux, Café Hayek, 11/05/2013|
MarketMinder's View: “Wherever industrial capitalism has flourished over the past three centuries it has eliminated for the first time in human history the millennia-long curse of recurrent famines. Today, food is in short supply only in societies without market institutions and cut off from global trade.”
|By Du Juan, China Daily, 11/05/2013|
MarketMinder's View: Other countries are increasingly keen to join in the shale oil boom. And this arrangement is a win-win for both countries—China is able to satisfy growing energy demand (which should help keep manufacturing costs somewhat in check), while Australia benefits from further investment in exploration and production. This new capital source should be especially welcome amid the downturn in metals and mining.
|By Michael S. Derby, The Wall Street Journal, 11/05/2013|
MarketMinder's View: We’re a touch puzzled as to why the Fed would consider it good for forward guidance on short-term rates to “influence the long-term rates” to stay low—this means a flatter yield curve, which typically constrains growth. Good thing markets typically don’t pay much attention to forward guidance—long-term rates are rising in anticipation of quantitative easing’s eventual end, which creates a better environment for bank lending and broad money supply growth.
|By Staff, EUbusiness, 11/05/2013|
MarketMinder's View: EU-US free trade talks appear to be back on track after the government shutdown and NSA spying spat threatened to stall the process. Though there remain several issues to smooth out, (food and aviation safety, electric car standards, financial services regulation, etc.), markets are likely encouraged by the prospect of fewer barriers hindering the transatlantic flow of goods and services.
|By David Oakley and Sam Fleming, Financial Times, 11/05/2013|
MarketMinder's View: While safeguards to protect minority shareholders might be well-intentioned, they potentially create administrative hurdles and a disincentive to list on the London Exchange—potentially detracting a bit from London’s status as a global financial hub.
|By Staff, Reuters, 11/05/2013|
MarketMinder's View: Early data suggest US growth continues in Q4, contrary to what many expected when the government shut down in October. With expectations still low and reality likely to beat, this bull market should have plenty of wall of worry left to climb.
|By Joshua Freed, Associated Press, 11/05/2013|
MarketMinder's View: The notion of IPO fever seems a bit overstated. Yes, the number of offerings is climbing, but it’s still nowhere near that of the late 1990s. Further, stock supply is falling (share buybacks have overshadowed IPOs), suggesting we aren’t near the supply/demand imbalance that drove the tech bubble. For more, see our 10/29/13 cover story, “Too Much Twitter Over IPOs.”
|By Claire Jones, Financial Times, 11/05/2013|
MarketMinder's View: The UK’s services PMI rose again in October, hitting 62.5—with the very forward-looking new orders component hitting its highest level since the survey began in 1996. Business investment—a weak spot throughout this entire recovery—appears to be turning, which should provide another tailwind for the UK economy.
|By Jason Zweig, The Wall Street Journal , 11/04/2013|
MarketMinder's View: They do it by chasing heat and, more generally, selling in and out of funds at inopportune times. Blame emotions—fear and greed blindside investors near-constantly. Staying disciplined is key to reaching your long-term goals and objectives, but for many folks, this is easier said than done. For more, see Todd Bliman’s 10/25/2013 column, “Passive Investors and Other Endangered Species.”
|By Leslie Shaffer, CNBC, 11/04/2013|
MarketMinder's View: We agree quantitative easing (QE) is deflationary—but not for the reasons posited here. Rather, because it flattens the yield curve (the spread between short- and long-term rates), which reduces banks’ potential operating profits and disincentivizes lending, QE limits the broad money supply growth and reduces the velocity of money (how often money changes hands). This also limits QE’s ability to “pump up asset prices.” For more on QE, see our 10/31/2013 cover story, “Taper Ghost Stories.”
|By Staff, Reuters, 11/04/2013|
MarketMinder's View: While China still has progress to make on the long-term economic reform front, that its service sector continues to expand at a healthy pace is more evidence China is faring better than many expect—and should continue contributing heavily to global growth.
|By Gregory Zuckerman, The Wall Street Journal, 11/04/2013|
MarketMinder's View: It’s always good to be vigilant! But these alleged warning signs seem a touch overstated. First, while some recent IPOs are smokin’ hot, overall valuations are still rather cheap relative to other bull markets—investors have yet to start paying a premium for stocks’ future earnings. Second, earnings regularly slow as bull markets age, without derailing the market.
|By Ralph Atkins, Financial Times , 11/04/2013|
MarketMinder's View: We agree: High-frequency trading benefits markets by improving overall efficiency through better price discovery and increased liquidity. For more, see Talia Hosenpud’s 10/10/2013 column, “High-Frequency Fallacies.”
|By Steven Russolillo, The Wall Street Journal, 11/04/2013|
MarketMinder's View: Bullish or bearish, we’d suggest taking short-term forecasts like this with a huge grain of salt. While fundamentals overwhelmingly point to more bull market, in our view, a correction is possible at any time, for any reason—or even no apparent reason. No matter what seasonal history and “momentum” say, volatility is always possible.
|By Staff, EUbusiness, 11/04/2013|
MarketMinder's View: Another sign of continued growth in the eurozone and a global reacceleration.
|By Staff, Xinhua, 11/04/2013|
MarketMinder's View: Though China’s plans for structural reforms are a positive—those telegraphed so far would help the country become more of a market force—whether they’re implemented is another story. Pie-in-the-sky plans without actionable specifics and a roadmap for full implementation don’t much benefit the country and could disappoint investors’ rather lofty expectations.
|By Spencer Jakab, The Wall Street Journal, 11/01/2013|
MarketMinder's View: With multiple datasets pointing to strong factory growth in October, the government shutdown and debt ceiling spectacle were “the third budgetary boogeyman in less than a year shrugged off by the manufacturing sector.” So much for default dread “sapping economic confidence.”
|By Rana Foroohar, Time, 11/01/2013|
MarketMinder's View: Well, it doesn’t have to! Housing is a sliver of US GDP. Even if housing falls from here (which is far less likely than this suggests, given mortgage rates remain near generational lows and home supply is finally rising off its ultra-low base), strong consumer spending and business investment can easily drive further growth—just as they have for most of this expansion! Housing is an incremental tailwind at best. Nice, but not vital.
|By Bettina Wassener, The New York Times, 11/01/2013|
MarketMinder's View: Emerging Asia was a big question mark for many investors earlier this year. The region was still growing, but at a slower rate, and that dinged revenue a bit for multinationals with big Emerging Markets presences. Now, growth is picking up, and revenues should follow for firms doing business there. Just one more reason earnings globally should keep beating expectations.
|By Sir Michael Snyder, The Telegraph, 11/01/2013|
MarketMinder's View: While it’s true banks and small businesses could be more aware of each other’s quirks and regulatory restrictions, this overlooks the larger issue: Central bank policy has limited the supply of loans. Quantitative easing flattened the spread between short and long rates, sapping banks’ potential operating profits and eagerness to lend. Once it ended and the spread widened, onerous capital requirements kept banks from taking advantage. Now, however, that’s changing—paving the way for more eager bank lending.
|By Jeremy Warner, The Telegraph, 11/01/2013|
MarketMinder's View: Is the UK in perfect shape? No. But it’s also only three quarters into a meaningful reacceleration—way too premature to declare the age of perma-decline. Now that the BoE is giving banks the flexibility they need to start lending meaningfully throughout the real economy, we could very well see a significant pickup from here. And if whispers about easier taxes in next month’s Autumn Statement (budget preview) are true, businesses and consumers could get an even bigger boost!
|By Sam Fleming, Financial Times, 11/01/2013|
MarketMinder's View: While standardized risk-weighting might improve transparency and help consumers and investors better compare bank balance sheets, these plans aren’t an automatic positive. If the standards are too tough, they could prompt another round of deleveraging and capital hoarding—a potential risk to bank lending and economic growth.
|By Staff, BBC News, 11/01/2013|
MarketMinder's View: Both Chinese PMIs—one measures state-run firms, one private—rose in October, suggesting China’s reacceleration continues. Double-digit growth rates likely won’t return, but growth should surpass investors’ relatively low expectations and contribute plenty to global GDP.
|By Raphael Minder, The New York Times, 11/01/2013|
MarketMinder's View: Spain is by no means out of the woods, but as this piece highlights, there are opportunities, and investors are capitalizing. And why is foreign investment rising? Government cutbacks made room for private capital! Over time, as this capital influx permeates Spain’s economy, it should provide a nice tailwind.
|By Louise Armitstead, The Telegraph, 11/01/2013|
MarketMinder's View: With the world reaccelerating, foreign demand is on the rise—a big boost for factories at home, whether you’re in the UK or US.
|By Alen Mattich, The Wall Street Journal, 11/01/2013|
MarketMinder's View: Negative interest rates—the trendy monetary policy suggestion of the day—likely won’t improve the flow of capital in the eurozone. Money isn’t locked up at the ECB because banks want to earn 0.5% on their cash—it’s parked because of rising regulatory capital requirements and other supply-side issues. If the rate on reserves turns negative, banks could very well just pull funds from the ECB and park it in high-quality sovereign debt (or something similar) instead. Lending is by no means guaranteed to increase.
|By Staff, EUbusiness, 11/01/2013|
MarketMinder's View: Unemployment keeps rising for a while even after the economy starts improving—it’s a late lagging indicator. Still-rising eurozone joblessness doesn’t necessarily herald a return to recession.
|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.”
|By James Hookway, The Wall Street Journal, 09/30/2013|
MarketMinder's View: A look at how government handouts can backfire (on many levels)—for one, Thailand’s over-investment in farming could detract from education and manufacturing. Economist Henry Hazlitt explains this concept pretty clearly: “Other industries must lose what the X industry gains.” Winners and losers often result from governmental action, an important factor for investors to consider from legislation globally.
|By Rebecca Ballhaus, The Wall Street Journal, 09/30/2013|
MarketMinder's View: “A government shutdown would disrupt a large number of federal activities. But services deemed essential would continue, meaning a shutdown would leave much of the public unaffected.” There you have it—a shutdown affects relatively few services Americans use day-to-day. Hence, the economic impact is likely muted.
|By Robert J. Shiller, The New York Times , 09/30/2013|
MarketMinder's View: Are we heading toward another national housing bubble? Highly unlikely—rising home prices have plenty of fundamental support (including affordability). Further, we can’t just view demand in a vacuum, the tight supply of homes are also driving up prices. For more, see our 9/12/2013 cover story, “Popping Housing Bubbles’ Bubbles.”
|By Ben White, Politico, 09/30/2013|
MarketMinder's View: We’ve actually seen many signs supporting an overall healthy economy, and it’s unlikely a government shutdown will materially impact private-sector-led markets. Further, when a government shutdown either doesn’t happen or is less disastrous than many fear, investor confidence likely lifts, potentially boosting stocks higher. For more, see our 9/25/2013 cover story, “Sam, I am Green Budgets and Ham.”
|By Nouriel Roubini, Project Syndicate, 09/30/2013|
MarketMinder's View: True, the eurozone isn’t out of the woods, nor necessarily calm: Greece likely needs more bailouts, Italy faces political uncertainty, and banking union details are still missing. But we’d argue concerns here are likely overstated (none are new), and they distract from considerable progress made despite headwinds—like Ireland’s return to debt markets, the eurozone’s leaving recession and healthy manufacturing numbers, to name a few.
|By Staff, Reuters, 09/30/2013|
MarketMinder's View: Taxing more to spend more is an odd choice if deficit reduction is the aim. In fact, it’s an odd choice if aiding economic growth is the aim. For investors, we’d suggest the focus on this issue and avoidance of economic reforms like those promised in Abenomics’ missing arrow #3 are likely to weigh on Japanese stocks.
|By Michael Schuman, Time, 09/30/2013|
MarketMinder's View: Shanghai’s free-trade zone may eventually be a positive for China—open-market reforms tend to encourage economic activity and foreign investment—but, like a number of the country’s recent reforms, many firms will want more information to act. Finally, such shifts are very long-term in nature—not necessarily a boon for stocks.
|By Jeanne Sahadi, CNN Money, 09/30/2013|
MarketMinder's View: This debt-ceiling breakdown is largely accurate, but we’d argue the implications described here if Congress doesn’t raise the limit are a tad overwrought. Current interest payments amount to only about 9% of federal tax revenue—a debt default is very improbable even if the ceiling isn’t raised, as the government likely prioritizes payments. Either way, though, it’s most likely politicians raise it as they have 107 times before.
|By Natasha Brereton-Fukui, The Wall Street Journal, 09/27/2013|
MarketMinder's View: There are indeed many reasons to love the Fed taper, in the US and globally, but in our view, they’re different from those described here. Tapering (and eventually ending) QE will allow yield curves to steepen worldwide, likely supporting faster growth (and surprising markets). For more, see today’s cover story, “Tapertagion!”
|By Justin Wolfers, Bloomberg, 09/27/2013|
MarketMinder's View: One quarter’s fall in one measure of prices does not deflation make. But it is a development worth watching—and, in our view, further evidence quantitative easing just isn’t as inflationary as feared.
|By Janet Hook and Kristina Peterson, The Wall Street Journal, 09/27/2013|
MarketMinder's View: Four days before the deadline, it seems Congress is still deadlocked, and a shutdown remains possible. However, shutdowns aren’t inherently bearish—markets are well used to fiscal standoffs, and the current one has been widely discussed for some time. For more, see our 9/25/2013 cover story, “Sam, I Am Green Budgets and Ham.”
|By Staff, Reuters, 09/27/2013|
MarketMinder's View: Yes, headline CPI shot up. But excluding food and energy, prices still fell—the weak yen’s impact on energy imports is still driving the lion’s share of Japanese price increases. This is more evidence Japan’s aggressive monetary easing hasn’t yet provided a net benefit.
|By Tetsuya Ito, The Yomiuri Shimbun, 09/27/2013|
MarketMinder's View: All of Japan would benefit tremendously from a corporate tax cut, which would spur investment throughout the nation. However, Prime Minister Shinzo Abe hasn’t yet announced the specifics, so it isn’t clear how much this plan will help.
|By Giada Zampano, The Wall Street Journal, 09/27/2013|
MarketMinder's View: Italy’s government is struggling to stay together amid the escalating tussle between the two main parties over Silvio Berlusconi’s potential expulsion. Should the coalition fall apart and new elections be called, the result would likely be a similarly fractious government—unless Italy’s byzantine electoral system is reformed (something the parties largely support), economic reforms likely remain difficult to pass. However, markets have long been aware of this, so politicking shouldn’t much impact Italy’s borrowing costs.
|By Jeremy Warner, The Telegraph, 09/27/2013|
MarketMinder's View: This discussion of the UK’s current account deficit ignores a key mitigating factor: The country still creates significant wealth domestically. Economies aren’t fixed pies. Over the years, wealth created at home (along with inbound investment) have more than offset any departing funds.
|By Jim Puzzanghera, Los Angeles Times, 09/27/2013|
MarketMinder's View: Yet more evidence of underappreciated US economic strength.
|By Wei Gu, The Wall Street Journal, 09/27/2013|
MarketMinder's View: This nicely captures what investors should—and shouldn’t expect—from the Shanghai free-trade-zone that kicks off Sunday. As a pilot test for nationwide financial reform, its immediate economic impact will likely be incremental, but it should create new opportunities for businesses and investors over time.
|By Richard Dyson, The Telegraph, 09/27/2013|
MarketMinder's View: Record-high London home prices aren’t evidence of a British housing bubble, in our view. London prices are high because supply is extraordinarily tight. Prices elsewhere in the country are far more muted (though improving from recessionary lows).
|By Yang Ziman, China Daily, 09/27/2013|
MarketMinder's View: More evidence June’s liquidity crunch was temporary and intentional. This time around, China’s central bank is flooding the banking system with cash as banks scramble to meet quarter-end regulatory capital requirements.
|By Jason Zweig, The Wall Street Journal, 09/26/2013|
MarketMinder's View: A friendly reminder for investors: When using any financial service or product, neglecting to read the fine print may bring unexpected expenses—such as commissions and additional fees—as this article highlights.
|By Stephen S. Roach, Project Syndicate, 09/26/2013|
MarketMinder's View: Quantitative easing indeed isn’t helping—but not because it isn’t “trickling down.” Rather, banks aren’t lending more on the new reserves. Broad money isn’t growing anywhere near as fast as the monetary base. Hence, it isn’t blowing bubbles, either. Ending QE should simply widen net interest margins and incentivize banks to lend more, providing the private sector greater access to capital to invest.
|By Philip Aldrick, The Telegraph, 09/26/2013|
MarketMinder's View: While GDP (and all its revisions) are backward-looking, the confirmation of growth from the first half of 2013 is evidence QE’s end in the UK didn’t have disastrous effects—growth improved! Investors, take note.
|By Li Jiabao, China Daily, 09/26/2013|
MarketMinder's View: Even incrementally reduced bureaucracy is positive for China’s economy—and investors.
|By Rana Foroohar, Time Business, 09/26/2013|
MarketMinder's View: Yes, current monetary policy is making the economy worse—because it flattens the yield curve, locking up credit and, by extension, growth-oriented investment. Moreover, the “risks” described here are the same cud-like fears investors have chewed over for years, all of which carry minimal risk for stocks looking forward. That this suggests otherwise shows sentiment is still too dour.
|By Bob Tita, The Wall Street Journal , 09/26/2013|
MarketMinder's View: Another positive effect from the shale oil boom: cheaper fuel for commercial marine ships, which helps bottom lines.
|By Steven Russolillo, The Wall Street Journal, 09/26/2013|
MarketMinder's View: This asks whether investors are “too complacent” over fiscal politicking or “right not to overreact.” In our view, the latter! Last-minute deadlock might foster volatility near-term, but history overwhelmingly shows government shutdowns and delayed debt ceilings aren’t inherently bearish. For more, see our 9/25/2013 cover story, “Sam, I am Green Budgets and Ham.”
|By Patricia Kowsmann, The Wall Street Journal, 09/26/2013|
MarketMinder's View: Portugal’s government remains committed to reform, but its highest court feels differently since the Constitution protects public sector jobs and wages. This underscores the big tasks still facing Portugal. But provided leaders remain committed to making progress and finding middle ground with the court, the troika should remain flexible.
|By Paul Krugman, The New York Times, 09/25/2013|
MarketMinder's View: A “default” by definition occurs when a country can’t pay back its bondholders (and nothing else)—which the US can easily do with current tax revenues, and likely will do even if we hit the ceiling. This season’s debt ceiling debate isn’t different from any of the past 107—markets likely understand that, hence their relative calm. Yes, some politicians and officials may claim otherwise, but their arguments likely focus more on politicking than facts.
|By Lorraine Woellert and Victoria Stilwell, Bloomberg, 09/25/2013|
MarketMinder's View: Durable goods are typically volatile—wild swings in either direction aren’t unusual on a monthly basis, like August’s growth after July’s 8.1% drop. Further, there are plenty more data suggesting Corporate America is much healthier than largely appreciated—and budget bickering isn’t nearly the headwind for businesses this piece suggests. For more, see our 08/27/2013 commentary, “Don’t Dump on Durable Goods.”
|By Eliot Brown, The Wall Street Journal, 09/25/2013|
MarketMinder's View: Rising property prices—largely a function of economic expansion—have helped reduce the total value of bad loans on record by about half in three years. Many may try to argue otherwise, but banks (and their balance sheets) simply aren’t as weak as feared.
|By Chris Isidore, CNN Money, 09/25/2013|
MarketMinder's View: Yet more evidence of US housing’s comeback—and an incremental tailwind for the whole economy.
|By James R. Hagerty, The Wall Street Journal, 09/25/2013|
MarketMinder's View: Though this article features only a small part of US manufacturing, it highlights more than a couple reasons why the industry has been picking up lately. Due to rising wages in the developing world, rising shipping costs and cheaper energy in the US, manufacturers see a competitive advantage in North America.
|By Staff, EUbusiness, 09/25/2013|
MarketMinder's View: Though negotiations aren’t over—trade talks can last for years—freer trade between the EU and Japan would likely benefit both economies (and markets!).
|By Edward Hadas, Reuters, 09/25/2013|
MarketMinder's View: “Whatever the Census Bureau says, the median household in the United States had enough income in 2012 to consume much more, both in quantity and in quality, than in 1989. The increase is not surprising; it merely continues the two-century trend of improving lifestyles in industrial economies.” Another largely underappreciated positive for the healthy US economy.
|By Claire Jones, Financial Times, 09/25/2013|
MarketMinder's View: We agree the UK housing market isn’t threatening the economy overall—though we doubt a bubble is likely simply because prices and rates are rising. The majority of data in this article suggest UK Housing is improving due to economic recovery—rising demand amid tight supply.
|By Cassandra Sweet, The Wall Street Journal, 09/24/2013|
MarketMinder's View: An interesting look at one unintended consequence of many states’ current energy policies—and a debate worth keeping an eye on as potential changes could impact Utilities stocks and household energy bills.
|By Stephanie Kirchgaessner, Financial Times , 09/24/2013|
MarketMinder's View: This grossly overstates the probability of default if the US doesn’t raise the debt ceiling—the likelihood is practically nil. Should lawmakers delay, the Treasury likely has to prioritize some bills over others, but this isn’t default. Only missing debt service/repayments constitutes default, and incoming revenues more than cover these obligations (which take precedence over all else). For more, see our 08/28/2013 cover story, “The Return of the Debt Ceiling: Part 108.”
|By Nelson D. Schwartz, The New York Times, 09/24/2013|
MarketMinder's View: More evidence of the US’s underappreciated industrial competitiveness—one of many fundamentals underpinning this expansion. Sure, as this piece points out, that might not lead to a massive influx of manufacturing jobs, but the longer-term evolution from a manufacturing- to service-based economy isn’t a negative. For every new piece of production technology, there are new jobs to service said technology.
|By Ilona Billington, The Wall Street Journal, 09/24/2013|
MarketMinder's View: Since UK regulators ordered banks to meet Basel III capital requirements by year-end (five years ahead of schedule), banks have had to hoard capital and haven’t much put the wider yield spread to use. However, once capital raises are in the rear view mirror, it wouldn’t surprise to see lending improve markedly now QE is finished.
|By Kathleen Madigan, The Wall Street Journal, 09/24/2013|
MarketMinder's View: Consumer confidence surveys aren’t predictive for stocks—they’re at best a coincident indicator of how folks feel when they take the survey.
|By Chris Isidore, CNN Money, 09/24/2013|
MarketMinder's View: While the Case-Shiller index isn’t a perfect gauge, this is more evidence of the housing market’s steady recovery—a small but underappreciated economic tailwind. For more, see our 09/12/2013 cover story, “Popping Housing Bubbles’ Bubbles.”
|By Marcus Walker, The Wall Street Journal, 09/23/2013|
MarketMinder's View: Though some political uncertainty remains as Chancellor Angela Merkel must negotiate a new ruling coalition, her re-election as Prime Minister largely confirms the eurozone status quo, which perhaps aids sentiment in the region.
|By Takashi Mochizuki, The Wall Street Journal, 09/23/2013|
Corporate tax cuts are likely necessary to reviving Japanese businesses and positive for markets. However, the idea the tax burden needs to be shifted from businesses to consumers seems suspect. Lower taxes across the board—including sidestepping a sales tax increase—would probably be a tailwind for economic growth, and over time, the larger tax base would likely help the government boost revenues. For more, see Emily Dunbar and Mary Holdener’s 9/4/2013 column, “Doing It Wrong.”
|By Bettina Wassener, The New York Times, 09/23/2013|
MarketMinder's View: Monthly data points like this can be volatile, but longer-term trends show continued improvement in China’s manufacturing sector, suggesting the country isn’t heading for the hard landing many feared. For more, see our 10/19/2012 cover story, “(Still) No Chinese Hard Landing.”
|By Steven Russolillo, The Wall Street Journal, 09/23/2013|
MarketMinder's View: Lower expected DJIA profit growth doesn’t signal deteriorating fundamentals. Rather, this is essentially a byproduct of the Dow’s arbitrary component selection—one of its many flaws. For more, see our 9/11/2013 cover story, “Upside Dow.”
|By Staff, Reuters, 09/23/2013|
MarketMinder's View: Positive news for the eurozone as growth in business activity beat expectations—further evidence the region is faring better than many expect. For more see our 7/3/2013 cover story, “The Good, The Basel and The Eurozone.”
|By Caroline Valetkevitch, Reuters, 09/23/2013|
MarketMinder's View: Yes, earnings probably won’t match 2010’s gangbusters growth rates—but that’s more a function of high y/y comps than a weak economy. Earnings growth typically slows as bull markets age, and slower growth isn’t inherently negative for markets.
MarketMinder's View: “Durable manufacturing, motor vehicles and parts production, and oil and gas extraction activities all increased to new record-high levels in August, and posted annual growth rates (4.1%, 8.4% and 11.4% respectively) that were above the average growth rate of 2.7% for industrial production overall. America’s booming energy and auto sectors continue to be two of the strongest engines of growth for the US economy, and remain at the forefront of the economic expansion.”
|By Jeanne Sahadi, CNN Money, 09/23/2013|
MarketMinder's View: First, Congress likely reaches a budget agreement in the 11th hour, or shortly thereafter, minimizing the risk of a prolonged shutdown. Second, while decreased government spending can impact GDP, the impact forecasted here seems overstated—the economy has weathered about four years of government cuts, thanks to far larger gains in business investment. For more on the debt ceiling, see our 9/18/2013 cover story, “Indebted to the Future?”
|By Lori Montgomery, The Washington Post, 09/20/2013|
MarketMinder's View: With gridlock high, neither party is pursuing extreme legislative change—just enough incremental changes as needed to reach a budget compromise. Low legislative risk is another reason to be bullish.
|By Chris Dieterich, The Wall Street Journal, 09/20/2013|
MarketMinder's View: Even if it does (which isn’t at all guaranteed—these things are often overhyped), the long-term impact is likely nil. Over time, volatility evens out as markets weigh fundamentals.
|By Mark Thompson, CNNMoney, 09/20/2013|
MarketMinder's View: Likely, it means the status quo—the opposition Social Democrats have backed Angela Merkel and her Christian Democratic Union on eurozone measures at every turn. Regardless of which party leads the next coalition, the will to hold the currency union together should remain intact.
|By Takashi Mochizuki, The Wall Street Journal, 09/20/2013|
MarketMinder's View: Given how many influential people within Prime Minister Shinzo Abe’s party oppose cutting corporate tax cuts, if he sees this through, it could augur well for further third arrow reforms. However, it’s premature for investors to get too excited over Japanese stocks—previous rumored reforms haven’t really panned out since Abe took office.
|By Philip Aldrick, The Telegraph, 09/20/2013|
MarketMinder's View: This thesis assumes forward guidance was credible in the first place. But words are just words—they aren’t set in stone, and plans can change at any time. As well they should! After all, central bankers’ words are based on forecasts, which can prove wrong over time. Investors shouldn’t base decisions on any central banker’s or politician’s words alone.
|By Staff, Associated Press, 09/20/2013|
MarketMinder's View: A headscratching move considering India’s yield curve has been inverted for over two months. Confusing monetary policy is likely a big reason investors have seemingly lost confidence in the rupee.
|By Makiko Mitamura, Bloomberg, 09/20/2013|
MarketMinder's View: A fascinating look at how humans’ emotions can potentially impact financial markets.
|By Jaime Daremblum, Real Clear World, 09/20/2013|
MarketMinder's View: An interesting look at Mexico’s ongoing reforms—just one example of the underappreciated positives in Emerging Markets.
|By Jim O’Neill, The Telegraph, 09/20/2013|
MarketMinder's View: More QE isn’t a reason to be bullish—QE is contractionary. The economy is growing despite it, not because of it. Markets will likely be happiest once QE ends.
|By Philip Aldrick, The Telegraph, 09/20/2013|
MarketMinder's View: UK public finances are improving quite a bit (not that they looked bad in the first place—debt service is quite affordable), and with growth picking up, improvement likely continues. More evidence the twin credit rating downgrades earlier this year just didn’t reflect reality—something investors should keep in mind next time the raters strike.
|By Jeanna Smialek, Bloomberg, 09/20/2013|
MarketMinder's View: Though this is one data point for one small region, it’s yet more evidence of the US’s underappreciated economic strength.
|By Dean Baker, USA Today, 09/19/2013|
MarketMinder's View: There’s much we disagree with here. In our view, ending QE would benefit the economy more than continuing it, as the Fed’s bond buying has mostly boosted idle excess bank reserves. Also, a growing and bustling private sector—not QE—is the real stimulus for economic growth. Reducing QE would make lending more profitable through higher long-term loan and bond rates, encouraging bank lending. That would likely grease the private sector’s wheels even more. For more, see today’s cover story, “Sept-Taper Caper.”
|By Staff, Reuters, 09/19/2013|
MarketMinder's View: A strong LEI figure is one of a number of reasons why we’re bullish. For more reasons, see Elisabeth Dellinger’s column, “62.5 Reasons to Be Bullish.”
|By Jake Sherman and John Bresnahan, Politico , 09/19/2013|
MarketMinder's View: Congress is gridlocked—a bullish feature, in our view, reducing the likelihood extreme legislation is passed. However, gridlock doesn’t mean nothing happens, and it’s overwhelmingly likely the debt ceiling rises for a 108th time, somewhere around the 11th hour. (We’ll add the debt-default rhetoric involving the debt ceiling is a bit off—the government has sufficient revenue to easily service the debt without borrowing or using “extraordinary measures.”) For more, see our 8/28/2013 cover story, “The Return of the Debt Ceiling: Part 108.”
|By Ben Bland, Financial Times, 09/19/2013|
MarketMinder's View: Increased airline traffic between Indonesia and Singapore is a sign of just how strong economies are around the globe: Individuals and companies can afford to fly, whether for business or pleasure.
|By Szu Ping Chan, The Telegraph, 09/19/2013|
MarketMinder's View: Japanese export values are up—which is what’s being reported on here. However, export volumes rose only 1.8% y/y—effectively meaning foreign demand hasn’t been boosted much by Abenomics’ weak yen policy. In addition, because of Japan’s need to import most of its energy, the same weak yen increases some costs for businesses—potentially cancelling out export benefits. Absent structural reforms, it seems to us better opportunities exist for investors. For more, see our 9/17/2013 cover story, “Abenomics’ Glowing Tofu Problem.”
|By Staff, Reuters, 09/19/2013|
MarketMinder's View: Another data point illustrating cyclical improvements in the eurozone economy: Irish GDP returned to growth in Q2 2013.
|By Eshe Nelson and Scott Hamilton, Bloomberg, 09/19/2013|
MarketMinder's View: A drop in food sales—which reached a two year high last month—was the primary culprit for the fall in UK retail sales this month, suggesting this August’s dip is regular month-to-month volatility rather than a fundamental game changer. Considering the myriad of other positive data such as increasing business investment and stronger manufacturing, the UK economy seems to be on a fine trajectory.
|By Victoria McGrane and Jon Hilsenrath, The Wall Street Journal, 09/18/2013|
MarketMinder's View: While we’d argue we’ve seen plenty of evidence the US economy is strong and improving, the main reason we think more QE is misguided is that it’s contractionary. QE created more money, but it’s largely sitting on the sidelines—not benefiting the economy—because QE also flattens the yield curve, which disincentivizes bank lending.
|By Peter Bofinger, Bloomberg, 09/18/2013|
MarketMinder's View: We agree Germany’s upcoming election likely won’t change eurozone policies much—leaders have shown ample political will to keep the euro together, which likely continues—and the eurozone isn’t out of the woods yet. But this greatly overlooks the area’s progress and signs of economic stability despite remaining issues.
|By Christopher Matthews, Time, 09/18/2013|
MarketMinder's View: While we haven’t seen much (any) proof QE has had a positive impact on the US economy and markets—we’d argue it has probably tempered economic activity some as it disincentivizes bank lending—this sensibly addresses common misperceptions surrounding QE and fear about its eventual wind down.
|By Li Jiabao, China Daily, 09/18/2013|
MarketMinder's View: Here’s another sign the Chinese economy is likely in better shape than many fear, despite slowing growth—supporting our view a hard landing is increasingly unlikely.
|By Scott Hamilton, Bloomberg, 09/18/2013|
MarketMinder's View: Likely a sensible move, in our view. QE is contractionary, disincentivizing bank lending and, hence, economic activity—that the UK economy has seen widespread growth since ending the program supports this.
|By Maria Petrakis and Georgios Georgiou, Bloomberg, 09/18/2013|
MarketMinder's View: While these plans could change, ending capital controls would be a key step in Cyprus’s recovery—it would signal increased confidence in the banking system. Of course, capital controls are just one of a number of issues Cyprus has to address before its economy can take off.
|By Staff, BBC, 09/18/2013|
MarketMinder's View: While global market impact is probably limited, measures like this don’t address the issues causing India’s currency troubles—and, thus, likely aren’t effective long-term solutions. India would benefit more from less protectionism and more structural reforms, which would also inspire more investor confidence.
|By Simon Rabinovitch, Financial Times, 09/17/2013|
MarketMinder's View: With this change, investors have more tools to manage risk—a key step in China’s ongoing financial maturation. Continued reform likely creates a tailwind for markets. Further, reducing capital controls can create a small tailwind for growth by allowing capital to flow more freely.
|By Andrew Taylor, Associated Press, 09/17/2013|
MarketMinder's View: Like all very long-term forecasts, this one simply involves too many factors that could change any number of times over long time horizons—in other words, reality isn’t at all guaranteed to play out as described here. For now, what matters most is US debt remains very affordable by historical standards. For more, see our 8/16/2013 cover story, “Don’t Fret the Debt.”
|By Kim Tae-jong, Korea Times, 09/17/2013|
MarketMinder's View: Positive news for Korea—and perhaps a small tailwind for growth—as banks will gain a revenue stream and consumers will gain access to more diversified financial products. A timely example of continued reform in Emerging Markets—a key fundamental for the category looking forward.
|By Leslie Shaffer, CNBC, 09/17/2013|
MarketMinder's View: This is overwrought, in our view. Growth isn’t really a threat to the economy. Yes, growth means tapering, but tapering is an economic positive. It should steepen the yield curve, adding to already-healthy fundamentals by incentivizing banks to lend more. Yes, rates might rise, but rising rates aren’t inherently bad—there doesn’t appear to be a catalyst for them to skyrocket out of control.
|By Emma Rowley, The Telegraph, 09/17/2013|
MarketMinder's View: Tight supply is a big reason UK home prices are at all-time highs, and now, homebuilders are responding. Looking ahead, rising construction output likely creates a nice tailwind for UK growth—more evidence of the UK’s post-QE reacceleration. With a steeper yield curve, banks have had a bigger incentive to lend—a key reason why mortgage approvals are riding high. For more, see our 7/8/2013 cover story, “A UK Perspective on QE.”
|By Raul Gallegos, Bloomberg, 09/17/2013|
MarketMinder's View: While this plan likely creates winners and losers, it is overall more market-friendly than initial proposals—a positive for Mexican stocks and US firms doing business south of the border. For more on Mexico, see our 8/15/2013 cover story, “What to Do About Mexico’s Energy Reforms.”
|By Russell Gold, The Wall Street Journal, 09/17/2013|
MarketMinder's View: An interesting development as the US shale oil boom continues: Hydraulic fracturing, or fracking, emits less methane into the atmosphere than originally thought. This could augur well for future project approvals, helping the economy reap further benefits.
|By Wayne Ma, The Wall Street Journal, 09/17/2013|
MarketMinder's View: While this tariff is far less onerous than expected, it is still an incremental negative—all protectionist measures are, as they reduce the global flow of goods and services. At the same time, with trade still getting freer, on balance—and global trade still rising despite the occasional spat like this—the risk of protectionism disrupting the bull market appears slim to none. For more, see our 5/22/2013 cover story, “Solar Wars: A (Un)Renewable Hope.”
|By Schuyler Velasco, Christian Science Monitor, 09/16/2013|
MarketMinder's View: It is true retail sales didn’t meet expectations, growing a lackluster 0.2% in August. But that doesn’t necessarily hint at a slowdown in the economy. Retail sales don’t include services—the bulk of consumer spending—so this stat isn’t exactly an economic crystal ball. Seems to us the reaction to the below-estimated retail data is another sign investors underappreciate the US economy’s health—bullish for stocks. For more, see our 9/16/2013 cover story, “One Weird—and Simple—Trick to Thinking Differently About Stocks.”
|By Staff, Bloomberg News, 09/16/2013|
MarketMinder's View: It isn’t all about confidence—some is about fundamentals, like the frequency of China meddling with domestic markets, negative real rates of return on savings and no real bond market to speak of. Ultimately, it does seem China’s property market is pricey, though we’d stop short of calling it a full-fledged bubble.
|By Left Banker, Seeking Alpha, 09/16/2013|
MarketMinder's View: It is arbitrary to label specific days of the week or months as “most treacherous” for stocks. No specific time period is inherently good or bad for stocks—so we’d suggest making an effort to avoid a case of the Mondays next month is likely a fruitless exercise. For more, see our 9/2/2013 cover story, “September Is Just a Month.”
|By Paul Krugman, The New York Times, 09/16/2013|
MarketMinder's View: In our view, this misses the real effect of quantitative easing: It is contractionary, so there are probably fewer jobs as a result of QE. Tapering is more likely a GOOD thing for the economy since QE flattens the yield curve, creating a disincentive to lend.
|By Mark J. Perry, AEIdeas, 09/16/2013|
MarketMinder's View: “Average food inflation over the last 4-years in the US is the lowest in more than 47 years, Americans spend a smaller share of their household budget on food (at 6.6%) than consumers in any other country in the world, and that share of total US consumer expenditures spent on food has fallen consistently over time, and is now half of what it was in the 1970s and about one-third of what it was in the 1950s.”
|By Kosaku Narioka, The Wall Street Journal, 09/16/2013|
MarketMinder's View: Japan’s last operating nuclear reactor shut down for maintenance this weekend. It is intended to be a temporary move—and that may be true. The real impact of the story is deeper: What was once a primary source of Japanese electricity is now a shell of itself, 30 months after the earthquake/tsunami. Companies broadly have had to turn to more expensive, imported power generation fuels, reducing profits—Abenomics’ cheap yen actually makes that worse, not better.
|By Jeffrey Sparshott, The Wall Street Journal, 09/16/2013|
MarketMinder's View: We’ve seen more than a handful (maybe 62 ½?) of indicators suggesting continued economic growth—August’s rebound in factory output after a flattish Q2 is just the latest. For more, see our 9/4/2013 cover story, “A Manufactured Buzz?”
|By Jeremy Warner, The Telegraph, 09/13/2013|
MarketMinder's View: We largely agree financial regulations enacted since 2008 don’t do much to prevent a repeat of the crisis—but not because institutions are still “too big to fail.” Rather, it is because items like capital requirements and the division (or lack thereof) between retail and investment banking weren’t the catalysts for 2008. That was the misapplication of mark-to-market accounting to banks’ illiquid assets, and there just isn’t a panacea for preventing similar secondary regulatory changes from having unintended consequences downstream.
|By Craig Torres and Ilan Kolet, Bloomberg, 09/13/2013|
MarketMinder's View: It isn’t surprising the Fed has a “communications challenge” considering the logic behind the last four years of monetary policy is flawed. For investors, here’s what matters: Quantitative easing is contractionary—it flattens the yield curve—and ending it will be good for the economy. Short-term interest rates are a separate issue, and we’d suggest investors take forward guidance on rates with a grain of salt—words and opinions aren’t set in stone.
|By Margot Patrick, The Wall Street Journal, 09/13/2013|
MarketMinder's View: To increase competition within banking, the UK tried a novel approach: Instead of forcibly breaking apart the big banks, officials removed customers’ administrative barriers to switching, giving them more choice and forcing banks to offer more competitive services and costs to keep them. An intriguing example of a market-friendly approach to regulatory change.
|By Dylan Matthews, The Washington Post, 09/13/2013|
MarketMinder's View: The biases illuminated here affect investors, too. Staying disciplined—shutting off the urge to see what you want to see and act on emotional responses—is key to investors’ reaching their long-term goals.
|By Neil Irwin, The Washington Post, 09/13/2013|
MarketMinder's View: “America doesn’t criminalize bad business decisions, even when they lead to business failure; if we did, Silicon Valley would be a penal colony. The fact that the collapse of financial firms can cause so much collateral damage for the economy doesn’t lower the legal bar for throwing CEOs in jail, no matter how much a basic sense of fairness makes a person wish it were so.” In other words, the US isn’t China—a key reason why our economy and capital markets have grown and thrived over time and likely keep doing so.
|By Jonathan House, The Wall Street Journal, 09/13/2013|
MarketMinder's View: Monthly retail sales figures don’t necessarily predict total consumer spending—which isn’t the sole or always the biggest driver of headline GDP. So while slower-than-expected August retail sales growth isn’t great news, it also isn’t automatically a sign of weaker Q3 GDP growth.
|By He Wei and Wei Tian, China Daily, 09/13/2013|
MarketMinder's View: On the surface, that Chinese officials plan to use Shanghai’s forthcoming free trade zone to pilot market-oriented changes augurs well for further nationwide reform—a key driver of Chinese stocks. However, it is difficult to see how officials can accurately test things like currency liberalization and opening the capital account in such a small area.
|By Kana Inagaki, The Wall Street Journal, 09/13/2013|
MarketMinder's View: Rather than trying to nudge investors into stocks with an über-complex capital gains tax code, Japan (and its markets!) would benefit more from removing administrative barriers to investment and growth. Higher capital gains taxes aren’t automatically bearish, but the apparent shift of focus away from Abenomics’ third arrow likely isn’t great news for Japanese stocks. For more, see our 9/10/2013 cover story, “Tracking the Third Arrow.”
|By Ambrose Evans-Pritchard, The Telegraph, 09/13/2013|
MarketMinder's View: Sure, Italy considered leaving the euro, and Germany flirted with booting Greece. But neither happened! The political will to preserve the euro prevailed, and it remains intact today—a key reason why investors are increasingly moving on from PIIGS fears.
|By Barry Hatton, Associated Press, 09/13/2013|
MarketMinder's View: An interesting look at the challenges Portugal faces in enacting further economic reforms—a key reason leaders have requested a more flexible deficit target. Portugal’s constitution might prevent leaders from making swift changes, but in the near term, what matters more is the political will to comply with bailout terms prevails, which should help the troika remain flexible.
|By Philip Aldrick, The Telegraph, 09/13/2013|
MarketMinder's View: Price controls are never the answer—they mess with the free flow of goods and services, which markets don’t like. Price controls were a key driver of the early 1970s’ bear market, and while a cap on UK home prices might not have the same impact, it would nonetheless be a risk for capital markets.
|By Jeanne Sahadi, CNN Money, 09/12/2013|
MarketMinder's View: A nice breakdown of how truly political the debt ceiling debate is. After much political posturing and grandstanding, we expect Congress to raise the debt ceiling for a 108th time, either right near the deadline or even a little past it. For more, see our 8/28/2013 cover story, “The Return of the Debt Ceiling: Part 108.”
|By Michael Casey, The Wall Street Journal, 09/12/2013|
MarketMinder's View: There are a number of big issues with ratings agencies: They’re backward-looking (Standard & Poor’s just downgraded Argentina, which has been troublesome for years); their opinions frequently hinge on ambiguous things like “contentious politicians”; lack of competition; and, as alluded to here, potential conflicts of interest exist. The solutions mentioned here, like adding additional government supervision or a government-run rater, don’t correct this shortcoming. Finally, if investors can freely assess stocks and other instruments that do not receive regulation-enshrined ratings, why exactly it is impossible for bonds to face the same is a bit beyond us. For more on rating agencies, see our 7/22/2013 cover story, “Rating Agencies: Late as Usual.”
|By Dina ElBoghdady, The Washington Post, 09/12/2013|
MarketMinder's View: For as much attention “technology” has gotten recently for creating stock market issues, did you know paperwork has actually caused the most US stock market closures since 1912? Whether it’s a computer glitch or a “fat finger trade,” long-term investors shouldn’t fret the occasional stock market disruption. For more, see our 8/29/2013 cover story, “Squirrelly Computers?”
|By Staff, BBC News, 09/12/2013|
MarketMinder's View: Events here bear watching—political gamesmanship in Eastern Europe is spilling over into trade relations. We’ve seen trade spats earlier this year between Europe and China over solar panels—though they ultimately proved rather toothless and limited. While this latest dispute is restricted to the Continent, it’s a story worth following.
|By Jeffrey Frankel, Project Syndicate, 09/12/2013|
MarketMinder's View: Delaying or spacing out legislation implementation gives markets time to assess and price in the impact beforehand—a better alternative to sudden, unforeseen lawmaking. However, we think the argument here misses the point—whether Japan implements its proposed sales tax hike all at once or in increments isn’t the game changer holding Japanese growth in the balance. Rather, meaningful structural reforms (the third arrow of Abenomics) are what Japan needs the most—but there are few signs the third arrow’s about to be fired. For more, see our 9/10/2013 cover story, “Tracking the Third Arrow.”
|By Staff, Reuters, 09/12/2013|
MarketMinder's View: Both US and UK retail sales are high and rising—consumer spending is healthy. Besides, unless the money that isn’t spent is buried in the backyard, it is likely being used in some form or fashion (invested, lent, spent, etc.). Focusing solely on spending can be a bit misleading.
|By John W. Schoen, CNBC, 09/11/2013|
MarketMinder's View: This forecast is just, well, a forecast and one group’s opinion—it isn’t set in stone. Plus, it fails to account for a few key variables—like quantitative easing being a drag on growth for the past few years. Once the Fed stops flattening the yield curve, growth could very well accelerate well beyond these predictions.
|By Jamil Anderlini, Financial Times, 09/11/2013|
MarketMinder's View: Structural reforms to open up the economy, like those laid out by Premier Li Keqiang Wednesday, would do wonders to help China achieve sustainable growth and become more of a global market force. The apparent political will to implement change is heartening, but we’d take it with a grain of salt—when and how these reforms would be implemented remains to be seen.
|By Annie Lowrey, The New York Times, 09/11/2013|
MarketMinder's View: We don’t doubt there is some concentration of income in the US, but we struggle to see how these statistics accurately depict income strata. The figures employed are pre-tax and include capital gains—they don’t reflect true take-home income. Moreover, we’d suggest there isn’t much (if any) real evidence this is an economic problem—it’s more political. Whatever the top 1% or 10% earn doesn’t really detract from overall national income/wealth/growth, because the economy isn’t a fixed pie—the important consideration for stock investors.
|By Scott Hamilton, Bloomberg, 09/11/2013|
MarketMinder's View: Bizarrely, in the name of “forward guidance,” BOE members are now seemingly talking down the UK’s economic recovery in an effort to convince markets rates will stay low for at least three years. But markets are smart—they probably know the BOE’s 7% unemployment target is rather arbitrary and policymakers will tighten when they deem appropriate, likely regardless of employment figures.
|By Carol Matlack, Bloomberg Businessweek, 09/11/2013|
MarketMinder's View: Anti-euro politicians and parties have been around for a while, and it’s largely unsurprising their popularity may increase (and their politicking may heat up more) near election time. But we’re skeptical a party with just 4% or even 5% support likely derails Germany (or the rest of the eurozone) from its pro-euro stance. For more, see our 08/22/2013 commentary, “Brewing German Elections.”
|By Dan Hyde, The Telegraph, 09/11/2013|
MarketMinder's View: To us, this policy seems a solution in search of a problem: "Given the fact that the APR is of little help to borrowers in establishing the best deal for them based on the current interest rates, it's unlikely that an APR based on a worst-case rate scenario based on historic rates will be of much use." Once this proposal takes effect (given overwhelming support, most consider the final vote a formality), mortgage companies, banks and borrowers may see some unintended consequences.
|By Staff, EU Business, 09/11/2013|
MarketMinder's View: This likely won’t radically shift Portugal’s course—the troika has been quite flexible with the periphery’s debt targets, and the request seems logical given the constitutional roadblocks to key financial reforms (a longer-term issue for Portugal). For markets, what probably matters more is Portugal’s slow and steady journey back from its 2011 bailout continues.
|By Neil Irwin, The Washington Post, 09/10/2013|
MarketMinder's View: We agree the Dow Jones isn’t a reliable representation of US markets—it is price-weighted, which skews each company’s impact on the index, and it includes only 30 companies. That 10% of its stocks were replaced due to their price alone doesn’t mean much for investors.
|By Staff, Reuters, 09/10/2013|
MarketMinder's View: Though monthly data are volatile, that China’s economy seems to be stabilizing suggests hard-landing fears are overwrought.
|By Aaron Back, The Wall Street Journal, 09/10/2013|
MarketMinder's View: While this rather overstates the fundamental support for Japan’s nascent economic recovery, its larger thesis is spot-on: Whether policymakers can implement politically difficult structural reforms is key for Japan’s economy and markets in the long run. For more, see today’s cover story, “Tracking the Third Arrow.”
|By Jeanne Sahadi, CNN Money, 09/10/2013|
MarketMinder's View: Renewed debt ceiling fears are overwrought, in our view. Congress has raised this arbitrary limit 107 times and they’ll likely do it again—mitigating the chances of events outlined here. That’s true even if they compromise at the eleventh hour or a few days after they hit the limit. For more, see our 8/28/2013 cover story, “The Return of the Debt Ceiling: Part 108.”
|By Staff, Bloomberg, 09/10/2013|
MarketMinder's View: QE tapering doesn’t mean the Fed is taking its foot off the gas—they’re taking their foot off the brake! QE is contractionary—it flattens the yield curve, creating a disincentive to lend, which slows down business investment and overall commerce. Ending it should help growth accelerate.
|By Jeff Macke, Yahoo! Finance, 09/10/2013|
MarketMinder's View: To suggest rising stocks mean investors are ignoring taper talk is to assume the taper is an automatic negative—it isn’t. People think it is, and the markets have seemingly discounted this backward perception in recent months. Looking ahead, reality should exceed these dour expectations, giving stocks a powerful lift.
|By Nektaria Stamouli, The Wall Street Journal, 09/10/2013|
MarketMinder's View: While Greece is by no means out of the woods yet, that it is closer to reaching an operating budget surplus probably boosts investor sentiment on the eurozone.
|By Daniel Yergin, CNN Money, 09/09/2013|
MarketMinder's View: We agree: “This revolution is not just about energy production; it’s about the economy story along several dimensions, whether measured in consumers’ pocketbooks, jobs, US manufacturing output, or America’s increased competitiveness in the world economy.”
|By Justin Lahart, The Wall Street Journal, 09/09/2013|
MarketMinder's View: Why are we only looking at computer products for signs of innovation? What about energy innovations? Or 3D printing? Or biotechnology involving medicine and genetic science? Or consumer goods (like LCD/Plasma televisions) where the exact phenomenon cited here—falling prices—is occurring left and right? Suffice it to say, this theory is flawed, in our view.
|By Dhara Ranasinghe, CNBC, 09/09/2013|
MarketMinder's View: Globally speaking, elections’ ending hasn’t been a tailwind for stocks. That’s particularly true when a pro-business candidate wins and his campaign rhetoric proves, well, rhetorical. Campaigning politicians are unlikely to pass sweeping legislation—a factor that outweighs uncertainty over whom the leader is. (Especially in Australia, because it’s been a virtual certainty Labor would lose for months. For more, see our 07/17/2013 cover story, “Carbon Dating Politics.”)
|By Eric Reguly, , The Globe and Mail, 09/09/2013|
MarketMinder's View: It is true extreme weather and natural disasters can negatively impact economies in the very short-term, but that’s been true since the beginning of time and economies have grown regardless. For more, see our 7/20/2012 cover story, “Gotta Have My Pops!”
|By Staff, The Telegraph, 09/09/2013|
MarketMinder's View: Evidence the UK economy is faring better than many may expect. For more charts on the global economy, see Elisabeth Dellinger’s 9/6/2013 column, “Chart Fest 2013.”
|By Diana Olick, CNBC, 09/09/2013|
MarketMinder's View: This is an interesting look at various factors being weighed in the debate over Fannie Mae and Freddie Mac. In our view, reducing government involvement in the housing industry wouldn’t necessarily cripple it. Similarly, not having guaranteed mortgage-backed securities (MBS) likely wouldn’t eliminate them, either. When left to market forces and no guarantee to compete with, investors will weigh risks and rewards, and some will likely see MBS as a viable investment vehicle. For more, see our 8/8/2013 cover story, “So Long, Fannie and Freddie?”
|By Staff, BBC News, 09/09/2013|
MarketMinder's View: This is a plus for Japan’s economy, to be sure, but unless Japanese Prime Minister Shinzo Abe fires his much-discussed, much-less-seen third arrow of economic reforms, we doubt Japanese stocks and economy benefit much longer term.
|By Staff, Bloomberg, 09/09/2013|
MarketMinder's View: Maybe. But it’s a bit backwards and bizarre to claim Japan can “afford” a higher sales tax because its inflation rate is below 1%, leaving “room for even more quantitate easing.” Japan has tried quantitative easing on more than one occasion, to little real, positive effect. In our view, Japanese stocks and the economy would benefit more from structural reforms. For more, see Emily Dunbar and Mary Holdener’s 9/4/2013 column “Doing It Wrong.”
|By Neil Irwin, The Washington Post, 09/06/2013|
MarketMinder's View: One could cherry-pick seemingly good and bad news from the data underlying any month’s jobs report. What matters more—for headline and underlying employment data—is private payrolls, the labor force, jobless claims and discretionary income have improved significantly overall since the recovery began.
|By Alen Mattich, The Wall Street Journal, 09/06/2013|
MarketMinder's View: There isn’t a discernible relationship between stock prices and bond yields over time—stocks historically rise and fall with rising interest rates, and rise and fall with falling interest rates. Looking ahead, stocks should keep moving higher on positive fundamentals regardless of what rates do. We’d also suggest rates aren’t likely to surge in the foreseeable future, but that’s more a tangential matter.
|By Ylan Q. Mui, The Washington Post, 09/06/2013|
MarketMinder's View: To assume the Fed’s forward guidance is “uncertain” in light of pending FOMC departures is to assume it was ever certain—but words are just words. With or without personnel turnover, the Fed can shift course at any time. Hence, markets, rather than Fed pledges, are likely a better gauge of what the future holds.
|By Kristen Gelineau and Rod McGuirk, Associated Press, 09/06/2013|
MarketMinder's View: An interesting look at a key issue in this weekend’s Australian election. Global politics matter for stocks.
|By Staff, EUbusiness, 09/06/2013|
MarketMinder's View: That headlines weren’t too preoccupied with heated Cypriot politicking shows how investors are starting to move on from eurozone debt fears—sentiment is improving.
|By Katherine Rushton, The Telegraph, 09/06/2013|
MarketMinder's View: “$3 trillion buying spree” is just a forecast, cash-based M&A is clearly on the rise. Cash deals shrink stock supply—a bullish force.
|By Philip Aldrick, The Telegraph, 09/06/2013|
MarketMinder's View: Falling exports and imports isn’t great news, but one weak month of a historically variable dataset doesn’t offset the UK’s many other signs of post-QE economic acceleration.
|By Nektaria Stamouli, The Wall Street Journal, 09/06/2013|
MarketMinder's View: We wouldn’t exactly call a 3.8% y/y drop welcome news for Greeks, even if it is a slower contraction from Q1. However, for global investors, what matters is Greece’s still-falling GDP doesn’t much impact global growth. Greece is a tiny sliver of the world economy, and since it’s shrinking more slowly and off a smaller base, it detracts less and less from total world output.
|By Lu Jianxin and Pete Sweeney, Reuters, 09/06/2013|
MarketMinder's View: As long as Chinese officials keep monkeying with stock issuance bans and quotas, China probably can’t be a globally dominant market force—likely a big reason China’s historical stock returns have lagged Emerging Markets despite robust economic growth. Moving to a freer system would give firms more financing options and make the market’s functioning more transparent, benefiting Chinese businesses and investors alike.
|By James Sterngold and Matt Wirz, The Wall Street Journal, 09/06/2013|
MarketMinder's View: Private debt isn’t inherently bad—corporate bonds help firms get the cash they need to invest and grow. With borrowing costs historically low, most businesses are earning more than enough returns on investments to cover the interest costs and still profit—debt is affordable. Plus, relative to total assets, total private debt is far smaller today than in 2008.
|By Staff, Associated Press, 09/06/2013|
MarketMinder's View: Requesting a precautionary credit line doesn’t mean Ireland needs another bailout—this is just an insurance policy in case markets get a bit tight at some point in 2014. For now, Ireland’s return to primary debt markets appears on track.
|By Staff, Reuters, 09/06/2013|
MarketMinder's View: The LTROs don’t start maturing until January 2015, but eurozone banks have repaid nearly one-fourth of the funds already. This doesn’t mean the region’s banks are out of the woods, but it is a sign liquidity pressures have eased substantially.
|By Daisy Maxey, The Wall Street Journal, 09/05/2013|
MarketMinder's View: We don’t recommend altering investment strategy in anticipation of the debt ceiling—this is an entirely political matter and one we expect politicians to resolve, albeit after much posturing. While we may see some day-to-day market volatility, this shouldn’t affect stocks’ long-term direction. For more, see our 08/28/2013 cover story, “The Return of the Debt Ceiling: Part 108.”
|By Spencer Jakab, The Wall Street Journal, 09/05/2013|
MarketMinder's View: First, it’s important to recall Emerging Markets economies are still growing. True, the rates have slowed, but that’s far from the 1997-1998 period in which they contracted. Moreover, the parallel is even weaker when you consider the reform, development, reserves and advances made in the period since then. Finally, we’ve just seen in the eurozone another example regional weakness needn’t presage global weakness—in fact, global strength can swamp regional factors.
|By Ambrose Evans-Pritchard, The Telegraph, 09/05/2013|
MarketMinder's View: While it’s true recent growth doesn’t mean the eurozone is out of the woods, we disagree the situation is as dire as portrayed here. The periphery has improved, and most concerns or fears about the region are already well known, largely sapping their power to move markets.
|By Steven Russolillo, The Wall Street Journal, 09/05/2013|
MarketMinder's View: Making portfolio decisions based solely on the time of year is generally a losing strategy. In our view, trying to navigate around eight days that average a return of -0.5% is sheer folly. It generally takes something underappreciated and fundamental to materially move stocks not the flipping of a calendar page or widely known events like Syria.
|By Jim Efstathiou Jr., Bloomberg, 09/05/2013|
MarketMinder's View: In addition to economic growth and jobs, here’s another positive from the shale oil boom: cheaper energy costs, passed down to the consumer.
|By Martin Hesse, Der Spiegel, 09/05/2013|
MarketMinder's View: Actually, we’d argue FAS 157’s implementation combined with the US government’s haphazard response to the fallout—brokering a deal for Bear Stearns, allowing Lehman to fail, nationalizing parts of AIG—drove vast uncertainty, and this is what triggered 2008’s panic. Additionally, the US Fed’s QE has reduced loan profitability at banks, so we disagree with the thesis the US government and Fed have buoyed US bank profits. Finally, it’s not really possible to remove all risk from the financial system, and attempts to do so likely reap major negative unintended consequences.
|By Wei Tian, China Daily, 09/05/2013|
MarketMinder's View: Chinese investors seek foreign capital markets because their domestic capital markets face a number of headwinds, such as restrictive regulations and arbitrary rulings. This uncertainty limits the size and maturity of Chinese capital markets, preventing the country from being a force on global markets.
|By Staff, BBC News, 09/05/2013|
MarketMinder's View: Another sign of US economic vitality.
|By Neil Irwin, The Washington Post, 09/04/2013|
MarketMinder's View: Speculation about Syria, who the new Fed chair will be, a backwards interpretation of QE’s ending, political fears regarding the debt ceiling and incrementally-higher-yet-still-historically-low interest rates—such concerns have been chewed for months, and likely don’t surprise the forward-looking market much. Further, the US economy has been growing steadily, albeit slowly, for the last four years—and the fundamentals underlying that strength have largely been getting better.
|By Roben Farzad, Bloomberg Businessweek, 09/04/2013|
MarketMinder's View: September is just a month, and in our view, there’s no true correlation between it and guaranteed market malaise—even if historically low interest rates rise some this autumn. We believe there is potential for upside surprise as reality likely ends up better than fearful expectations.
|By Jim Puzzanghera, LA Times, 09/04/2013|
MarketMinder's View: Overall, here’s a sensible take on July’s trade data: Though exports dipped slightly, higher imports are yet another signal the US and global economies continue growing.
|By Joel L. Naroff, Philly.com, 09/04/2013|
MarketMinder's View: Despite chatter to the contrary, the BLS’s employment reports—which cover two different, not especially comparable datasets—show too much undesired part-time work isn’t plaguing the US labor force. Consider: “Between July 2012 and last July (a preferred time frame because it removes seasonal-adjustment aberrations), all of the additional people who took part-time positions wanted those part-time jobs. Their ranks increased by 260,000. In contrast, the number of people forced to take part-time work because of economic issues fell by 3,000.”
|By John Makin, Real Clear Markets, 09/04/2013|
MarketMinder's View: While we agree it can’t be known exactly when the Fed will start tapering QE in advance, in our view, the sooner the better. We believe QE is a contractionary policy and keeps money sitting on the sidelines, instead of coursing through the greater economy—more QE, whether from more QE-infinity or QE4, would only further disincentivize economic activity.
|By Philip Aldrick, The Telegraph, 09/04/2013|
MarketMinder's View: For the last few months, UK economic data have shown steady improvement—this is just the latest in the series. All this comes after the Bank of England ceased its quantitative easing program—something we believe more US investors should take heed of, considering widespread tapering fears.
|By Cabriele Steinhauser, The Wall Street Journal, 09/04/2013|
MarketMinder's View: In our view, this seems mostly like a solution in search of a problem. That a money market fund in the entire history of money market funds dipped below $1 per share for a brief period during the first financial panic in about 80 years (2008) says more about the stability of such liquid savings vehicles than the threat. And it likely reduces choices for savers and investors. Fortunately, the likelihood this proposal passes is slim, as it faces opposition in a number of member countries.
|By Kristen Grind, The Wall Street Journal, 09/03/2013|
MarketMinder's View: An interesting take on some common investor mistakes. Being aware of biases and other behavioral errors can help investors stay disciplined, increasing their chances of long-term success.
|By Patti Domm, CNBC, 09/03/2013|
MarketMinder's View: History shows seasonal adages like “September is the worst month for stocks” aren’t predictive. Further, while short-term volatility is impossible to predict with any certainty, fears of a Fed taper, Emerging Markets and Syria shouldn’t much weigh on stocks longer term. These factors are either largely misinterpreted or have been widely discussed for some time, likely limiting their negative surprise power. For more, see our 9/2/2013 cover story, “September is Just a Month.”
|By Ambrose Evans-Pritchard, The Telegraph, 09/03/2013|
MarketMinder's View: Protectionism is indeed a risk to watch as it limits the flow of goods and services worldwide, which dampens global growth—and anecdotally, we’re seeing more trade barriers lately. However, we’re also seeing a broad push toward freer trade globally—and trade continues rising despite the small spats described here—which mitigates the risks for now.
|By Hibab Yousuf, CNN Money, 09/03/2013|
MarketMinder's View: We’d suggest volatility never left—so we’re not sure how it can come “back,” per se. That’s true regardless of what the VIX (aka the “Fear and Greed Index”) says—it is neither a great gauge of volatility nor predictive of future returns. Further, volatility isn’t necessarily bad. It means upward movement, too—movement that helps investors reach their goals and objectives over long periods of time.
|By Staff, Reuters, 09/03/2013|
MarketMinder's View: ISM Manufacturing beat expectations last month, hitting 55.7 versus 54. Though monthly readings vary, the sector’s continued growth is one of many positive fundamentals underlying this current bull market. For more, see our 5/2/2013 cover story, “Manufacturing Innovation.”
|By Diana Olick, CNBC, 09/03/2013|
MarketMinder's View: Despite fears of rising mortgage rates, home prices continue to increase due to robust demand and tight supply—another tailwind for economic growth.
|By Staff, Xinhua, 09/03/2013|
MarketMinder's View: Seeing as we’re well into Q3 2013, we wouldn’t give much weight to this. Stocks are forward-looking, so revised data from nine-plus months ago don’t matter much. Forward-looking trends are more important, and these point to stabilization in the world’s second-biggest economy.
|By Nina Bains, The Wall Street Journal, 08/30/2013|
MarketMinder's View: There isn’t a trend to buck—September may be the only month with average negative returns over time, but the average is skewed by a handful of really bad years like 1931 (-29.6%), 1937 (-13.8%) and 2008 (-8.9%). Toss those, and September is much more benign.
|By Michael J. De La Merced, The New York Times, 08/30/2013|
MarketMinder's View: The “fragility of modern markets” decried here is fiction. There were more interruptions in the period before high-tech, computerized exchanges—often, for paperwork. For more, see our 8/29/2013 cover story, “Squirrelly Computers?”
|By Damian Paletta, The Wall Street Journal, 08/30/2013|
MarketMinder's View: Considering how many budget deals have died over the past three years, markets likely aren’t surprised by the latest stalemate. Budget bickering is the norm in Washington—but, looking ahead, it shouldn’t prevent a last minute (or retroactive, if need be) compromise on the 108th debt ceiling increase. For more, see our 8/28/2013 cover story, “The Return of the Debt Ceiling: Part 108.”
|By Staff, Associated Press, 08/30/2013|
MarketMinder's View: It seems awfully premature to extrapolate weak Q3 growth from three lackluster July data points, especially when fundamentals point broadly to a still-strong private sector. This rather skeptical take is another sign sentiment is still nowhere near uniformly optimistic, implying this bull has room to run.
|By John H. Makin, American Enterprise Institute, 08/30/2013|
MarketMinder's View: While this description of the current economy seems too dour—household wealth and consumer spending are back at all-time highs and growing—the larger fallacy, in our view, is the suggestion the Fed should be tasked with identifying “speculative bubbles.” History shows the Fed is rather terrible at this. Exhibit A: The Great Depression, when the Fed contracted the money supply. Recent attempts, like a four-years-early dot com bubble call, have proven equally off-target.
|By Emily Gosden, The Telegraph, 08/30/2013|
MarketMinder's View: Domestic production is declining, and imported natural gas prices are rising—the UK pays over twice as much as US firms and households do. This is why the UK should benefit tremendously once shale production starts in earnest. Higher domestic supply should reduce prices, freeing up cash for other endeavors.
|By Staff, Associated Press, 08/30/2013|
MarketMinder's View: In the immediate aftermath of China’s flash boom, securities regulators said all trade orders placed would stand. Now, however, authorities have announced investors can sue Everbright for any losses incurred as a result of trades placed during the heightened volatility. This seemingly haphazard approach to regulation likely creates uncertainty for Chinese traders—just one example of the immaturity of Chinese capital markets.
|By Staff, The Telegraph, 08/30/2013|
MarketMinder's View: Another sign of incremental improvement in UK lending markets post-QE. However, small- and mid-sized business lending turned negative again, potentially indicating regulatory headwinds remain. For more, see our 7/30/2013 cover story, “Let It Be.”
|By David Reilly, The Wall Street Journal, 08/30/2013|
MarketMinder's View: This argument is based on the assumption recent weakness in consumer confidence surveys is a worrisome indicator. Yet history shows confidence gauges have no predictive power—they show how people feel at one moment in time. Emotions change on a dime, and people often say one thing and do another.
|By Elaine Kurtenbach, Associated Press, 08/30/2013|
MarketMinder's View: Once again, rising energy costs—a byproduct of high fuel imports and a weak yen—were responsible for the CPI rise. Excluding energy, prices fell again, further evidence a weak yen hasn’t yet been a net benefit and isn’t the answer to all of Japan’s economic issues.
|By Carla Canivete, The Wall Street Journal, 08/30/2013|
MarketMinder's View: Socialism is baked into Portugal’s constitution, preventing leaders from enacting some of the measures necessary to comply with bailout terms. The opposition has vowed to challenge additional austerity measures in court, likely creating additional roadblocks to economic reform. This is emblematic of some of the many political challenges the eurozone still faces and will likely have to deal with for some time.
|By Martin Crutsinger, Associated Press, 08/29/2013|
MarketMinder's View: While imports’ downward revision isn’t great news, imports still rose. Moreover, upward revisions to business investment, housing and consumer spending are further evidence of the fundamentals underpinning US economic strength.
|By Ambrose Evans-Pritchard, The Telegraph, 08/29/2013|
MarketMinder's View: For the end of QE to be a material negative for Emerging Markets currencies, QE itself would have had to be hugely positive. Yet data show it hasn’t been a significant driver—most Emerging Markets currencies didn’t strengthen much after QE began. Many hovered within a given range, and some even fell. Those that have weakened lately—namely India, Indonesia and Brazil—started falling long before taper talk began.
|By Caroline Baum, Bloomberg, 08/29/2013|
MarketMinder's View: A sensible take on why folks shouldn’t fret July’s drop in new home sales—the many fundamentals driving housing’s resurgence remain in place.
|By Jeff Cox, CNBC, 08/29/2013|
MarketMinder's View: That stocks have broken through some allegedly bearish arbitrary thresholds says nothing about what they do from here—charts are backward-looking. Recent volatility doesn’t alter the many fundamentals driving this bull market.
|By Staff, Associated Press, 08/29/2013|
MarketMinder's View: Like many other Emerging Markets, the Philippines slowed a bit in Q2 but still grew at an enviable rate. Even if Emerging Markets growth slows further from here (as many fear), the region should still contribute significantly to global growth—a likely market tailwind.
|By Angeline Benoit, Bloomberg, 08/29/2013|
MarketMinder's View: While Spain isn’t out of the woods yet, incremental economic improvement, led by exports, suggest conditions are starting to stabilize—which holds true for the broader eurozone as well. For more, see our 7/24/2013 cover story, “¡Viva España!”
|By Peter Coy, Bloomberg Businessweek, 08/28/2013|
MarketMinder's View: Yes, Congress is gridlocked—but gridlock doesn’t mean nothing happens. It just means nothing extreme happens. Debt ceiling compromise isn’t extreme—it’s run of the mill. That, plus the fact most debt ceiling concerns have been widely known for eons likely mitigates meaningful market-moving surprise. For more, see our 08/28/2013 commentary, “The Return of the Debt Ceiling: Part 108.”
|By Mark J. Perry, AEIdeas, 08/28/2013|
MarketMinder's View: Which wouldn’t be possible without the US’s booming shale revolution—and without shale exploration, jobs, businesses and wealth created by the boom wouldn’t be adding to the overall US economy like they recently have.
|By Margaret Chadbourn and Emily Stephenson, Reuters, 08/28/2013|
MarketMinder's View: As expected, Dodd Frank’s “skin in the game” rules look likely to be relaxed—a good thing, in our view. Requiring banks to keep a stake in debt they securitize likely restricts their potential to make new loans—it keeps money on the sidelines instead of at work in the greater economy.
|By Staff, Reuters, 08/28/2013|
MarketMinder's View: “Every pound currently held in liquid assets [at banks] is a pound that could be lent to the real economy.” We agree: Relaxing banks’ cash-holding requirements would be a positive for UK loan growth. But depending on when the BoE moves the deadline for full Basel III implementation, the impact might be minimal.
|By Elizabeth McDonald, Fox Business, 08/28/2013|
MarketMinder's View: In our view, it would be better if the Fed stopped purchasing assets altogether, considering QE is contractionary and disincentivizes banks from lending—and, bank lending likely helps the housing market more than the Fed’s purchasing mortgage-backed securities.
|By Fiona Govan, The Telegraph, 08/28/2013|
MarketMinder's View: Yes, Portugal’s GDP is still contracting on a y/y basis, the country still faces headwinds, and it could rely on foreign aid for a while longer. But that doesn’t take away from the fact Portugal has made much progress in the last few years—as a (albeit potentially brief) return to growth in Q2 shows—something investors should keep in mind.
|By Staff, The Yomiuri Shimbun, 08/28/2013|
MarketMinder's View: While we’d love to see this proposal pass, it seems unlikely—specific Japanese industries are heavily protected, and removing tariffs on certain imports (like rice) is likely highly unpopular. Though, recognizing tariffs’ negative impact on trade and calling to remove them is notable.
|By Victoria Stilwell, Bloomberg, 08/28/2013|
MarketMinder's View: It’s possible rising (but still historically low) interest rates could impact the housing market some, but they’re unlikely to derail housing’s recovery. Monthly data are volatile, and many other factors support the sector—like existing home sales, which were up strong in July.
|By John H. Cochrane, The Wall Street Journal, 08/27/2013|
MarketMinder's View: An excellent, well-reasoned take on an oft-overlooked potential risk factor. In our view, the economy—and financial markets—would fare much better without the Fed and other central banks’ current micromanaging “macroprudential” policies.
|By Damien Paletta, The Wall Street Journal, 08/27/2013|
MarketMinder's View: Investors likely needn’t fret the impending debt ceiling. Not even two years ago, Congress debated the same issue and raised it last minute—as they’ve done 107 times before. While heated politicking might spook folks as we move towards the mid-October deadline, history shows the long-term impact is nil. For more, see 5/20/2013 cover story, “Return of the Debt Ceiling.”
|By Staff, Associated Press, 08/27/2013|
MarketMinder's View: Consumer confidence surveys aren’t terribly reliable market indicators—they’re backward-looking and capture how folks feel at one moment—but this is one of many indicators sentiment is improving a bit. Over time, as sentiment improves and investors gradually realize reality is better than expected, they gain confidence in firms’ future profitability and bid prices up.
|By Ambrose Evans-Pritchard, The Telegraph, 08/27/2013|
MarketMinder's View: While Brazil’s currency intervention could very well prove feckless, this argument seemingly confuses the cause of Brazil’s woes. Evidence strongly suggests they don’t stem from possible QE tapering. Rather, years of policy shortfalls, like protectionism or infrastructure bottlenecks and a lack of competitiveness, have made Brazil a less attractive investment destination—hence Brazil’s present liquidity issues and vulnerability to investors’ whims. Jitters over QE-tapering ghost stories merely bring these longstanding problems to light. For more, see Elisabeth Dellinger’s 7/19/2013 column, “Will Emerging Markets Throw a Taper Tantrum?”
|By Staff, Reuters, 08/27/2013|
MarketMinder's View: Home prices increased 12.1% y/y in June—further evidence of housing’s ongoing improvement, which is a small but noteworthy economic tailwind.
|By Staff, The Economist, 08/27/2013|
MarketMinder's View: As this shows, Indonesia’s economy has many structural issues, including nationalist policies that likely hamper long-term growth prospects. Limiting commodity exports and investment opportunities, for example, can impact foreign direct investment—an important ingredient in a Southeast Asian economies. As with Brazil, taper terrors are merely exposing the real issues facing Indonesian markets.
|By Angeline Beniot, Bloomberg, 08/27/2013|
MarketMinder's View: Rising Spanish entrepreneurship improves the country’s chances for economic improvement over the longer term. This isn’t an instant fix, but it does show how, as economic reforms take hold, private sector growth can offset painful public sector cuts.
|By Patrick Jenkins, Financial Times, 08/27/2013|
MarketMinder's View: In our view, there is no be-all-end-all solution for preventing potential future crises—including higher capitalization ratios. Plus, the EU bank regulation developments described here could create further uncertainty, potentially weighing on European Financials.
|By Dean Nelson, The Telegraph, 08/26/2013|
MarketMinder's View: We agree India would greatly benefit from infrastructure and logistics improvements, particularly those brought by simply allowing foreign retailers and wholesalers to enter the country. India has a major problem with hunger and it’s not because they don’t grow enough food. They simply can’t distribute it effectively. More modern infrastructure would mean fewer wasted goods and more income for farmers—a tailwind for economic development.
|By Paul Vigna, The Wall Street Journal, 08/26/2013|
MarketMinder's View: Yes, today’s Durable Goods Orders weren’t exactly stellar and wage growth has been relatively slow through this expansion, but we’d suggest this is only one of very few negative data points. Consider: US retail sales are strong and still rising, corporate earnings are overall growing and beating expectations, manufacturing and services PMIs are growing, rail and air freight traffic are rising and business investment is near all-time highs. For more, see Elisabeth Dellinger’s 8/22/2013 column, “62.5 Reasons to Be Bullish.”
|By Na Jeong-ju, The Korea Times, 08/26/2013|
MarketMinder's View: Events here bear watching as Korea works to implement further financial reforms after preceding reforms have already proved successful.
|By Patti Domm, CNBC, 08/26/2013|
MarketMinder's View: All the events outlined here have been known possibilities for a while now—and some are even misunderstood positives, in our view, like QE ending. Ultimately, there is no seasonality to stocks. The myth September is a bad month for stocks is no more than a coincidence, and it isn’t a coincidence we’d bank on for any of the factors noted here.
|By Staff, China Daily, 08/26/2013|
MarketMinder's View: Reforming China’s tax structure isn’t at the top of our list of needed reforms, but recognizing high and complex corporate taxes detract from growth is an incremental step in the right direction. A story worth keeping an eye on.
|By Matt Clinch, CNBC, 08/26/2013|
MarketMinder's View: Markets are inherently volatile, and flash crashes like this are always possible. But in our view, investors needn’t pay much attention to short-term movements when investing over long periods of time. For more on flash booms and busts, see our 8/21/2013 cover story, “Flash Bang Boom!”
|By Staff , Associated Press, 08/26/2013|
MarketMinder's View: While we agree the government shouldn’t ignore deficits in budgeting, we’d suggest there is ample time to adjust policy or for the economy to grow in the interim. There are myriad problems with making long-term forecasts. For example, budgetary issues involve many different factors, like political and fiscal policy changes, to name a few.
|By Maureen Farrell, CNNMoney, 08/23/2013|
MarketMinder's View: Glitches or no, markets have always been volatile in the short-term—that technology occasionally contributes isn’t really a game changer. More importantly, for long-term investors, short-term hiccups become tiny blips over time. For more, see our 8/21/2013 cover story, “Flash Bang Boom!”
|By Philip Aldrick, The Telegraph, 08/23/2013|
MarketMinder's View: It’s also further evidence of the UK’s post-QE acceleration. The breakdown of Q2 GDP growth, released today, showed business investment grew for the second straight quarter—the first consecutive rise since 2007.
|By Jonathan Weisman, The New York Times, 08/23/2013|
MarketMinder's View: Congress has raised the debt ceiling 107 times before, and they likely do it again—though heavy politicking beforehand wouldn’t surprise. For more see our 5/20/2013 cover story, “The Return of the Debt Ceiling.”
|By Staff, The Telegraph, 08/23/2013|
MarketMinder's View: Brazil’s efforts to defend its currency bear watching—forex reserves are dwindling, which could erode investor confidence and compound the country’s existing problems (which, we’d add, have much more to do with years of misguided fiscal policy than potential QE tapering).
|By Staff, EUbusiness, 08/23/2013|
MarketMinder's View: It seems Ukraine’s assumption it had averted a Crimean trade war was a touch premature, as Russian President Putin is threatening retaliatory protectionist measures if Kiev inks a trade deal with the EU instead of joining Russia’s Customs Union. Higher trade barriers in Eastern Europe wouldn’t be grand, but freer trade between Ukraine and the EU would likely offset the impact on global trade, keeping market impact minimal.
|By Andy Sharp, Bloomberg, 08/23/2013|
MarketMinder's View: Expensive imported energy is a big headwind for Japanese firms, and restarting nuclear plants was Abe’s preferred solution. Continued troubles at Fukushima make these plans iffy.
|By Li Jiabao, China Daily, 08/23/2013|
MarketMinder's View: It seems the potential end of QE isn’t deterring foreign investors from China, despite what many presume.
|By Staff, The Yomiuri Shimbun, 08/23/2013|
MarketMinder's View: No doubt Japanese industry would benefit if smaller firms banded together to compete with the keiretsu conglomerates, but this plan seems to amount to the government picking winners and losers. This could fall well short of investors’ high expectations for Abenomics’ third arrow.
|By Jana Randow, Bloomberg, 08/23/2013|
MarketMinder's View: Business investment grew for the first time in three quarters—another sign of eurozone stabilization.
|By Alex Frangos, The Wall Street Journal, 08/22/2013|
MarketMinder's View: While we don’t agree with all of this, we think the central point is sensible: Unlike 1997, Asian Emerging Markets today are much better equipped to deal with financial system pressures, largely due to liberalized financial markets, more developed economies and the fact foreign exchange reserves are high today compared to 1997.
|By Ylan Q. Mui, The Washington Post, 08/22/2013|
MarketMinder's View: Tapering quantitative easing (QE) likely incentivizes banks to lend more because it steepens the yield curve, increasing loan profitability. Hence, businesses access capital more easily, which they can then deploy in actually economically stimulating ways. Rather than spurring on economic growth, QE has held it back. For more, see our 08/19/2013 cover story, “The Bizarro World of QE Taper Fears.”
|By Nils Pratley, The Guardian, 08/22/2013|
MarketMinder's View: We wouldn’t so much characterize this as investors focusing on “good” news instead of “bad” news, but rather, investors appreciating forward-looking—not past—data. Manufacturing’s optimistic outlook impacts capital markets more than last month’s Treasury deficit.
|By Jason Lange, Reuters, 08/22/2013|
MarketMinder's View: Two more pieces of encouraging data underlying our conviction in the widely underappreciated US economic strength: improving employment numbers (a lagging indicator) and manufacturing showing continued growth.
|By Staff, BBC News, 08/22/2013|
MarketMinder's View: Led by Germany, improving business activity is another positive from the much-maligned eurozone—another sign euro crisis fears pose less of a global market headwind today.
|By Jeffry Bartash, MarketWatch, 08/22/2013|
MarketMinder's View: Strong US LEI—at its highest level in five years—is yet another reason we’re feeling bullish. High and rising LEI historically tends to foretell continued economic growth. For more, see Elisabeth’s Dellinger’s column, “62.5 Reasons to Be Bullish.”
|By Christopher Matthews, Time, 08/21/2013|
MarketMinder's View: While this nicely highlights some common misperceptions about quantitative easing (QE), it likely overstates QE’s impact on earnings—yes, QE has helped firms improve their balance sheets, but top-line revenues are growing, too. When tapering starts, dour sentiment may prevail initially, but longer term, the end of QE likely spurs economic activity and pleasantly surprises markets. For more, see our 8/19/2013 cover story, “The Bizarro World of QE Taper Fears.”
|By James Crabtree and Victor Mallet, Financial Times, 08/21/2013|
MarketMinder's View: India’s current troubles seem tied more to an inverted yield curve (and long-running structural barriers to investment) than potential QE tapering. That the central bank is addressing this with policies that further invert the curve could rankle investors, compounding the existing issues.
|By Staff, Der Spiegel, 08/21/2013|
MarketMinder's View: That no one's really panicking over a potential third Greek bailout shows how sentiment toward the PIIGS has improved. Further, that officials are seemingly considering aiding Greece through fiscal transfers via the EU budget rather than more loans speaks to the prevailing will to hold the eurozone together.
|By Jason Lange, Reuters, 08/21/2013|
MarketMinder's View: Despite slightly rising mortgage rates, the housing market continues improving—an incremental positive for the US economy.
|By Emily Gosden, The Telegraph, 08/21/2013|
MarketMinder's View: Falling North Sea oil production is a big reason why the UK is pursuing shale fracking. Fracking in the US has uncovered enormous oil and gas potential—helping make it an oil and gas exporter, not importer. The UK (and its economy) could likewise benefit.
|By Emese Bartha, The Wall Street Journal, 08/21/2013|
MarketMinder's View: Germany’s 18-month-high borrowing costs hardly seem indicative of a Bund sell-off or economic weakness. Rather, higher yields could be related to overall eurozone improvement, as investors are beginning to feel they have more investing options in the area.
|By Staff, The Telegraph, 08/21/2013|
MarketMinder's View: After a tough last year, it appears the UK Manufacturing sector is on the up-and-up—likely another sign the UK’s recovery is underway post QE.
|By Mary Anastasia O’Grady, The Wall Street Journal, 08/20/2013|
MarketMinder's View: Events here bear watching as President Enrique Peño Nieto works to overcome political barriers and implement important energy reforms—potential long-term positives for Mexico and one of many recent underappreciated developments in Emerging Markets. For more, see Elisabeth Dellinger’s 8/15/2013 column, “What to Do about Mexico’s Energy Reforms.”
|By Staff, Xinhua, 08/20/2013|
MarketMinder's View: History has overwhelmingly shown free trade—not protectionism—can better “stabilize the economy, improve economic transformation and provide healthy growth” by allowing more goods to cross more borders. Thus reducing or abolishing tariffs, rather than using them as levers to boost certain industries, would likely benefit China—and stocks—more in the long run. For more, see our 7/9/2013 cover story, “Free Trade!”
|By Kim Tae-jong, The Korea Times, 08/20/2013|
MarketMinder's View: It seems Korea’s attempts to enable small- and midsized-businesses (SMEs) to compete and grow have had the opposite of their intended effect. Investors who saw these plans as surefire positives when they were announced in 2011 likely ended up disappointed—just another example of why investors should be mindful of economic policies’ potential unintended consequences.
|By James Saft, Reuters, 08/20/2013|
MarketMinder's View: India isn’t without problems, but in our view, a possible Fed taper isn’t a big negative for that nation. While it is perilous to pin volatility on any one thing, the impact of taper talk on India’s currency, like the impact on Emerging Markets stocks, seems more consistent with typical correction ghost stories. The real issue for India is what likely makes it more vulnerable to capital flight—namely, its antiquated capital markets, which include strict limits on foreign investment.
|By Craig Torres and Laura Marcinek, Bloomberg, 08/20/2013|
MarketMinder's View: In our view, determining just how much reserve capital is “enough” is rather arbitrary. The 2008 financial crisis was a product of several converging factors—chief among them the application of mark-to-market accounting rules to illiquid assets—and higher capital ratios likely wouldn’t have had a significant impact. Plus, the uncertainty over which banks have shortfalls could (unnecessarily) weigh on Financials sentiment—just as it did on UK Financials when the BOE took a similar tack. For more, see our 3/28/2013 cover story, “Double Secret British Probation.”
|By Denise Roland, The Telegraph, 08/19/2013|
MarketMinder's View: While we’d suggest this goes a bit too far, requiring higher capital ratios leaves banks with less to lend—likely a headwind for economic growth.
|By Szu Ping Chan, The Telegraph, 08/19/2013|
MarketMinder's View: We’re not ones to obsess over trade deficits—we generally think total trade is a better indicator of trade’s actual economic effect—but there is one very interesting aspect of this report. Abenomics’ yen-weakening approach is intended to buoy the economy through cheaper exports. Because Japan imports the vast majority of its (now more expensive) energy, this trickles down to increased operating costs for businesses. In July, energy bills soared despite consumption volume changing little. How’s that for stimulus?
|By Leslie Scism, The Wall Street Journal, 08/19/2013|
MarketMinder's View: Despite their conservative reputation, annuities, like any other investment, come with risk. As it pertains to Equity Indexed annuities, a major risk is you don’t earn enough return to finance your retirement: “Many contracts sold recently capped the annual upside at about 4% to 5%, according to advisers.” Furthermore, they’re awfully complex, as outlined here. We’d suggest investors weigh all of the facts if and when considering an annuity or other insurance product.
|By Katie Holliday, CNBC, 08/19/2013|
MarketMinder's View: We have much to quibble with here. First of all, events like a possible Fed taper, German elections and a possible Japanese consumption tax increase have been widely known for some time now and thus don’t seem likely to sneak up on many. What’s more, the Fed’s tapering QE is likely a positive fundamental factor, in our view. Finally, while it can be challenging, long-term investors needn’t focus on short-term volatility.
|By James R. Hagerty, The Wall Street Journal, 08/19/2013|
MarketMinder's View: While we agree a growing manufacturing sector is one economic positive underlying the current expansion, we disagree with the notion the trade deficit tells you much of anything. Rising imports are often a sign of healthy demand—not a bad thing at all. And while it is true manufacturing employment has declined (relatively steadily since the 1940s), output is up—productivity gains brought by technology largely explain the phenomenon. For more, see our 5/2/2013 cover story, “Manufacturing Innovation.”
|By Michael Spence, Project Syndicate, 08/19/2013|
MarketMinder's View: While we agree with the optimism about global growth prospects, we would put much more emphasis on the private sector as carrying the load. Yes, electoral, political and monetary policy decisions abound, but those are widely known. In our view, less widely appreciated is the health of the private sector—particularly in the US and UK.
|By Richard Dyson, The Telegraph, 08/16/2013|
MarketMinder's View: This supposed geographic shift in gold demand likely doesn’t have much bearing on prices over time. There has always been a buyer for every seller—that more sellers happen to be in the West and more buyers in the East for now is just an interesting factoid. Besides, India has long been among the world’s biggest gold consumers (and importers).
|By Staff, EUbusiness, 08/16/2013|
MarketMinder's View: Russia’s naming preferences aside, a trade war on the Crimean peninsula isn’t great news—stocks typically do best when goods and services move freely across borders. However, this localized protectionism shouldn’t much impact total global trade.
|By Staff, Der Spiegel, 08/16/2013|
MarketMinder's View: While the North and Baltic Seas’ forthcoming restrictions against ships’ use of diesel fuel could be a boon to natural gas producers, they could also raise shipping costs, potentially impacting global trade. Investors should always be mindful of the winners and losers created by regulatory changes.
|By Corina Ruhe, Bloomberg, 08/16/2013|
MarketMinder's View: And imports rose 2.5%—another sign of a stabilizing eurozone economy. For more, see our 8/15/2013 cover story, “Welcome to the Neurozone.”
|By Jeremy Warner, The Telegraph, 08/16/2013|
MarketMinder's View: There isn’t much—if any—evidence the UK’s recovery is unsustainable. Many indicators point to accelerating trade and business investment—growth doesn’t rest on allegedly credit-fueled consumers alone. Especially considering loan growth is one of few lackluster UK economic data points recently.
|By Matthew Dalton, The Wall Street Journal, 08/16/2013|
MarketMinder's View: It’s a fallacy to sum up bank and household debt and approach it as though it’s an accurate representation of total indebtedness—it effectively overstates, because a consumer’s loan is a bank’s asset, which is funded by bank borrowing (consumer deposits). That said, the forthcoming Basel III capital requirements likely will strain banks and lending on the margin—with small and mid-sized banks facing the toughest road.
|By Li Fangfang, China Daily, 08/16/2013|
MarketMinder's View: Yes, imported autos are expensive in China—mostly because of the 25% import tariff on cars. Reducing or abolishing the tariff, rather than trying to cap retail prices, would be a more beneficial way of reducing prices in the long run—it would foster higher trade.
|By Leika Kihara and Tetsushi Kajimoto, Reuters, 08/15/2013|
MarketMinder's View: The tax debate in Japan seems to be obscuring many folks to the broader picture: Japan’s crucial “third arrow” of Abenomics—economic reforms to open the economy to trade, liberalize labor markets and more—remains unfired. The tax debate is important, no doubt, but tax incentives or a corporate tax cut aren’t likely to be game-changing developments.
|By Rana Foroohar, Time Magazine, 08/15/2013|
MarketMinder's View: Though we agree eurozone growth in Q2 isn’t a cure-all, this seems a bit too dour to us. Growth is, after all, growth. What’s more, this seemingly misallocates the cause of troubles and challenges ahead to harsh austerity measures, rather than political uncertainty and lack of reform in the periphery. For more, see our 8/15/2013 cover story, “Welcome to the Neurozone.”
|By Staff, The Telegraph, 08/15/2013|
MarketMinder's View: Strong retail sales are yet another indication the UK economy’s been doing better than many feared. The broader economic trend—accelerating UK growth—suggests Mother Nature’s not the sole cause.
|By Jeanna Smialek and Michelle Jamrisko, Bloomberg, 08/15/2013|
MarketMinder's View: Though just one volatile data point, jobless claims continue to lower as a number of other positive data points come to light—we expect these trends to continue as the US economy expands.
|By Pratik Parija and Bibhudatta Pradhan, Bloomberg, 08/15/2013|
MarketMinder's View: We agree improved infrastructure and increased foreign investment would help India’s economy, but political headwinds (like popular opposition to and restrictions on foreign investment) may get in the way of development—as they have in the past.
|By Mark J. Perry, AEIdeas, 08/15/2013|
MarketMinder's View: US industrial production overall was lackluster in July, but looking more closely, oil and gas extraction boomed—thanks to the US shale revolution—rising +10% y/y, “the highest level since the Federal Reserve started reporting sectoral output in 1972.”
|By Brett Arends, MarketWatch, 08/15/2013|
MarketMinder's View: If quantitative easing were the sole, principal or even secondary driver of the current bull market, we’d expect stock prices to be very detached from fundamentals like earnings. Yet there’s been little to no P/E expansion during the present bull market—stocks’ movements have been matched, at times exceeded, by earnings growth. Moreover, QE is actually contractionary policy as it discourages banks from lending by reducing net interest margins. Finally, there’s no “simple mathematical equation” for forecasting stocks.
|By Jose de Cordoba and Laurence Iliff, The Wall Street Journal, 08/15/2013|
MarketMinder's View: In our view, even an incremental move away from a heavily government-supported Oil industry could have positive implications for Mexico’s economy down the line. For now, however, the policy likely has little effect on stocks.
|By Staff, BBC News, 08/14/2013|
MarketMinder's View: Led by Portugal, Germany and France, the eurozone grew 0.3% in Q2. While the region still has issues to work through (e.g., implementing structural reforms) and growth isn’t uniform across all members, continued economic stabilization suggests the region isn’t the drag on global growth widely feared.
|By Staff, The Wall Street Journal, 08/14/2013|
MarketMinder's View: Among the myriad perspectives here, the most important for investors to remember is past performance is no guarantee of future results. What did well a week, month or year ago doesn’t automatically do well moving forward—markets are forward-looking.
|By Ambrose Evans-Pritchard, The Telegraph, 08/14/2013|
MarketMinder's View: There is no evidence today’s margin levels are bearish. Historically, margin tends to rise and fall with markets—it doesn’t drive returns. Moreover, the absolute amount of margin outstanding tells you nothing—more important is the level of margin relative to total market cap. At the moment, it’s a small fraction and very low by historical standards.
|By Brenda Cronin and Shelly Banjo, The Wall Street Journal, 08/14/2013|
MarketMinder's View: There isn’t much—if any—evidence suggesting the supposed wealth effect drives spending. Income is a much bigger factor, and US incomes have grown lately—more evidence of the private sector’s underappreciated strength.
|By Staff, BBC News , 08/14/2013|
MarketMinder's View: Though the impact on capital markets is likely minimal, North and South Korea’s agreement over the joint industrial zone shows how economic interest tends to trump saber-rattling—one reason saber-rattling tends not to be a big market driver in the mid to longer term.
|By Anabela Reis, Bloomberg, 08/14/2013|
MarketMinder's View: Thanks to higher exports, Portugal was the fastest-growing eurozone member in Q2 with GDP rising 1.1% q/q. While one quarter does not make a recovery—and some areas of Portugal’s economy, like private investment, still appear weak—this does illustrate how reality in the eurozone periphery continues to exceed investor expectations.
|By Carl Richards, The New York Times, 08/13/2013|
MarketMinder's View: “First, diversification works over time, and no, seven months doesn’t count. When we talk about diversification working, we’re talking in terms of years, even decades. Not just days, weeks or even months.” An important lesson for long-term investors to remember.
|By Jim Jubak, CNN Money, 08/13/2013|
MarketMinder's View: While bull market corrections are normal, predicting them is an exercise in futility—sharp swings in sentiment can happen suddenly and without warning. Plus, September isn’t inherently or always bad for stocks—throughout history, markets have seen many positive Septembers. That a few bad ones have brought down the average is coincidental, not causal. For more, revisit our 8/28/2009 cover story, “Stay in September.”
|By Sarah Portlock, The Wall Street Journal, 08/13/2013|
MarketMinder's View: We agree GDP—which is subject to numerous revisions—is an imperfect measurement when it comes to gauging current economic health in this mostly sensible article. Other data, such as corporate earnings, give better indications of how well the economy is (or isn’t) doing—and are more relevant for stocks.
|By Eric Martin and Adam Williams, Bloomberg, 08/13/2013|
MarketMinder's View: Should the proposed reforms pass, opening Mexico’s oil industry to private investment would likely provide Energy firms globally an additional source of revenue and profits—not to mention modernize production and improve energy distribution for all Mexicans. This also continues Mexico’s trend of relaxing state control across a variety of industries, which is generally positive for markets—and an example of the importance of economic reform to Emerging Markets equity returns. For more, see our 3/13/2013 cover story, “Losing Monopoly.”
|By Adam Shell, USA Today, 08/13/2013|
MarketMinder's View: Two quibbles here. One, stock momentum doesn’t exist: Stocks don’t rise higher simply because they’ve been rising. And two, sentiment surveys aren’t predictive—they show how investors feel at one particular moment, which is typically based on what’s just happened and can change on a daily basis.
|By Jason Lange, Reuters, 08/13/2013|
MarketMinder's View: This marks the fourth consecutive month of rising retail sales—another sign of underlying US economic strength.
|By Jeremy Warner, The Telegraph, 08/13/2013|
MarketMinder's View: While Europe likely takes some time to work through its many issues, this seemingly overstates the case. What’s more important for investors is that while eurozone members may spend years squabbling over deeper integration, all remain committed to preventing the currency’s near-term disorderly collapse.
|By Laura Saunders and Jason Zweig, The Wall Street Journal, 08/12/2013|
MarketMinder's View: Master limited partnerships can offer favorable returns, but more often than not, these returns are diminished by complicated tax implications and fees. As with all investments, we agree investors should “weigh the pros and cons of each option” and consider their overall goals and investment objectives.
|By Bruce Einhorn, BusinessWeek, 08/12/2013|
MarketMinder's View: Yes, Japan’s debt load is big—but when scaled properly, it’s much smaller than this piece suggests. Gross public debt is ¥1 quadrillion (206% of GDP), but net debt, which excludes debt owned by the government and BOJ is only ¥815 trillion (166% of GDP). Exclude debt held by state-owned Japan Post, and the tally falls to ¥676 trillion (142%) of GDP. And thanks to ultra-low interest rates, total debt service costs are only about 4.5% of GDP.
|By Stelios Bouras, The Wall Street Journal, 08/12/2013|
MarketMinder's View: That Greece has managed to balance its budget to create a primary budget surplus (pre-interest payments) is a notable development. The country isn’t out of the woods by any means, but it is seemingly ahead of where many investors recently expected.
|By Jeff Cox, CNBC, 08/12/2013|
MarketMinder's View: Many technical indicators, including the Hindenburg Omen, have a not-so-stellar track record of gauging market inflection points—for every true signal, there are many false positives. More often than not, if investors follow these indicators alone, they likely miss significant opportunities. For more, see our 6/4/2013 cover story, “Led Zeppelin.”
|By Cai Xiao, China Daily, 08/12/2013|
MarketMinder's View: Though this is all talk for now, increasing securitization would likely benefit China. Currently, credit risk is largely concentrated with the banks (and, by extension, the government). More securitization would allow risk to be diversified throughout the broader economy and make China’s financial system much more modern.
|By Nicole Hong, The Wall Street Journal, 08/12/2013|
MarketMinder's View: For equity investors with globally diversified portfolios, currency moves are zero sum over time—and for US stocks today, the dollar likely isn’t a significant performance driver. Other stronger-than-appreciated fundamentals should swamp.
|By Jeffrey Dorfman, Forbes, 08/12/2013|
MarketMinder's View: This highlights well the many drivers of wages for low-skilled jobs—and why well-intended means of boosting wages could create unintended consequences, including higher unemployment.
|By Staff, Associated Press, 08/09/2013|
MarketMinder's View: Those differences include state-owned Japan Post’s heavy presence in Japan’s insurance industry—a barrier to competition. Whether Japan fulfills the 2006 legislation to privatize the behemoth will be key to the trade talks’ success. This will be an important test of Prime Minister Shinzo Abe’s ability (and willingness) to tackle vested interests in order to pursue structural reform.
|By William Kazer, The Wall Street Journal, 08/09/2013|
MarketMinder's View: Maybe it is, but one month’s data don’t a trend make. However, investors’ reactions to the data say much about sentiment. The general surprise suggests expectations were too dour, which indicates sentiment still has room to improve before it catches up with reality—a bullish feature.