Links: 2013-08-16

Obama’s Economic Approval Slips to 35%

“Despite President Barack Obama’s renewed focus on the nation’s economy this summer, he scores worse with Americans on the economy than he did in June. His approval rating on the issue, now 35%, is down seven percentage points, and his ratings on taxes and the federal budget deficit are each down five points. During the same period, his overall approval rating is down three points.”

Confident Consumers Step Up Their Borrowing –

This makes sense now. So there IS releveraging but writedowns make it look like there is still some DEleveraging.

“Most of the adjustment was due to a decline in the amount of debt tied to outstanding home loans, likely due to lenders’ write-offs from foreclosures and recent gains in home prices that helped owners sell.”

Jobless Claims in U.S. Decline to Lowest Level Since 2007 – Bloomberg

“Employers fired the fewest workers last week since before the recession began almost six years ago, raising expectations that bigger job gains will soon give U.S. consumers the ability to boost spending.

The number of claims for jobless benefits dropped by 15,000 to 320,000 in the week ended Aug. 10, the least since October 2007, according to Labor Department data today in Washington. Other figures showed consumer confidence hovered near a five-year high last week, builder sentiment jumped this month to the highest level since 2005 and manufacturing is struggling to gain traction following a slowdown earlier this year.”

Food Stamp Cut Backed by Republicans With Voters on Rolls – Bloomberg

“Among the 254 counties where food stamp recipients doubled between 2007 and 2011, Republican Mitt Romney won 213 of them in last year’s presidential election, according to U.S. Department of Agriculture data compiled by Bloomberg. Kentucky’s Owsley County, which backed Romney with 81 percent of its vote, has the largest proportion of food stamp recipients among those that he carried. “

U.S. budget cuts hitting long-term unemployed hard – The Globe and Mail

“Phyllis Kennedy is facing a bleak future. U.S. government budget tightening has slashed her weekly unemployment check by more than a fifth, and her prospects of finding a job are grim after over a year of unemployment.

Kennedy, 57, from Little Falls, N.J., had her $380 (U.S.) weekly unemployment check cut by $85 at the end of June. Just when she was coming to terms with the blow, she learned her benefits would end altogether in three weeks, more than two months earlier than she had anticipated.”

From CAPE to CAPE | FT Long Short

“Jeremy Siegel of the Wharton School proposing that an alternative measure of earnings should be used. This might change conclusions, and there will be more on that next week. For now, I would like to introduce another fascinating attempt to alter the methodology of Yale’s Robert Shiller, who has been central to popularising the CAPE over the last two decades.

Back in 2009, Alain Bokobza of Societe General released the results of his own new normalised CAPE, and his colleagues have kindly updated his data. The essential new insight was that corporate taxation has not been constant over the years. Rather, it was introduced in 1911 at only 1.5 per cent. After the First World War it rose to 15 per cent, and then, as the apparatus of the welfare state rolled out over the ensuing decades, it rose to 40 per cent. Mr Bokobza contends that this affects the multiple that investors will pay. So he recalculated the CAPE for the years before 1950, assuming a 40 per cent tax rate.”

Dalio Patched All Weather’s Rate Risk as U.S. Bonds Fell – Bloomberg

“As the bond market plunged in late June, Ray Dalio convened the clients of Bridgewater Associates LP, the world’s largest hedge-fund manager, to tell them that a fund designed to withstand a broad range of market scenarios was too vulnerable to changes in interest rates.

Bridgewater, citing months of study, said it had underestimated the interest-rate sensitivity of various assets in its All Weather fund and was taking steps to mitigate the risk, according to clients who listened to or read a transcript of the June 24 call. By the end of the month, the Westport, Connecticut-based firm had sold off enough Treasuries and inflation-linked bonds to help reduce the fund’s most rate-sensitive assets by $37 billion, according to fund documents and data provided by investors. “

Foreclosures Distort Home-Price Measure – Real Time Economics – WSJ

“The housing bust obviously depressed the real estate market, but a new study shows that a big jump in distressed sales during the worst of the downturn may have exaggerated swings in at least one key measure of house prices.”

Missing Piece in Obama Housing  Plan: Arrests – Bloomberg

“The government, in turn, has shown almost no interest in charging individuals with criminal conduct. Somehow one of the most destructive and widespread frauds in recent history happened without anyone causing it — except for Fabrice Tourre, apparently.”

Fall Tapering in the Air – Tim Duy’s Fed Watch

“Bottom Line: The realization continues to grow that whether it is September or October or December, the end of asset purchases is now in sight. “

Fed’s Bullard: Bond-Buying Pullback Could Come in Small Steps –

“The Federal Reserve could hedge its bets by making small moves rather than large, aggressive ones when it starts pulling back on its $85 billion-a-month bond-buying program, said James Bullard, president of the Federal Reserve Bank of St. Louis.

Mr. Bullard, in a press briefing Thursday, said he hasn’t decided whether the Fed should begin pulling back in September, as many market participants increasingly expect.

But his comments were notable because they were the first by a central-bank official on the tactics the Fed might employ when it does begin to wind down the bond purchases.”

Saft: Market may be losing faith in Fed | Capital City | IFRe

“For the first time in more than 30 years we may be entering a period of declining faith in the Fed.

James Saft

James Saft, Reuters Columnist

If the Fed does begin to taper in coming months, slowing its bond purchases as many expect, it will mark a tacit acknowledgement of the limits of the power of monetary policy. By extension, it would also mark a decrease in the power or willingness of the Fed to control the prices of financial assets.

This realisation – that the Fed can’t always play Santa Claus and FOMC day isn’t a sort of secular Christmas – will hit investors hard.”

Summers of Our Discontent –

” But the idea that it is somehow historically inevitable that the chairmanship of the Federal Reserve should go to Summers, that it belongs to him, that he would be an enthusiastic enforcer of bank regulation to protect the little guy?

I have my doubts.

This idea is being pushed by the boys’ club around President Obama, and also by the bullying cool kids, some of the Wall Street types like former Treasury Secretary Robert Rubin who paved the way for the country’s ruin. Larry’s loyal former protégée Sheryl Sandberg aside, it evokes a sexism of complacency — just a bunch of alpha males who prefer each others’ company and who all flatter themselves that they’re smart enough to know how smart Summers is.

These days, it’s impolite to mention that all those cool bankers that President Cool didn’t punish enough brought the country to the brink of disaster. “

Larry Summers and Financial Crises: Is He Being Graded on Attendance? | MyFDL

“According to Ezra Klein, a major plus in the case for Larry Summers as Fed chair is his experience dealing with financial crises. While it is true that he took a leadership role in dealing with far more crises than Janet Yellen, the other leading contender for the job, it is hard to believe that his record in this area would be a plus if he was being graded by the outcomes.”

Cantwell to Summers: ‘Do a mea culpa’ if you want to chair the Fed | Strange Bedfellows — Politics News –

“Lawrence Summers will need to “do a mea culpa” and admit his role in deregulatory mistakes that helped cause the Great Recession if the Washington, D.C., financial mandarin wants to be chairman of the Federal Reserve Board, U.S. Sen. Maria Cantwell, D-Wash., said in Seattle on Thursday.

Cantwell sits on the Senate Finance Committee, which must approve any nomination for Fed chairman, and is frankly suspicious of the former secretary of the treasury. “Nobody is going to get my support unless owning up to mistakes of the past,” she said after a Seattle news conference.”

Fed Belongs to Everybody as Public Says It’s Our Money – Bloomberg

“The unprecedented frenzy surrounding Federal Reserve Chairman Ben S. Bernanke’s potential successor shows that Americans won’t let the central bank go back to its opaque and secretive ways.

The backlash that resulted from Bernanke’s bailouts during the financial crisis and his record expansion of the Fed’s balance sheet has pushed the central bank toward openness at the fastest pace in its 100-year history. His introduction of regular press conferences in 2011 is just one of his recent initiatives.

That scrutiny has persisted as the U.S. economy has struggled to gain momentum and led to an unparalleled public debate over the next chairman, according to Sarah Binder, a senior fellow at the Brookings Institution in Washington who researches the relationship between the Fed and Congress.

Rand Paul is dead wrong. Milton Friedman would have supported the Fed’s bond buying | AEIdeas

These comments align Pethokoukis as a monetarist with Paul Krugman, a Keynesian, against the Austrians like Paul or Hayek.

“Friedman understood the power of monetary policy, for both good and ill. He would almost certainly have been aghast that the Fed blew it again in 2008 by its tight money policies that possibly turned a modest downturn into the Great Recession. And he almost certainly would have been appalled at Republicans pushing for tight money — or, heaven help us, a return to the gold standard — with the economy barely growing and inflation low. It is certainly inconvenient for Paul that Friedman — a libertarian, Nobel-laureate economist — would have little use for the senator’s supposedly Hayekian take on the Fed or monetary policy. Although the Bernanke Fed has imperfectly executed its QE programs, they are a big reason why the US is growing and adding jobs — despite President’s Obama’s regulatory onslaught and tax hikes — and the EU (and the inflation hawk ECB) is back in recession. Paul is wrong on Friedman and wrong on the Fed. It’s not even close.”

Rand Paul Loves Milton Friedman, but Milton Friedman Would Have Hated Rand Paul – Matthew O’Brien – The Atlantic

I think there is a disconnect between what Paul thinks and what Friedman, who was more activist regarding monetary policy, believes. This is the divide between the Austrians and the Monetarists.

Behind the Curtain: Eve of Destruction –

“It is almost impossible to find an establishment Republican in town who’s not downright morose about the 2013 that has been and is about to be. Most dance around it in public, but they see this year as a disaster in the making, even if most elected Republicans don’t know it or admit it.

Several influential Republicans told us the party is actually in a worse place than it was Nov. 7, the day after the disastrous election. This is their case”

Chris Christie Lays Out Argument For 2016 |

“New Jersey Gov. Chris Christie laid out his ideas for saving the Republican Party at a gathering of the Republican National Committee on Thursday, in remarks that offered sharp criticism of rival Republicans and a window into his own potential 2016 platform.

Christie spoke at length about his record in New Jersey, emphasizing accomplishments like teacher benefit reform and bringing down the Garden State’s budget deficit. Christie’s remarks were closed press, but multiple guests provided quotes and recordings.”

Christie’s Tough Talk Shows GOP Divide |

“New Jersey Governor Chris Christie criticized some in the GOP on Thursday for emphasizing ideas over winning, turning heads with blunt talk interpreted by nearly everyone in the room as attacks on Kentucky Senator Rand Paul and Louisiana Governor Bobby Jindal.”

BBC News – Rupee falls to a record low against the dollar

This has a lot to do with capital flight.

“On Wednesday India’s central bank put further restrictions on the amount of money that companies and individuals can send out of the country.

That had little impact and the rupee fell to 62.03 to the dollar, below its previous low of 61.80 hit on 6 August.

Overseas investors have been pulling money out of Indian shares and debt on concerns over the economy.”

Gold goes East as consumers hoard bullion and jewellery – Telegraph

“A Western sell–off of ETFs has provided a buying opportunity for Asians, with queues forming outside jewellers, reports Richard Dyson. “

A new development in the China bad bank story | FT Alphaville

Isn’t this what Michael Pettis has been saying – that the savers/taxpayers always pay. Someone has to pay when the bad debts come up. And that’s why growth must slow if the Chinese switch from an investment-led model to a more consumer-oriented one.

“We don’t know whether the Chinese authorities are planning to provide more assistance to help along the AMCs. But the assumption seems to be there that there will be continued state support, judging from a Barclays note cited by Paul back in March 2012. And when Cinda sold a stake to UBS and StanChart in 2012, it also sold a portion of equity to CITIC and to China’s National Social Security Fund.

Funneling fiscal resources towards repaying those bad debts just means the taxpayer, ie the already-financially-repressed Chinese householder, is the one who pays up.”

BBC News – Picture this: Is there life after Photoshop?

Adobe has moved to the cloud. That works for dedicated photo professionals or large companies with enough budget. But this leaves small and medium-sized businesses without a dedicated constant photo need out in the cold. These are the challenges that vendors will face in moving to a cloud-centric model.

“Adobe Photoshop has dominated the photo editing space – but with a new subscription model is there life after Photoshop for small businesses looking for something more cost-effective?”

You Are What Your Mother and Father (and Grandmothers and Grandfathers) Ate | Mark’s Daily Apple

“Epigenetic shockwaves can reach far into the future, too. Until the 20th century, the people of Overkalix, Sweden were at the mercy of the elements. Winter brought total isolation, with every route into and out of the municipality completely frozen over and inaccessible. That meant if the harvest was poor, the people flirted with starvation. If the harvest was good, they prospered and thrived. It was either famine or feast. In 2002, Swedish researchers analyzed the extensive birth, death, and health records of the area to see how this feast and famine cycle of the 19th century might have affected the health of the population. Amazingly, they found that boys who ate very well during late childhood were more likely to go on to have grandsons with health issues like heart disease, diabetes, and early mortality later in life. On the other hand, boys who experienced famine during late childhood had longer-lived grandsons with fewer health problems.”

BBC News – Criminologists identify family killer characteristics

“British criminologists have made the assessment after studying newspaper records of “family annihilator” events over the period from 1980 to 2012.

A family break-up was the most common trigger, followed by financial difficulties and honour killings. “

Android Device Manager Review & Rating |

“Finally, Google provides a baked-in way to track down a lost or stolen phone and give you some control over your data no matter where you are.”

PC maker Lenovo records highest-ever quarterly market share of 16.7pc –

“Lenovo’s combined sales of smartphones and tablets surpassed PCs for the first time ever during the quarter, demonstrating the momentum of these two businesses. During the first quarter of this year, Lenovo became the world’s fourth largest smartphone supplier, growing 132pc.

At the same time, Lenovo’s first quarter pre-tax income increased 16pc year-over-year to $215m while earnings grew 23pc year-over-year to $174m. The PC firm maintains a continued focus on growing its business across all geographies, customer segments, and product lines. “

Back to the future as Samsung releases flip smartphone –

This is why Android is going to win against Apple. There are too many niches for one company to fill in a marketplace this big. Apple’s share will decline inexorably.

“Samsung is targeting the phone at the Chinese market and there are currently no plans to release the device in Europe or the US.

However, an unlocked version could potentially work abroad as dual-SIM support is included for both CDMA and GSM radios.

The company said the phone was aimed at those who wanted to move on from “the old school” in a statement on their Chinese website. “

Deflating housing bubble at heart of Netherlands’ economic blues –

“Haarlem, officially the best shopping city in the Netherlands, looks like many picturesque Dutch towns: a medieval church surrounded by a hedonistic cornucopia of pedestrian shopping streets.

Normally those streets are filled with confident window-shoppers, but these are not normal times, and Dutch consumers are feeling anything but confident. Household spending has been falling for three straight years, and it dropped again 2.4 per cent year on year in the second quarter, dragging the entire economy down with it. “

BBC News – Falling Netherlands house prices leave owners stuck

Good piece on how the fall in house prices is hurting the Dutch economy. Must read

Egypt’s Nightmare Scenario Draws Nearer |

“However awful Egypt’s political crisis may appear after the bloody government crackdown that left more than 500 protesters dead, the worst may be yet to come. Islamists enraged by the military-led government’s brutal tactics could retaliate on a scale that touches off an even bloodier phase to the struggle, regional experts say.

“I think a cycle of violence is coming,” says the Century Foundation’s Michael Wahid Hanna. “This will likely take the form of insurgent tactics, including possibly suicide bombings and assassinations.””

‘Horrible’: Christian churches across Egypt stormed, torched –

“Christians all around Egypt are cleaning up in the aftermath of a spate of attacks, which came on the country’s deadliest day since the 2011 revolution that overthrew longtime President Hosni Mubarak.

Bishop Angaelos, the Cairo-born head of the Coptic Orthodox Church in the United Kingdom, said he was told by colleagues in Egypt that 52 churches were attacked in a 24-hour span that started Wednesday, as well as numerous Christians’ homes and businesses.

Ishak Ibrahim, a researcher with the Egyptian Initiative for Personal Rights, told CNN he had confirmed attacks on at least 30 churches so far, in addition to the targeting of church-related facilities, including schools and cultural centers.”

Mourners search for missing loved ones in Egypt as death toll from violence soars to 638 – The Washington Post

“Weeping relatives in search of loved ones uncovered the faces of the bloodied, unclaimed dead in a Cairo mosque near the smoldering epicenter of support for ousted President Mohammed Morsi, as the death toll soared past 600 Thursday from Egypt’s deadliest day since the Arab Spring began.

World condemnation widened for the bloody crackdown on Morsi’s mostly Islamist supporters, including an angry response from President Barack Obama, who canceled joint U.S.-Egyptian military maneuvers.”

Egypt’s Brotherhood to hold ‘march of anger’ – Middle East – Al Jazeera English

“Egypt’s Muslim Brotherhood has asked supporters of Mohamed Morsi, the deposed president, to take part in a nationwide Day of Rage in protest against the recent violent clearing of protest sites by security forces.

The announcement came a day after hundreds of people were killed in the police action that ended two sit-ins in Cairo that began after the army toppled Morsi on July 3.”

NSA broke privacy rules thousands of times per year, audit finds – The Washington Post

“The National Security Agency has broken privacy rules or overstepped its legal authority thousands of times each year since Congress granted the agency broad new powers in 2008, according to an internal audit and other top-secret documents.

Most of the infractions involve unauthorized surveillance of Americans or foreign intelligence targets in the United States, both of which are restricted by statute and executive order. They range from significant violations of law to typographical errors that resulted in unintended interception of U.S. e-mails and telephone calls.”

The Government Now Admits There’s an ‘Area 51’ – Philip Bump – The Atlantic Wire

“Newly declassified documents, obtained by George Washington University’s National Security Archive, appear to for the first time acknowledge the existence of Area 51. Hundreds of pages describe the genesis of the Nevada site that was home to the government’s spy plane program for decades. The documents do not, however, mention aliens.”

Encrypted email service Lavabit raises $100K for legal defense fund | The Verge

“A week after Lavabit founder Ladar Levison shuttered the encrypted email service rather than comply with undisclosed government demands, he’s getting set for a legal fight. Speaking to RT, Levison says that the defense fund he created has reached $100,000 as he gears up for a showdown in the Fourth Circuit Court of Appeals.”

Edward Snowden downloaded NSA secrets while working for Dell: Sources – The Economic Times

“Former intelligence contractor Edward Snowden began downloading documents describing the U.S. government’s electronic spying programs while he was working for Dell Inc in April 2012, almost a year earlier than previously reported, according to U.S. officials and other sources familiar with the matter.

Snowden, who was granted a year’s asylum by Russia on Aug. 1, worked for Dell from 2009 until earlier this year, assigned as a contractor to U.S. National Security Agency facilities in the United States and Japan. “

Google will automatically encrypt cloud data in response to NSA anxiety | The Verge

“Google Cloud Storage — a non-consumer service used by companies like Ubisoft, Rovio, Best Buy, and others for storing content— will for the first time automatically encrypt its users’ data. The move is intended to protect, companies developers, and ultimately your data from prying eyes, utilizing the128-bit Advanced Encryption Standard (AES). Under the new system, data will be encrypted on Google’s end “before it’s written to disk.” Google tells us that the keys to unlock this encryption are managed using the same systems Google uses for its data.”

Lies, Damned Lies, And The NSA | TechCrunch

“Today the Washington Post reported documents demonstrating that the NSA breaks privacy laws “thousands of times” each year.

Consider this the conclusion of what was the last-ditch argument put forth to defend the NSA: Yes, they have the capability to abrogate your Constitutional rights, but there is no evidence of abuse! Wrong. We now have proof that the NSA both wittingly and unwittingly breaks that law on average of 7.6 times per day, using leaked 2012 numbers.

That’s a nontrivial number of infractions.”


Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.