Libor, the scandal-tarred benchmark that underpins interest rates on trillions of dollars in financial contracts, is being sold to NYSE Euronext, NYX -0.78% the U.S.-based company that runs the New York Stock Exchange. The deal, designed to restore Libor’s international credibility, was announced Tuesday by a British government commission and the NYSE.
From DAVID ENRICH and CASSELL BRYAN-LOW.
Read more at NYSE Euronext to Take Over Libor – WSJ.com.
Malcolm Gladwell tells the story of story of Konrad Kellen, a “truly great listener”:
Everyone believed what [Leon Goure, US expert who believed the Vietcong were demoralised and about to give up] said, with one exception – Konrad Kellen. He read the same interviews and reached the exact opposite conclusion.
Years later, he would say that his rethinking began with one memorable interview with a senior Vietcong captain. He was asked very early in the interview if he thought the Vietcong could win the war, and he said no.
But pages later, he was asked if he thought that the US could win the war, and he said no.
The second answer profoundly changes the meaning of the first. He didn’t think in terms of winning or losing at all, which is a very different proposition. An enemy who is indifferent to the outcome of a battle is the most dangerous enemy of all.
Goure’s analysis is a classic case of confirmation bias: he sought evidence to support his preconceived ideas, rather than gathering and evaluating evidence objectively. This applies as much to investing as it does to war.
Read more BBC News – Viewpoint: Could one man have shortened the Vietnam War?.
Christopher Snowdon reviews Denmark’s attempt to reduce obesity by taxing saturated fats:
The economic and political failure of the fat tax provides important lessons for policy-makers who are considering ‘health-related’ taxes on fat, sugar, ‘junk food’ and fizzy drinks in the UK and elsewhere. As other studies have concluded, the effect of such policies on calorie consumption and obesity is likely to be minimal. These taxes are highly regressive, economically inefficient and widely unpopular. Although they remain popular with many health campaigners, this may be because, as one Danish journalist noted, ‘doctors don’t need to get re-elected.’
Read more at The Proof of the Pudding: Denmark’s fat tax fiasco | Institute of Economic Affairs.
An outside day reversal on Japan’s Nikkei 225 warns of retracement to test support at 13500. Respect of support — or a trough above the zero line on 21-day Twiggs Money Flow would indicate a healthy up-trend. Breach of the rising trendline is unlikely, but would warn of a test of primary support at 12500.
China’s Shanghai Composite Index is testing long-term support at 1950 — as shown on the monthly chart. Failure of support is likely and would warn of a test of the 2008 low at 1700. Reversal of 13-week Twiggs Money Flow below zero would strengthen the bear signal. Respect of support at 1950 is unlikely, but would indicate another test of 2400/2500.
India’s Sensex respected its rising trendline and is likely to test resistance at 20000. Breach of resistance would signal a primary advance, with a target of 22000*. Reversal below 18500 is unlikely, but would warn of reversal to a primary down-trend. Recovery of 13-week Twiggs Money Flow above zero would indicate buying pressure.
Singapore’s Straits Times Index remains weak after finding support at 3100. Reversal of 13-week Twiggs Money Flow below zero after bearish divergence would warn of a primary down-trend. Breach of support at 3100 would confirm. Recovery above 3300, while unlikely, would signal a fresh primary advance.
The ASX 200 broke resistance at 4860, indicating the correction is over. Follow-through above 4900 would strengthen the signal. Recovery of 21-day Twiggs Money Flow above zero indicates healthy medium-term buying pressure. Breach of resistance at 5000 would offer a long-term target of 5850*. Reversal below 4860 is unlikely, but would warn of another test of support at 4650.
* Target calculation: 5250 + ( 5250 – 4650 ) = 5850
The S&P 500 Index penetrated its descending trendline, indicating the correction has ended. Follow-through above 1650 would signal a primary advance to 1800*.
* Target calculation: 1680 + ( 1680 – 1560 ) = 1800
The FTSE 100 broke through medium-term resistance at 6400, confirming the correction has ended, after earlier penetrating its descending trendline. Follow-through above 6500 (from the March 2013 peak) would strengthen the signal, indicating an advance to 6900. Recovery of 21-day Twiggs Money Flow above zero would also strengthen the signal. In the long term, breakout above 7000 would offer a target of 8000*.
* Target calculation: 7000 + ( 7000 – 6000 ) = 8000
Germany’s DAX is testing resistance at 8000. Breakout above that and the declining trendline would signal another primary advance, with a target of 9300*. Recovery of 21-day Twiggs Money Flow above zero would indicate medium-term buying pressure. Respect of resistance and reversal below 7700 is less likely, but would warn of a test of prmary support at 7400.
* Target calculation: 8500 + ( 8500 – 7700 ) = 9300
Italy’s MIB Index is consolidating below resistance at 16000. Penetration of the declining trendline suggests the correction is over. Breach of resistance would signal an advance to 18000. Recovery of 21-day Twiggs Money Flow above zero would strengthen the signal. Respect of resistance is unlikely, but would test primary support at 15000.
Spain’s Madrid General Index broke resistance at 800 and its descending trendline, indicating the correction is over. We still need to watch the weak 21-day Twiggs Money Flow: a peak below zero would indicate selling pressure, but recovery above zero would suggest a fresh advance. Respect of the new support level at 800 would confirm an advance to 870. Reversal below 800, while unlikely, would warn of another test of primary support at 750.
Michael J. Casey at WSJ interviews HSBC group chief economist Stephen King, author of When the Money Runs Out: The End of Western Affluence:
Mr. King’s thesis….. is that we in the West are in line for a shock when we discover that the high-growth rates to which we’re accustomed aren’t coming back. In the U.S., we’ve been wrongly budgeting for a return to 3.5% average real growth rates that persisted through the second half of the 20th century — an affliction suffered by both policymakers and households that he calls an “optimism bias” — and yet even before the financial crisis destroyed trillions of dollars of wealth the economy was only clocking gains of 2.5% per year. Forget worrying about the post-crisis onset of a Japan-style “lost decade,” Mr. King says. “We have been through a lost decade already. ”Among the reasons for this long-term shift to a slower potential growth rate, he cites the exhaustion of a various one-off productivity gains that boosted growth after World War II: the entry of women into the workforce; the liberalization of world trade; a tripling in rates of consumer credit founded on an unsustainable increase in housing prices; and education. These gains are no longer to be had, he says, but policymakers are blind to that fact and so are burdening the economies of the U.S., Europe and Japan with long-term debts.
While I agree that we are unlikely to see a resumption of the rapid debt growth of the last 3 decades, this should contribute to lower inflation and greater stability, without a credit-fueled boom-bust cycle, that could partially offset the negative effects. I also question whether productivity gains are really exhausted, or if this is a temporary after-effect of low, post-GFC capital investment. There is ample evidence that the global economy is slowing and productivity gains will fall — if one is prepared to ignore evidence to the contrary such as the rise of automation, advances in genetics, nanotechnology, sustainable energy and slowing global population growth — which should alleviate the poverty trap that many countries are still in. The researcher has to beware of confirmation bias, where they gather data to support a preconceived opinion.
Read more at Horror Story: Rude Awakening Awaits Western Economies – Real Time Economics – WSJ.
Lisa Abramowicz and Mary Childs at Bloomberg write:
Investors who sought exchange-traded funds as a faster way to trade corporate bonds are finding that they can be as expensive to trade as the underlying debt.
As trading in the three-biggest credit ETFs surged to unprecedented levels last month amid the market’s biggest losses since 2008, the funds’ shares dropped as much as 1.1 percentage points more than the net value of the less-traded securities they hold. The two largest high-yield bond ETFs have lost about 6 percent since reaching a five-year high May 8. That’s about 2 percentage points more than the loss for the Bank of America Merrill Lynch U.S. High Yield Index….
Read more at Crowded ETF Exit Proving Costly as Bonds Trail: Credit Markets – Bloomberg.
I found this essay by Christine Nicholls, senior lecturer at Flinders University, truly inspiring:
When discussing how to embed Indigenous Australian knowledge and practices into the Australian national curriculum effectively – particularly the maths curriculum – there’s no better place to start than analysing our own distinctively Australian national sport: AFL, the winter game.
Why, you might ask. Well, have you ever wondered why Indigenous players frequently excel at Aussie Rules, where they are vastly over-represented in the national AFL competition?
She points out that this excellence is not natural ability, based on superior genetics, but learned from early nurturing.
Australia’s Indigenous languages are rich in spatial terminology. As linguist Mary Laughren once noted:
“Desert children’s ability to handle directional and spatial terminology in particular is taken as a sort of intelligence test similar to the counting prowess test among Europeans.”
This ability, to handle sophisticated terminology about space and directionality with confidence and accuracy, and the concomitant skill in land navigation even when one is completely surrounded by desert, is inculcated into children from the earliest infancy, even today.
This spatial terminology is largely foreign to our Western culture.
This culturally specific form of mathematical knowledge, intergenerationally transmitted, imparted in its most intact form via Aboriginal languages, plays itself out not only on the AFL field but in tradition-oriented Aboriginal art, and has an important role in other Indigenous knowledge.
The ability to apply such knowledge is a product of nurture, not nature – it cannot be genetically transmitted any more than it is possible to transmit concepts about number and computation to other little Australians, except via processes of acculturation.
This reinforces the view that one culture is not superior to another — just different. And that we have a great deal to learn from indigenous culture. As Will Rogers once said: “We are all ignorant. Just on different subjects.”
Read more at It's time we draft Aussie Rules to tackle Indigenous mathematics.
P.S. I will forgive Christine for classing AFL as the only football code requiring 360 degree spatial awareness. She obviously has not been exposed to Soccer or Gridiron.
There are growing calls for increased use of land value taxes to replace income taxes and corporations taxes as a major source of government revenue. Yves Smith points out:
Income and sales taxes add to the price of doing business, and hence reduce their supply and competitiveness. Most economists – even Milton Friedman – recommend that the more efficient tax burden is one that collects economic rent – property rent, fees charged for using the airwaves, monopoly rent, and other income that is basically an access charge. If you tax land rent, for instance, this doesn’t raise the price of housing or office space. The rent-of-location is set by the market place……
I agree with Michael Hudson that our income tax system encourages the use of debt, over-use of which was one of the primary causes of the recent GFC:
Our tax system favors debt rather than equity financing. By encouraging debt it has prompted a tax shift onto the “real” economy’s labor and capital. The resulting interest charge and tax shift mean that we’re not as efficient and low-cost producers as we used to be…..
But I have two concerns:
Read more at It’s Time to Levy the Land | naked capitalism.
The ASX 200 has also penetrated its descending trendline, suggesting the correction is over. Breakout above 4850 would signal a test of 5250. Bullish divergence on 21-day Twiggs Money Flow indicates buying pressure. Target for a break above 5000 would be 5850* to 6000. Respect of 4850/4900 is unlikely but would warn of another test of support at 4650.
* Target calculation: 5250 + ( 5250 – 4650 ) = 5850
