LyrArc Article Gist
Research figures show corporate insiders are not buying into the rally in the U.S. stock market in Feb. 2012.

LyrArc Article Gist
Renewed warnings about the bubble in housing prices in China. Earlier warnings came from Krugman, Lardy, John Taylor. This one comes from Nomura economists Zhiwei Zhang and Wendy Chen. Could the government's action to curb rising housing prices not be adequate leading to a financial crisis as early as 2014, is the question posed by Zhang and Chen. They cite the rise of housing prices by 84% from 2001 to 2006, before the financial crisis of 2008 in the U.S., using the Case-Shiller housing price index. One problem- the government statistics may have underestimated the extent of the bubble. China's official index shows housing prices rising 113% in major cities from 2004 to 2012. Zhang and Chen say this is much smaller than the actual rise because it includes older, lower quality housing property. They cite an academic paper that adjusts for this and finds prices jumping by 250% in the period 2004 to 2009. Another problem is that China's housing prices growth slows after government action but then resumes the growth, leaving the risk exposure at the high level as before. Because the local governments are tied up in the housing bubble the problem would hit the banking system. About 14.1% of the outstanding bank loans are to local government financing vehicles, and 6.2% to property developers, according to Nomura economists. The declining potential growth rate in China means there is less room for bad loans to be absorbed by hyper growth levels than in the past. Errors in policy can magnify the risk including loosening monetary policy and exacerbating the bubble at the wrong time. In the absence of errors the risks still remain requiring the sale of public assets to bail out local governments and banks. The argument made by Krugman and other economists has been that China is not immune to the risks of a housing bubble going bad, in any way less than Sweden, the U.S., Spain and other countries, requiring bailouts of banks....

LyrArc Article Gist
Robert Shiller explains why price increases in U.S. housing are likely to remain at inflation adjusted 1-2 % a year in coming years. The Zillow-Pulsenomics Home Price Expectations Survey, incorporating 100 forecasters, and the S&P Case/Shiller Composite Index Futures, as of Dec. 2012, both show this modest growth for the next 5 years. The sharp price increases of 2012, with the S&P/ Case-Shiller 20 City Index up 9% from March to Sept. 2012, are seen as partly seasonal and not likely to last. Reasons he cites against the possibilities of another U.S. housing price surge are a more regulated housing market, wary buyers, lower economic growth, preferences for renting vs buying, and harder to rent detached single family homes. Recent housing price increases also include seasonal fluctuations and could moderate in coming months, says Shiller. History shows only one housing price boom in the U.S. in the last hundred years, with real prices increasing 68% from 1942 to 1953. By comparison the price surge in home prices from 1997 to 2006 was 86% in real terms, which was reversed almost entirely by 2012. The Census Bureau statistics show the home ownership rate declining to 65.5% in the third quarter of 2012 from 69% in the third quarter of 2006. Karl Case said in an op-ed in the NYT in 2010- the investment in a home was never meant to be a way to pay the bills and enjoy an artificially high standard of living, and only seen as a safe investment for most of American history. ...

LyrArc Article Gist
China's GDP growth for the second quarter of 2012 was 7.6% from the prior year. China set a target of 7.5% GDP growth in March 2012. About half of the GDP growth in 2011 was generated from investment spending. As part of a new Stimulus China is increasing bank lending and moving forward development projects in energy and infrastructure. Bank loans showed an increase from 793 billion yuan ($124 billion) in May 2012 to 920 billion yuan ($144 billion) in June 2012.

LyrArc Article Gist
The 3 week old government in Italy, led by former EU commissioner, Mario Monti, announced a three year plan of 30 billion euros in tax increases, spending cuts, reform of pension plans, and efforts to boost growth. Monti said at a news conference that "Italians are to blame for our public debt, and we risk compormising everything we've accomplished in the past 60 years." Under the new plan retirement age for women in the private sector would be increased from 60 to 66 years by 2018, bringing it in line with retirement ages for men. Italy's Labor minister, Elsa Fornero, broke down in tears as she described the change, saying it was necessary to avoid "collective impoverishment." Italy faces the difficult task of refinancing $400 billion in short term debt coming up for renewal in 2012, just as bond yields for Italy have spiked to over 7%. Because Italy lacks an extensive day care system, women helped raise grandchildren after early retirement at age 60. Other changes were to impose a 1.5% one time tax on money repatriated back to Italy under a tax amnesty scheme setup by former premier Berlusconi. Action was taken against widespread tax evasion by banning cash payments above 1000 euros. Stimulus measures of 10 billion euros are designed to boost small business and reduce high youth unemployment running at 29%. Companies get tax breaks of 2 billion euros if they hire young people....

LyrArc Article Gist
With the U.S. Federal Reserve pulling back from its monetary easing policy and the ECB holding steady with a low interest rate policy, bond investors are finding attractive buys for government bonds of Italy and Spain. 10 year government bonds of Italy yielded 4.2%, and Spain's government bonds yielded 4.3% on Aug. 22, 2013. By comparison German government bonds yielded 1.88%, narrowing the gap between the bonds of southern European countries and German bonds as the eurozone economies recover in 2013-2014.

LyrArc Article Gist
France is moving quickly with spending on the $37 billion stimulus. Public buildings, museums, cathedrals and historical sites are being renovated in 2009. About 50 chateaus, and 75 cathedrals are part of 100 million euros for cultural centres. About 75% of France's stimulus money will be spent in 2009, in contrast to the slow work in the USA.

LyrArc Article Gist
Zweig points out that P/E multiples fall quickly in the midst of higher uncertainty. Benjamin Graham's "cyclically adjusted" P/E refined by Yale economist Robert Shiller smooths out the top and bottoms of the market by averaging the past 10 years of earnings and incorporating effects of inflation. This "cyclically adjusted" P/E for the U.S. market for the last 50 years is 19.5. The P/E for the market when the S&P 500 was at 1325 in late July 2011 was 22.9, and at the low in the first week of August 2011 of 1167 was 20.2. With the higher uncertainty- as for instance Bank of New York Mellon charging clients to hold cash- the P/E multiples are in a different territory. The P/E dropped to 13.3 in March 2009 after the financial crisis of 2008. Larger macroeconomic trends and uncertainty may have yet to play out and not registered fully in the market indexes. Jack Hough throws light on this from a different angle in the Wall Street Journal, August 5, 2011 comparing stagnant wages and its relationship with corporate earnings....

LyrArc Article Gist
This article in the NYT explains why the loss of jobs particularly in the auto industry to Mexico, with the experience of NAFTA passed by president Bill Clinton, has caused widespread opposition to the TPP trade agreement proposed by president Obama. Both Hillary Clinton and Donald Trump in 2016 oppose the TPP.

LyrArc Article Gist
Electricity production and consumption data from the provinces has been overstated say experts making the decline in economic growth in China look less severe than it really is. Coal stockpiles at one key storage location in Qinhuangdao port reached 9.5 million tons in June, says an analyst for Wood Mackenzie, global energy consulting firm, a level not seen since the level of 9.3 million tons in November 2008 during the height of the 2008 financial crisis.

LyrArc Article Gist
Nocera looks at the lack of efforts to help homeowners under water in the Obama administration. Sheila Bair comments on Geithner's role, as Geithner's book "Stress Test" provides little detail on how the Obama administration addressed the issue. A story by Dougherty in the WSJ on April 20, 2014, points out that about 10 million households in America are underwater in 2014, and another 10 million households have only 20% equity in their homes. Unemployment statistics in the same issue of the WSJ show 7 million people taking parttime jobs because they cannot find work. These households are critical for consumer spending to support growth. The weak economic recovery could very well be one of the results of poor policy decisions by the Obama administration including this one, when other alternatives proposed by Sheila Bair and Martin Feldstein were offered repeatedly in 2009-2010. Here Nocera documents the efforts by Senator Durbin to give homeowners rights to go to bankruptcy court to provide ways to negotiate ways out of foreclosure....

LyrArc Article Gist
Jackson Diehl, deputy editorial page editor of the Washington Post, says its hard not to conclude that Obama is really not engaged with the struggle for democracy and democratic process in the countries of the Middle East and the Arab World. His voice is only heard sporadically, and is missing altogether at crucial times, as the people of Egypt, Libya, and other countries express their democratic aspirations. This has been the case from the beginning of this struggle and continues today. He cites an Arab opinion poll, from Shibley Telhami of the University of Maryland with Zogby International, which shows a positive view of Obama at 34%, compared with 39% in 2009. When asked which countries have played a positive role, France and Turkey are given first place and the U.S. is close to China. This is because France's Sarkozy and Turkey have been actively engaged, and Obama has been silent for most of the time. Diehl says most Egyptians he talked to in Cairo in a recent visit, think that Obama's focus is on going along with the military and Israel. ...

LyrArc Article Gist
Hillary Clinton returns on September 15, 2016, to the campaign trail after 3 days of rest to recover from pneumonia. She chose to speak at the University of North Carolina in Greensboro, with N. Carolina  now considered a state that is winnable, and with a new focus on young people on campuses where she wants to regain her once large lead in the summer. She said that the break had given her time to reflect on what it is she represents. "The campaign trail doesn't really encourage reflection and its important to sit with your thoughts every now and then. It helped me reconnect with what this campaign is all about." Adding that it was about quality health care, financial security, clean water and other critical needs of people.

LyrArc Article Gist
Inflation in Britain falls to 0.5% annualized rate in December 2014. Bank of England Governor Mark Carney says this is good for British consumers as long as this does not become generalized. Food prices and utility prices are stable. The services economy which makes up 77% of Britain's economy shows inflation of 2.3%, and unemployment is at 6%, making it less likely that this would become generalized. With lower oil prices inflation could fall further.

LyrArc Article Gist
Robert Reich of the Clinton administration responds to a question by Charlie Rose, about Obama's failure to have a narrative of governing that connects the dots. Reich says Obama got caught up in tactical judgements and failed to grasp the larger strategic narrative. He sees Obama as having supported Wall Street and business as much or more than any previous administration, but is not perceived as pro-business.