Tuesday, January 12, 2016
In a race to the bottom, how are winners decided?
A Chorus Line: On Monday, as the stock market collapse entered its second week and Chinese stocks fell another 5%, the big brokerage firms suddenly stopped painting everything rosy. JPMorgan advised worried investors to sell on the occasional bounces on the way down. Royal Bank of Scotland was somewhat blunter, suggesting you simply sell everything and go to bonds because, “This is about return of capital, not return on capital. In a crowded hall, exit doors are small.” Citi said the same thing in finance speak, noting it had cut its US stock recommendation to “underweight”. This might be a good time to note that it is not only Goldman Sacs that “talks its book”, and a grain or two of salt may be in order.
Concrete Results: As part of the nuclear agreement, Iran has removed the core of the Arak heavy water nuclear reactor and filled it with cement. As part of their general stupidity, Senate Democrats are urging the President to impose more sanctions on Iran.
Mystery: GDP growth is minuscule and profits are down but hundreds of thousands of jobs are reportedly being created. Must be that productivity has fallen through the floor.
Softly, Softly: If you depend on the mainstream media you may not know that a Socialist Democrat from Vermont, Bernie Sanders, is running for President. You also probably don't know that he leads Donald Trump in national polling, that he is even with Ms. Clinton in Ohio and Hew Hampshire, and nationally. He has raised nearly as much money as Hillary has, but has no staff dedicated to fund-raising; she has over 30 on her finance team.
Land Ho! According to three different ship-traffic tracking websites, for the first time in at least the last 400 years, on January 8th there were no cargo ships in-transit between Europe and North America. Not much going on in the Pacific, either. This has never happened before. Falling trade means lower profits, and slowing economies.
Malpractice: A new law designed to harass doctors and complicate a medical procedure with unnecessary rigmarole, North Carolina now requires that doctors send the ultrasound images of their abortion patients to the statehouse for the governor and senators to review.
Honey Trap: The stock markets are way worse off than you are told on the evening news, which just report the major indexes and go on to celebrity divorces. Sure the Dow and S&P and NASDAQ are down 9% to 11% or so, but the average company's stock is down 26.9% from the market's peak.
Wish You Were Here: Over the weekend, London's Daily Telegraph installed electronic monitors on journalists' desks to record their coming and going. After a mild protest, the electronics departed.
Conundrum: Why is it that an economist can note that “China’s stock market seems to be ... driven by technical pressures and gambling rather than economic fundamentals.” and not see the gap between Wall Street and the real economy in the US?
The Parting Shot:
Posted by Charles Kingsley Michaelson, III at 7:18 AM