JPMorgan Sees ‘Lehman Moment’ for Russia If Ukraine Deteriorates
By Jason Corcoran
August 29, 2014 8:38 AM EDT
Russia’s equity markets may face a “Lehman moment” if the Ukraine conflict deteriorates further, according to Alexander Kantarovich, head of research for JPMorgan Chase & Co. in Moscow.
“With the significant deterioration in the Ukrainian situation, markets may treat this as a Lehman-style shock,” Kantarovich wrote in an e-mailed report today. “Revisiting the post-Lehman lows would imply downside of 50 percent from an index perspective.”
Russia’s ruble-denominated Micex Index has fallen 6.6 percent this year. The stock gauge posted the worst monthly drop in July since 2012 as the U.S. and the European Union escalated sanctions targeting Russia’s $2 trillion economy after the downing of a passenger jet on July 17 over Ukrainian territory controlled by pro-Russian insurgents.
The Micex lost 67 percent in 2008, the biggest decline among benchmarks in the 30 largest stock markets, as Lehman Brothers Holdings Inc.’s collapse triggered a global recession and foreign banks cut credit. It rebounded by 120 percent in 2009, data compiled by Bloomberg show.
Jim Sinclair’s Commentary
Statistics have become cartoons.
Researchers: Unemployment rate isn’t accurate
August 27, 2014, 5:30 AM
The U.S. jobs report, a key measure of how well the economy is doing, has gotten increasingly less accurate in the past 20 years. The fix for that problem could be in a surprising place: Twitter.
Those are the conclusions of two separate reports out this month. The first report, published by the National Bureau of Economic Research, found that the unemployment number released by the government suffers from a problem faced by other pollsters: Lack of response. This problem dates back to a 1994 redesign of the survey when it went from paper-based to computer-based, although neither the researchers nor anyone else has been able to offer a reason for why the redesign has affected the numbers.
What the researchers found was that, for whatever reason, unemployed workers, who are surveyed multiple times are most likely to respond to the survey when they are first given it and ignore the survey later on.
The report notes, "It is possible that unemployed respondents who have already been interviewed are more likely to change their responses to the labor force question, for example, if they want to minimize the length of the interview (now that they know the interview questions) or because they don’t want to admit that they are still unemployed."
Jim Sinclair’s Commentary
It is clearly not all roses out there.
U.S. Consumer Spending Falls for First Time in Six Months
By Lorraine Woellert
August 29, 2014 4:27 PM EDT
American consumers have become thriftier, trimming spending as bigger wage gains fail to materialize and using every opportunity to rebuild nest eggs. The result may lower economic growth.
Household purchases unexpectedly decreased 0.1 percent in July, the first drop in six months, after rising 0.4 percent the prior month, Commerce Department figures showed today in Washington. Incomes rose at the slowest pace of the year and savings climbed to the highest level since the end of 2012.
While an improving job market is lifting confidence, it has yet to spur the broad-based increases in pay that will boost demand at retailers such as Williams-Sonoma Inc. (WSM) and Guess? Inc. (GES) The weak start for consumer spending, which accounts for almost 70 percent of the economy, prompted some economists to cut third-quarter growth estimates even as other data showed manufacturing was strengthening.
“This is not going to be a consumption-driven quarter,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics Inc. in White Plains, New York. “We need to see sustained faster payroll growth and wage growth.”
Stocks rose, extending the biggest monthly gain since February, led by advances among financial, health-care and technology shares. The Standard & Poor’s 500 Index climbed 0.3 percent to 2,003.37 at the close in New York.
Rand Paul Slams US Interventionists’ "Unhinged Foreign Policy" For Abetting The Rise Of ISIS
Submitted by Tyler Durden on 08/29/2014 14:44 -0400
Authored by Dr. Rand Paul, originally posted at The Wall Street Journal,
As the murderous, terrorist Islamic State continues to threaten Iraq, the region and potentially the United States, it is vitally important that we examine how this problem arose. Any actions we take today must be informed by what we’ve already done in the past, and how effective our actions have been.
Shooting first and asking questions later has never been a good foreign policy. The past year has been a perfect example.
In September President Obama and many in Washington were eager for a U.S. intervention in Syria to assist the rebel groups fighting President Bashar Assad’s government. Arguing against military strikes, I wrote that "Bashar Assad is clearly not an American ally. But does his ouster encourage stability in the Middle East, or would his ouster actually encourage instability?"
The administration’s goal has been to degrade Assad’s power, forcing him to negotiate with the rebels. But degrading Assad’s military capacity also degrades his ability to fend off the Islamic State of Iraq and al-Sham. Assad’s government recently bombed the self-proclaimed capital of ISIS in Raqqa, Syria.
To interventionists like former Secretary of State Hillary Clinton, we would caution that arming the Islamic rebels in Syria created a haven for the Islamic State. We are lucky Mrs. Clinton didn’t get her way and the Obama administration did not bring about regime change in Syria. That new regime might well be ISIS.
Dethrone ‘King Dollar’
By JARED BERNSTEINAUG. 27, 2014
WASHINGTON — THERE are few truisms about the world economy, but for decades, one has been the role of the United States dollar as the world’s reserve currency. It’s a core principle of American economic policy. After all, who wouldn’t want their currency to be the one that foreign banks and governments want to hold in reserve?
But new research reveals that what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles. To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.
The reasons are best articulated by Kenneth Austin, a Treasury Department economist, in the latest issue of The Journal of Post Keynesian Economics (needless to say, it’s his opinion, not necessarily the department’s). On the assumption that you don’t have the journal on your coffee table, allow me to summarize.
It is widely recognized that various countries, including China, Singapore and South Korea, suppress the value of their currency relative to the dollar to boost their exports to the United States and reduce its exports to them. They buy lots of dollars, which increases the dollar’s value relative to their own currencies, thus making their exports to us cheaper and our exports to them more expensive.
In 2013, America’s trade deficit was about $475 billion. Its deficit with China alone was $318 billion.