MORNING BID – The quiet days for Apple

Jul 22, 2014 12:59 UTC

Apple’s been the two-ton behemoth of the stock market for so long that it is going to be surprising, in a way, to see that the company isn’t really pulling its weight anymore when it comes to its percentage of S&P 500 earnings. This sort of thing can be a bit silly, but Howard Silverblatt, the index guru over at S&P Dow Jones, points out that Apple right now is about 3.2 percent of the total market value of the S&P while at the same time accounting for an expected 2.8 percent of earnings in the S&P – the first time since 2008 that Apple hasn’t delivered a percentage of S&P earnings equivalent to its market value.

In the past few years, Apple has tended to carry much of the S&P on its back, such as in the fourth quarter of 2011 and first quarter of 2012, when it accounted for 6 percent and 5.2 percent of the index’s earnings – compared with accounting for about 4.4 percent of the market’s value at that time. In the last quarter of 2012 the stock was 6.3 percent of the market’s earnings and was less than 4 percent of its market value.

Of course you wouldn’t expect that to be the case now – the second and third quarters are the relative dead period when it comes to Apple, given people are generally waiting for the next round of Apple innovations at the end of the year, be it a new phone or what-have-you.

This time through won’t be all that different – with the only real issue being just how solid the growth is for the quarter and whether the stock begins one of its patented run-up-to-the-new-phone rallies that we’ve seen in past years that lasts through the end of the calendar year. Notably, Samsung’s Galaxy S5 came out and face-planted, and that’s either the result of just being a lousy product or competition from China, so it’ll be interesting to see whether upstarts out of China are starting to take share from everybody, or if the Samsung problems auger in general for better things for Apple, as tech editor Eddie Chan points out.

In the last five years, the period beginning July 1 has been the most fruitful for holders of Apple shares, with an average price gain of about 22.5 percent, compared with the relatively unexciting 11 percent gains seen in the first half of the last five years (for Apple, that is, for many companies, 11 percent is fantastic).

The stock has been basically flat since the beginning of this month, but it’s early in the “best six months” period for the iPad giant, so we’ll see where it goes from here. Starmine still puts the stock as undervalued, saying it should trade around $104 a share rather than the $94 where it stands now. The forward P/E ratio of about 13.7 is far short of its 10-year historic mean of about 20.7, and the stock’s price has traded around or below its book value for most of the last four years now. We’ll be looking a bit more as well at the idea that there are fund managers that are shunning shares in a way that they hadn’t in the past – not seeing the kind of value that they feel has been offered in other years, perhaps in part as the expected growth rate for the company slows with all of the additional competition.

Unequal inequality

Jul 21, 2014 22:03 UTC

At the Upshot over the weekend, Tyler Cowen writes that Americans’ view of income inequality is too narrowly nationalistic. Instead, he says, we should “preface all discussions of inequality with a reminder that global inequality has been falling and that, in this regard, the world is headed in a fundamentally better direction.” Basically, rising incomes in growing economies like China and India should outweigh the inequality concerns of countries (like the U.S.) where increasing exports are causing incomes at the top to rise. “While Chinese growth has added to income inequality in the United States, it has also increased prosperity and income equality globally,” he says.

A global reduction in income inequality is great, says Ryan Avent, but Cowen’s piece misrepresents the heart of the American argument against income inequality. It isn’t about globalization; instead, it’s about lax financial regulation, subsidies to big banks, low tax rates for the rich, and the appearance that political persuasion can be bought. Further, he says, even if American inequality is benefiting the poor in other parts of the world, “few voters are content to have their economies run as charities.”

There are two distinct issues here, says Dan Little. First, there’s “income distribution within an integrated national economy,” then there is “extreme inequalities of per capita GDP across national economies.” The are two fundamentally different things. Branko Milanovic and Christoph Lakner put out a paper in May that took a look at the latter type of inequality. This curve shows global growth over the last two decades along the income spectrum.

global-growth

The takeaway here is that life has gotten a lot better for the global middle class — this is particularly true in Asia — as well as the top one percent. But life hasn’t gotten that much better for the 75th to 99th percentiles of the global income distribution. “The ‘losers’ were predominantly the people [from the ‘rich world’] who in their countries belong to the lower halves of national income distributions,” say the authors. The trough of that chart? That’s middle America. — Shane Ferro

On to today’s links:

Plutocracy Now
Russian billionaires are panicked and trying to get their money out of the country – Bloomberg
For context, how Russian state propaganda has spiraled out of control – Julia Ioffe

China
“China has become indebted before it has become rich.” Debt-to-GDP is over 250% – FT

Ugh
“As supply [of bear-bile] dwindles, prices rocket” and criminal gangs hunt more – The Economist
The new subprime boom: car loans “focusing in the riskiest borrowers” – DealBook

Bubbly
Carmelo Anthony, technology investor – WSJ

Billionaire Whimsy
Carlos Slim thinks the work week should be three days long – HuffPo

Millennials
Does a generational shift explain wage stagnation? – Bloomberg

Study Says
New Yorkers are not leaving the city for the land of lower taxes – NYT

Failure
A novel way to defend your $2.6 billion fraud: cite the Harvard Business Review – Bloomberg

Data Points
“In 1978 the Bee Gees accounted for 2 percent of the entire record industry’s profits” – The Paris Review

Bank of Inchoate Sense

Ben Walsh
Jul 18, 2014 21:24 UTC

Brad DeLong is confused. The Berkeley economics professor has read the Bank for International Settlements’ (BIS) – often called the central bank for central banks –annual report and he just cannot understand what its positions on the global economy and monetary policy actually are: “It calls for raising interest rates now… It fears activist expansionary fiscal policy even more than it fears monetary ease… It seems hostile to any increase in the demand for risky assets.”

The BIS’s position, DeLong writes, fits with no current understanding of the the crisis, recession, or current economy. It does not buy into the Janet Yellen or Ben Bernanke view that interest rates should be kept low for a long time (we wrote about Yellen’s response here). Nor is it the view taken by Harvard economist Ken Rogoff and Nomura’s chief economist Richard Koo that we just need to wait for the credit mess of the financial crisis to work itself out. Nor is it DeLong’s own view that the government should get things going by borrowing more money.

Paul Krugman thinks the whole thing is actually really simple. “You need to see this in terms of an attitude, not a coherent model,” he says. Like political philosopher Michael Oakeshott said about conservatism: it’s “not a creed or a doctrine, but a disposition.” Since 2010, Krugman says, the BIS has been advocating against stimulus because it would limit the necessary harm of the recession. That may sound odd, but Krugman says it’s a retread of Schumpeter’s good old-fashioned theory of creative destruction. When the facts changed – most research doesn’t support the skills mismatch explanation of elevated unemployment – the BIS just looked for new reasons to support the same policies, which left it, Krugman writes, without “any method at all… I see an attitude, looking for justification.”

Oxford University macroeconomist Simon Wren-Lewis has a similar reaction as Krugman’s to the BIS report: it’s understandable, if not rigorously defensible. The BIS, says Wren-Lewis, is saying that low interest rates are dangerous. So dangerous that they, not a lack of regulation or fraudulent behavior, are what caused financial crisis. The BIS just wants higher interest rates instead of new financial regulation.

Noah Smith throws some cold water on the idea that just because asset prices are high – for stocks, bonds, real estate, farmland – the Fed and other central banks need to raise interest rates as soon as possible. “The Fed has raised asset prices,” through quantitative easing and low interest rates, he writes, “but there’s no sign that it has caused an irrational rise in prices.” If markets acted rationally in response to Fed policy, there really isn’t a bubble to burst: “Causing a crash today will just cause a crash today, period.” The Fed, thankfully, isn’t doing that. Instead, it is slowly and deliberately phasing out post-crisis monetary policy. – Ben Walsh

On to today’s links:

EU Mess
Espirito Santo files for bankruptcy protection - Bloomberg

Crisis Retro
“This is the Apocalypse Now point of the banking industry” - The Independent

Jobs
Why churn is so important for the labor market - WSJ

Banks
“The Justice Department has massively distorted and perverted the notion of accountability” in bank settlements - David Dayen

Huh
“The symbol is not supposed to be a symbol, it’s supposed to be something with meaning” - Recode

Ugh
Domestic abuser & CEO Gurbaksh Chahal is back with an inspirational video and “the world’s first high frequency marketing OS” - Valleywag

Billionaire Whimsy
Warren Buffett enjoys free baseball hats from car dealerships - GM

Good Questions
“Why do they need us to join Airbnb nation?” - Kate Losse

Alpha
Morningstar does not care for Jeff Gundlach, and the feeling is mutual - Bloomberg

Losing participation points

Ben Walsh
Jul 17, 2014 22:18 UTC

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Today, the White House tried to answer one of the thorniest questions about the U.S.’s post-recession economy: why, despite the recovery, has the percentage of working-age Americans that are either working or looking for work steadily fallen? At the beginning of the recession in December 2007, what economists call the labor force participation rate was 66%. It is currently 62.8%, the lowest it’s been since the 1970’s.

About half the answer, the Council of Economic Advisors says, is that America’s workforce is getting older and “older individuals participate in the labor force at lower rates than younger workers.” Another third of the drop is due to pre-recession trends like declining participation by so-called prime age workers, plus the particularly nasty but inchoate effects of the Great Recession, like a big rise in the ranks of the long-term unemployed (economists think this pushes down the participation rate but are not completely sure why). Another sixth of the decline is due cyclical factors (the normal ups and downs of the economy).

Business Insider’s Myles Udland points out that the White House is chiming in on a highly politicized debate regarding just how strong the labor market is. The Obama administration is saying, the WSJ’s Josh Zumburn writes, that “only one-sixth of the decline is clearly attributable to the weak economy.”

Matt Yglesias thinks the most important issue for ordinary people isn’t about demographics or business cycles, but about what the paper calls the “residual”: the fall in the participation rate that we can’t quite figure out. Unfortunately, he says the study doesn’t come up with any firm answers about what’s causing this chunk of the decline. As Felix Salmon pointed out in 2012, the last time the participation rate was this low, trends like women joining the workforce en masse were still unfolding. Other factors are at work now, and are part of the reason why the US is in the midst of its weakest post-war recovery. — Ben Walsh

On to today’s links:

Possibly Useless Data
Business is looking up for at least one Spanish bespoke tailor - Bloomberg

Yikes!
Russians hacked the NASDAQ - Bloomberg Businessweek

USA! USA!
Americans have no good reasons to complain about food prices - AEI

Billionaire Whimsy
William Koch claims victory in his fight for consumers against a “dark industry” (wine auctioneers) - Reuters

Please Update Your Records
The $400 million ISIS bank robbery may never have happened - FT

True Truisms
The best way to make cities safer for pedestrians and cyclists: slow down cars - Mike the Mad Biologist

Takedowns
Shadow Stats is complete nonsense. Ignore anyone who cites it - Matt O’Brien

Epistles
“Microsoft’s strategy is… [11 paragraphs later] an estimated reduction of 12,500 employees” - Business Insider

Menthol & Antitrust

Jul 17, 2014 14:13 UTC

The U.S. is poised to lose a cigarette company. One of America’s largest tobacco companies, Reynolds American, struck a deal to buy rival Lorillard this week. The deal is for $25 billion excluding debt (which adds about $2 billion more) — although the WSJreports it’s so complex it is unlikely to be finalized before next year. If the deal clears antitrust hurdles, Reynolds-Lorillard together would control somewhere between 35 and 40 percent of the American tobacco market.

Americans on average still smoke 1,300 cigarettes per year, says Roberto Ferdman, but tobacco consumption has been on the decline since the 1960s. “Acquiring Lorillard, the U.S. industry’s third-largest competitor, would help Reynolds cope with the slowdown and give it the Newport menthol line, which is popular in urban areas,” writesBloomberg. Susan Cameron, the CEO of Reynolds, told Dealbook after the merger was announced: “This is about Newport and new synergies.”

Supporting that explanation is Reynolds’ willingness to jettison Blu, the U.S.’s most popular e-cigarette, to competitor Imperial Tobacco for $7.1 billion and put all its focus on growing its Vuse-brand e-cigarette (presumably to assuage antitrust regulators). Kool, a menthol brand that competes with Newport, is also being sold to Imperial as part of the deal. Matt Levine notes that the fact that antitrust regulators would take a stance at all seems to be at odds with decades of U.S. public health policy: “All of our other tobacco regulation is about making smoking more expensive, so why should antitrust regulators be working on ways to make it cheaper?”

In part, the acquisition reflects how relatively attractive the U.S. tobacco market has become. Non-U.S. growth and lighter regulation, the driving factor behind Philips Morris’ split from Altria’s U.S.-only business, can no longer be assumed. Philip Morris’ second quarter earnings showed that the only region where the international cigarette company’s volume increased was Asia. Places like Japan and Russia are following the U.S.’s lead in restricting tobacco sales and discouraging use, and sales are falling in even Eastern Europe, traditionally a strong tobacco market.

Domestically, tobacco M&A bankers have efficiently worked themselves out of a job: “this is the last move in the U.S.,” a banker told the WSJ. There just aren’t any more companies left to combine: Altria and the and the new company will together control about 90% of the U.S. cigarette market. Despite creating a duopoly, regulators are likely to approve the deal, says Bloomgerg Businessweek’s Justin Bachman. Bachman argues that the $30 billion in taxes paid annually by the tobacco industry (half to state and local governments, and half to the federal government), give regulators a financial interest in managing the decline of the industry health experts would prefer to see disappear tomorrow. — Shane Ferro and Ben Walsh

On to today’s links:

Oxpeckers
“BuzzFeed headlines actually make fairly small promises and then overdeliver” -Andrew Beaujon

Old Normal
“The bliss of being an unknown cog turned out to be temporary glitch” - Jack Shafer

Educational
The Koch brothers fund “a high school free market and liberty-based course” in public high schools - Joy Resmovits

Transparency
Nestle won’t say how much water its bottling plant is extracting from drought-ridden California - The Desert Sun

Mergers & Awkwardness
Rupert Murdoch tried to buy Time Warner and failed - Andrew Ross Sorkin

Borderline Systemic Importance
“Just because Mr. Fink is talking his book and Ms. White is acting the sycophant doesn’t mean they are wrong” - Jesse Eisinger

Housing
“Wealth of this kind is far more destructive than the alleged sins of the top 1 percent” -Robin Harding

Charts
“Millennials are roughly as likely to own homes as people with similar demographics two decades ago” - Jared Kolko

UGH
In most places in the U.S., bike share can’t keep up with demand because the single bike supplier went bankrupt - Marketplace

Urban Panning
City parking regulations are the worst (Schoolhouse Rock-style!) - Sarah Goodyear

Innovations
Here are some graphics about CEO swearing with no swear words - Bloomberg
“Historically, most controls on swearing have been meant to protect women and children against blasphemy” - Bloomberg

Monetary matters

Jul 15, 2014 21:47 UTC

Today, Janet Yellen appeared before the Senate Banking Committee to give her semi-annual monetary policy report to Congress. Her basic message, laid out in a prepared statement, hasn’t changed: the economy is slowly improving, but certain measures of the labor market still worry her. Since her last report to Congress in February,“important progress has been made in restoring the economy to health and in strengthening the financial system. Yet too many Americans remain unemployed, inflation remains below our longer-run objective, and not all of the necessary financial reform initiatives have been completed.”

“Yellen’s testimony is likely to reinforce a sense of complacency among investors who regard the Fed as convinced of its forecast and committed to its policy course,” writesBinyamin Appelbaum. He continues that, with regard to the future of monetary policy, “uncertainty about the future is actually contributing to the sense of stability, by making the Fed more cautious about retreating.” Ylan Mui summarizes Yellen’s comments generally: “Move too fast or too abruptly, and the fragile recovery could falter.”

In the Q&A with senators, The WSJ (and a number of others) picked up this detail:

The Fed says house prices are within historic norms, as measured by price-to-rent ratios. However stock market valuations for small firms, social media and biotechnology firms “appear to be stretched.” Meantime risk spreads on corporate bonds have reached all-time lows, a sign of over-valuation.

To that, Cullen Roche writes, “despite being Fed Chief, Janet Yellen doesn’t understand the concept of ‘value’ relative to what is a proper ‘value’, any better than anyone else pretending to do so.” Neil Irwin says, “she sees some risks out there, though it’s clear she is not ready to sound an overall alarm bell over asset prices.” Reuters has a goodoverview of other interesting tidbits from the Q&A.

After reading the speech, Tim Duy thinks the next big policy battle at the Fed relates to the language it has been using about the amount of time between the ending of asset purchases (which we now know will be October 2014) and a change in the Fed funds rate (which is up in the air). It currently reads a “considerable time” or “considerable period.” However, he says, “it is no longer clear that a ‘considerable period’ between the end of asset purchases and the first rate hike remains a certainty.” Thus, Fed watchers should look for a change in that language in the future — just how soon, though, is up for debate. — Shane Ferro

On to today’s links:

Service With a Smile
A word on behalf of that Comcast customer service rep - John Herrman

Please Update Your Records
SEC Commissioner gives the FSOC a superhero group name: Firing Squad On Capitalism - Michael Piwowar

Ouch
Job prospects for humanities Ph.D.s are, well, take a guess - Jordan Weissmann

Do No Evil
Project Zero: Google’s new web privacy research initiative - Chris Evans

Regulators
Why can Uber operate in New York but Lyft can’t? - Alison Griswold

Crisis Retro
Here’s an explainer on mortgage-backed securities in case you zoned out during the financial crisis - Danielle Douglas

USA! USA!
U.S. roads have a D+ grade, but are still “in better shape than those in Sweden, the U.K., New Zealand and Australia” - Angela Greiling Keane

Tech
Kara Swisher, tech’s “most feared and well-liked journalist” - Benjamin Wallace

MORNING BID – What’s all the Yellen about?

Jul 15, 2014 12:51 UTC

Rants from TV commentators aside, the market’s going to be keenly focused on Janet Yellen’s congressional testimony today, with a specific eye toward whether the Fed chair moderates her concerns about joblessness, under-employment and the overall dynamism of the labor force that has been left somewhat wanting in this recovery. The June jobs report, where payrolls grew by 288,000, was welcome news even as the economy continues to suffer due to low labor-force participation and weak wage growth.

Inflation figures are starting to show some sense of firming in various areas, for sure, but still not at a point that argues for a sharp move in Fed rates just yet. Overall, a look at Eurodollar futures still suggests the market sees a gradual, very slow uptick in overall rates – the current difference between the June 2015 futures and June 2016 futures are less than a full percentage point – not as low as it was in May of this year, but still lower than peaks seen in March and April 2014 and in the third quarter of 2013, before a run of weak economic figures and comments from Fed officials themselves scared people again into thinking that the markets would never end up seeing another rate hike, like, ever again.

Now the expectations for Fed moves have coalesced around late in the first half of 2015 for at least the first token rate rises, and it might even be a bit sooner depending on what happens with employment and inflation figures. On this front, Liz Ann Sonders of Charles Schwab points out that some of the leading and coincident indicators for the labor market look promising – noting that the jobless rate overall and the payroll figures are lagging indicators.

She points out that private-sector employment is up 9 percent since the end of the recession, outpacing the economy’s overall 5.9 percent growth rate – and that’s clearly due to a lot of local and state government austerity that was forced upon municipalities and other localities due to diving tax revenues and weak growth. Government employment didn’t finally trough until mid-2013, and has since started to come up a bit more, but it’s still down 3 percent from the end of the recession; the gains in private employment don’t completely obviate whatever need there is for government jobs and services – particularly if federal and state employment tends to be middle-class labor.

Job quits and layoffs figures are improving.

Job quits and layoffs figures are improving.

Other factors pointing to strength – the improvement in the JOLTS data, the job openings labor turnover survey, which shows job openings rising to levels consistent with the 2007 area – still not at the same level as it was in 2001 during the end of the tech boom, but much better than what’s been happening of late.

The “quit rate” also measured by JOLTS points to more people voluntarily leaving jobs – again, the 2.1 percent rate for private payrolls falls short of the 2.5 to 2.6 percent level during the end of the last boom and far from the 2.8-2.9 percent level back in 2001 – but it’s important enough that Yellen may modify some of her language. Given she’s learned pretty quickly to try to bore people to death after the “six months” remark that set people off, those looking for lots of news may be disappointed. But if there is to be any, it could be here.

The Abenomics arrows

Jul 14, 2014 22:49 UTC

Abenomics grinds on. Bloomberg has just put out a new report on the state of Japanese prime minister Shinzo Abe’s project to revive his country’s economy and concludes that “the record is mixed.” “Inflation is up, though import prices rather than wages account for the bulk of the increase. A skeptical public remains unconvinced that long-term prospects are brighter.” Japan is a little over 18 months into Abenomics, and two of the three “arrows” — fiscal stimulus and monetary easing — have been deployed. Barry Ritholz thinks they’ve already been pretty successful so far: “deflation is being replaced by inflation; profits and investments are both increasing for Japanese companies; and the Nikkei 225 is up considerably.”

However, there’s plenty to be worried about. Back in April, Japan raised the consumption tax to 8% from 5% — the first hike since 1997 (which threw the economy into a tailspin). It was supposed to be “the fatal flaw in Abenomics,” according to theEconomist, but “the early signs are that a preternaturally lucky Mr Abe has got away with it.” However, the Japan Times writes today that the economy has taken a significant hit after the tax hike: average household consumption is down, wage growth is below inflation, corporate capital investment hasn’t made up for the fall in household consumption, and export growth is sluggish.

Joseph Sternberg at the WSJ is not quite optimistic about the future of the Japanese economy after the tax hike, but points out there are reasons to think it could be different this time around. “Japan is not in the throes of a banking crisis, as it was in 1997. Asia doesn’t appear likely to suffer a general financial meltdown of the sort that exacerbated an already weakened Japan’s sluggishness the last time around.”

The last, substantive structural reforms to help end boost long-term growth, were just announced a few weeks ago and will take longer to assess (the first two were “designed to buy time for the third arrow,” says the Bloomberg report). It gets at the heart of Japan’s sluggish growth: lack of corporate flexibility (it’s almost impossible to fire someone), high corporate tax rates, problems with the health care and agriculture industries, and a lack of women in the workforce. Earlier this year, Michael Arnoldquoted a Barclays Capital research report saying “If Abenomics’ Third Arrow works, its implications for Japan’s economic outlook and asset prices are extraordinary.” —Shane Ferro

On to today’s links:

Surprisingly Difficult Questions
“Of all the low-hanging fruit in the world, is there one variety that hangs the lowest?” -Ryan Jacobs

Please Update Your Records
“Rick Santelli had a meltdown on CNBC today” - Myles Udland

Classic Bess
Bloomberg POSH Listing For “Knee-High Christian Louboutin Python-Skin Boots” Raises More Questions Than It Answers - Dealbreaker

Critical Thinking
His choice of credit card “makes no sense for Obama presently” - Gary Leff

Investigations
CalPERS kickbacks: “$200,000 of cash stuffed into shoeboxes and paper bags” - Dan Primack

Possibly Not-So-Useless Data
A day in the life of a NYC cab driver visualized - Chris Whong

Yikes
Coca-Cola is offering expat employees in China pollution-related hazard pay - Financial Review

Climate Change
Miami is sinking and no one with any power seems to care - Robin McKie

Regulators
Another day, another multi-billion dollar bank settlement - Reuters

Energy
Did we hit peak oil and miss it? - Ambrose Evans-Pritchard

Wonks
Trying and failing to understand the BIS report - Brad DeLong
“The Fed has raised asset prices, but there’s no sign that it has caused an irrational rise in prices” - Noah Smith

Thirsty for work [Updated]

Jordan Fraade
Jul 11, 2014 21:09 UTC

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Last week’s jobs report may have capped off the best six-month period since the recovery began, but the long-term unemployment situation is as terrible as ever. Nearly3.1 million Americans have been out of work for six months or longer — a third of all unemployed Americans. This isn’t just a bad business cycle, says Nick Bunker. It has become structural problem in the labor market* (see update below). The Beveridge Curve, which tracks the relationship between the unemployment rate and job vacancies, has shifted outward, meaning there are lots of job vacancies, but more unemployed people than you would have expected had the pre-recession trend continued. There are plenty of jobs out there, Bunker says. Employers just aren’t hiring people to do them.

Catherine Rampell points to new data from NBER and Chicago Fed researchers showing that the average job opening is going unfilled for an average of 25.1 days, the longest vacancy rate since May 2001. She’s got a number of ideas on why this is happening, but she’s convinced that the one thing that’s not causing it is job seekers lacking the skills that employers want. If this were about the skills gap, she says, employers competing for a small pool of skilled applicants would be forced to raise wages — something we haven’t seen recently.

A 2012 paper from the Boston Fed backs this up, saying the high rate of unemployment is pervasive across the entire economy, and therefore not the result of a skills mismatch. Ben Casselman sums up a more recent NBER paper: “The high level of long-term unemployment during and after the Great Recession was driven by the lack of jobs and the difficulty of finding work after a long period of joblessness, not by characteristics [meaning skills] of the unemployed themselves.” Danny Vinik looks at a number of factors, from labor-market dropouts to wage growth, and says that what’s happening isn’t just a crisis, it’s a national tragedy.

There’s lots of debate about what to do next. One thing we definitely should not do, according to Robert Waldmann, is what happened last December: get rid of extended unemployment benefits. Waldmann writes that the conservative argument that the expiration of those benefits motivated people to find work in 2014 is not backed up by month-to-month employment data. Dean Baker says that we should bring the long-term unemployed back into the workforce by changing Americans’ labor habits as a way to spread the work around, such as “encouraging firms to reduce work hours as an alternative to laying people off.” James Pethokoukis suggests tackling the problem on a number of fronts, including tax credits for hiring, privatized job-training programs, and vouchers to help people move to places where they can find work.

There’s some hope, yet. Suzy Khimm notes that on Wednesday, Congress overwhelmingly passed a bill that streamlines federal job-training programs and gives private employers more say in how they work. — Jordan Fraade

On to today’s links:

Self-Promotional
A Cynking ship - Shane Ferro
Data’s drawbacks: The best way to commute is not always the fastest - Shane Ferro

Expensive Habits
The most expensive cities for expats aren’t anywhere near London or Moscow - Quartz

It’s Academic
A “peer review ring” has been busted - Washington Post

Data Points
The millennial daughter of the head of the Mortgage Bankers Association will continue renting, thanks - Lorraine Woellert

Servicey
For a hefty fee, the Awl’s staff will teach you how to dress - Shirterate

Rent-Seeking
Not everyone is upset about London’s banking shenanigans - Jason Karaian

So Hot Right Now
Unlisted real estate sales are a thing now - Carla Fried

Copy Wrong
Aereo would like to be considered a cable company - Aereo Blog
But its argument is probably going to fail –  Brian Fung

* In fact, that’s not what Nick Bunker said at all. It was the opposite: “If you look at their Beveridge Curve for economic recoveries going back over 60 years, you see the current shift is actually quite typical.” We regret that we erred in our original reading.

Europe’s debt woes

Jul 10, 2014 22:57 UTC

The parent company of Portugal’s Banco Espírito Santo suspended trading this morning after shares fell 17% (its market value has declined 32% in this week alone). The bank — the country’s second-largest lender — missed interest payments on some short-term securities to “a few clients” earlier this week. Things haven’t been great for the Portuguese bank since December, when an audit revealed serious accounting irregularities in its parent company.

“Lisbon needs to sort out Banco Espírito Santo – fast,” say Breakingviews’ George Hay and Neil Unmack. “The Espírito Santo group has managed to create a national crisis out of a family drama,” they add. Specifically, Portuguese regulators need to keep a closer watch on the bank, which has traditionally been run by the Espírito Santo family, and step up to manage the fallout of what’s already done, “pushing through an orderly restructuring, and making sure it is equitable for creditors,” they write. However, Bloomberg View editors say that “Portugal can’t easily afford to support the bank, should support be needed.” This is a problem, they say, because while recent reforms in Europe were supposed to break the ties between bank finances and sovereigns, it hasn’t really happened yet, leaving the Portuguese government on the hook.

The bad news from southern Europe wasn’t contained to Portugal today. From theWSJ:

In Spain, a bank and a construction company each called off planned bond sales. In Italy, a drug company pulled its stock offering. In Greece, a government-bond sale came in smaller than expected. And stock markets across the continent fell, along with the euro.

John Jansen points out that southern European bond spreads are a lot wider against German bunds than they were a month ago. Toward the core of the eurozone, things aren’t great either. Sam Ro reports that Pantheon Macroeconomics’ Claus Vistesen said today, “we are running out of downbeat adjectives to describe the data in France,” after the news that industrial production is down 3.7% year-over-year.

“It’s ‘Groundhog Day’ for those who remember 2011′s European debt crisis,” writes Barron’s Brendan Conway. However, Simon Kennedy at Bloomberg says this definitely isn’t a return of the euro crisis. “Even Greece sold bonds today, though at yields higher than some analysts predicted amid the skittishness,” he writes, suggesting that Mario Draghi’s promise that the ECB will do “whatever it takes” to save the euro may be keeping the market relatively stable. Blonde Banker says it’s just another day in Europe. “High debt – both sovereign and personal. High unemployment. Weak economic growth. Deflation… Carry on.” — Shane Ferro

On to today’s links:

Cephalopods
Meet Steven Mandis, a small business loan shark and former Goldman Sachs banker, who “describes his career as a search for meaning” - Zeke Faux and Max Abelson

The Fed
An overhaul of the Fed funds rate could be coming - Robin Harding

Servicey
Everything you possibly wanted to know about Marc Andreessen’s Twitter habits (and more) - Dan Frommer
What is CYNK? - Myles Udland

Black Market
Sex, drugs, and the proper measurement of economic activity - Nick Bunker

Stuff We’re Not Linking To
“When you marry for money, you work for it every day” - Amanda Gordon

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