Ryan McCarthy http://blogs.reuters.com/ryanmccarthy Mon, 21 Jul 2014 21:30:03 +0000 en-US hourly 1 http://wordpress.org/?v=4.2.5 Wall Street ends slightly lower on Ukraine, Gaza worry http://in.reuters.com/article/2014/07/21/markets-usa-stocks-close-idINKBN0FQ20O20140721?feedType=RSS&feedName=everything&virtualBrandChannel=11709 http://blogs.reuters.com/ryanmccarthy/2014/07/21/wall-street-ends-slightly-lower-on-ukraine-gaza-worry/#comments Mon, 21 Jul 2014 20:50:20 +0000 http://blogs.reuters.com/ryanmccarthy/?p=391 NEW YORK (Reuters) – U.S. stocks slipped on Monday as investors remained cautious about instability in Ukraine and Gaza, though the three major indexes ended well off their lows, a sign that some appetite for riskier assets remained.

The S&P 500 fell as much as 0.6 percent, though it recovered most of those losses and closed right above its 14-day moving average, suggesting buyers were using weakness to come back into the market. Still, the day’s losses were broad, and nine of the 10 primary S&P 500 sector indexes fell. The S&P energy sector index represented the only positive group, up 0.2 percent. U.S. crude oil for August delivery CLc1 shot up 1.4 percent to settle at $104.59 ahead of Tuesday’s contract expiry.

Violence escalated in the Gaza Strip despite growing international calls for a cease-fire. The Palestinian death toll rose above 500 while Israel’s losses also mounted. While the impact to the U.S. economy is seen as minimal, investors are concerned about the fallout from an extended period of increased violence as well as the prospect that it could spread to other parts of the Middle East.

Market participants also kept watch on the uncertain situation in Ukraine, where fighting flared in the city of Donetsk. Last week a Malaysian Airlines jet was shot down over Ukraine, adding to an already tense situation between the country and Russia.

The United States and the European Union announced further economic sanctions against Russian interests last week before the Malaysian Airlines jet was shot down, and sanctions could become even more stringent.(Full Story)

“We’re certainly paying attention to the issues abroad, but right now, they don’t seem like the kind of events that will have anything beyond a short-term impact,” said John Chisholm, chief investment officer at Acadian Asset Management in Boston. “We expect these uncertainties to be reversed in two or three weeks.”

The Dow Jones industrial average .DJI fell 48.45 points or 0.28 percent, to end at 17,051.73. The S&P 500 .SPX declined 4.59 points or 0.23 percent, to finish at 1,973.63. The Nasdaq Composite .IXIC dropped 7.44 points or 0.17 percent, to close at 4,424.70.

The CBOE Volatility Index .VIX climbed 6.2 percent to 12.81, a level that is well below its historical average of 20. Some analysts have suggested that the low volatility has left the market – which hasn’t had a correction, defined as a 10 percent pullback, since October 2011 – vulnerable to a shock.

“Markets aren’t particularly attractive, and it seems likely that we’ll see a correction of 10 to 15 percent, though the timing on that is very difficult to say,” Chisholm said.

After the market closed, Netflix Inc reported a quarterly profit that more than doubled from a year ago. Netflix shares rose 1.7 percent to $459.65 after the bell.

Chipotle Mexican Grill Inc CMG.N shares jumped 8.1 percent to $637.50 after the market closed following the burrito chain’s results, which included second-quarter revenue that sharply exceeded Wall Street’s expectations.

Herbalife Ltd HLF.N dropped 11 percent to $54.02 after Pershing Square’s Bill Ackman, who is short the stock, told CNBC he would present evidence on Tuesday that the company is an “incredible fraud.”

McDonald’s Corp MCD.N shares slid 1.5 percent to $97.55 and Yum Brands Inc YUM.N shares fell 4.2 percent to $74.13 as the fast-food restaurant chains face a new food safety scare in China, denting efforts to shore up reputations hurt by a 2012 safety scandal in one of their biggest markets.

About 61 percent of stocks traded on the New York Stock Exchange ended the day lower, while 59 percent of Nasdaq-listed shares finished the regular session in negative territory.

About 4.91 billion shares traded on all U.S. platforms, according to BATS exchange data, below the month-to-date average of 5.6 billion.

(Editing by Jan Paschal)

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“A political economy theory of everything” http://blogs.reuters.com/counterparties/2014/03/11/a-political-economy-theory-of-everything/ http://blogs.reuters.com/ryanmccarthy/2014/03/11/a-political-economy-theory-of-everything-2/#comments Tue, 11 Mar 2014 21:47:23 +0000 http://blogs.reuters.com/ryanmccarthy/?p=389 Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

The hosannas for Thomas Piketty’s new book, “Capital in the Twenty-First Century”, have started to roll in. Published in French last year and out in English this month, Piketty’s book, Buttonwood says, “might turn out to be one of the most significant economics books that have been produced since 2000”. The World Bank’s Branko Milanovic goes further, saying it might be “one of the watershed books in economic thinking”.

In the first of a series of posts on the book, Ryan Avent says, “like Marx, Mr Piketty aims to provide a political economy theory of everything.” That theory in a very basic nutshell: economic inequality is a feature, not a bug of modern capitalism. Piketty’s work, Kathleen Geier writes, takes on Simon Kuznets’s notion of a natural curve of inequality that declines as economies mature: “As Piketty demonstrates, Kuznets’s inequality theory was based on fatally incomplete data—he only dealt with one country (the United States), from the years 1913 to 1948.” Piketty’s data is broader and is cross-country; you can see much of it at his World Top Incomes Database.

The key to Piketty’s analysis, Geier writes, is the relationship between the rate of return on capital and economic growth.  History has shown that the rate of of return on capital has consistently been higher than economic growth — check out Piketty’s chart here. When this happens, inequality naturally begins to build on itself through what Milanovic calls “positive feedback loops”. In short, the rich get richer, aided by their own richness. This, the argument goes, is what’s been happening in many economies for the last 30 years or so.

The six-decade period between 1914 and 1973, Thomas Edsall writes, was a historical exception: economic growth rates exceeded the return on capital. But Piketty chalks this up to the impact of two world wars and the Great Depression.

Jacob Hacker and Paul Pierson think the book is a kind of reverse de Tocqueville: where the 19th century French scribe found widespread social equality in America, Piketty, also a Frenchman, finds “a new patrimonial elite”.

Dean Baker writes that “capitalism is far more dynamic and flexible than the way Piketty presents it in this book”.  Much of today’s record corporate profit “hinges on rules and regulations that could in principle be altered.” Piketty, it’s worth noting, suggests that things like a “progressive wealth tax at the global scale” can help slow the growth of income inequality. MIT’s Daron Acemoglu wonders if technology and globalization might have been driving inequality of late, rather than it being an inherent quality of capitalism.

If things don’t change, Geier writes, Europe and America could see “rates of inequality and wealth concentration that will not only match but exceed their nineteenth-century peaks”. — Ryan McCarthy

On to today’s links:

Yikes
Moving to wealthier neighborhoods gives young boys PTSD – Sarah Sloat

UGH
Why is US infrastructure so expensive? “Our greedy and opaque political culture” – Ryan Cooper

Wonks
How aid to the poor is also an investment – Jared Bernstein
The US is two and a half years away from full employment – Matt Busigin

Primary Sources
Jolts: more jobs data, more of the same, consistently muted recovery – BLS

Reminders
There’s no such thing as “easy money” – Josh Brown

FWIW
It’s hard to measure internet innovation in GDP statistics – Joe Stiglitz

Alpha
Hedge fund investors now have to use passwords, aren’t pleased – Reuters

Equals
Women may be hurting their earning potential by avoiding tougher majors – Catherine Rampell

Oxpeckers
Explainers, explained – The Awl

Pivots
SAC Capital has a new name – DealBook

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Follow Counterparties on Twitter. And, of course, there are many more links at Counterparties.


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“A political economy theory of everything” http://blogs.reuters.com/counterparties/2014/03/11/a-political-economy-theory-of-everything/ http://blogs.reuters.com/ryanmccarthy/2014/03/11/a-political-economy-theory-of-everything/#comments Tue, 11 Mar 2014 21:47:23 +0000 http://blogs.reuters.com/ryanmccarthy/?p=387 Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

The hosannas for Thomas Piketty’s new book, “Capital in the Twenty-First Century”, have started to roll in. Published in French last year and out in English this month, Piketty’s book, Buttonwood says, “might turn out to be one of the most significant economics books that have been produced since 2000”. The World Bank’s Branko Milanovic goes further, saying it might be “one of the watershed books in economic thinking”.

In the first of a series of posts on the book, Ryan Avent says, “like Marx, Mr Piketty aims to provide a political economy theory of everything.” That theory in a very basic nutshell: economic inequality is a feature, not a bug of modern capitalism. Piketty’s work, Kathleen Geier writes, takes on Simon Kuznets’s notion of a natural curve of inequality that declines as economies mature: “As Piketty demonstrates, Kuznets’s inequality theory was based on fatally incomplete data—he only dealt with one country (the United States), from the years 1913 to 1948.” Piketty’s data is broader and is cross-country; you can see much of it at his World Top Incomes Database.

The key to Piketty’s analysis, Geier writes, is the relationship between the rate of return on capital and economic growth.  History has shown that the rate of of return on capital has consistently been higher than economic growth — check out Piketty’s chart here. When this happens, inequality naturally begins to build on itself through what Milanovic calls “positive feedback loops”. In short, the rich get richer, aided by their own richness. This, the argument goes, is what’s been happening in many economies for the last 30 years or so.

The six-decade period between 1914 and 1973, Thomas Edsall writes, was a historical exception: economic growth rates exceeded the return on capital. But Piketty chalks this up to the impact of two world wars and the Great Depression.

Jacob Hacker and Paul Pierson think the book is a kind of reverse de Tocqueville: where the 19th century French scribe found widespread social equality in America, Piketty, also a Frenchman, finds “a new patrimonial elite”.

Dean Baker writes that “capitalism is far more dynamic and flexible than the way Piketty presents it in this book”.  Much of today’s record corporate profit “hinges on rules and regulations that could in principle be altered.” Piketty, it’s worth noting, suggests that things like a “progressive wealth tax at the global scale” can help slow the growth of income inequality. MIT’s Daron Acemoglu wonders if technology and globalization might have been driving inequality of late, rather than it being an inherent quality of capitalism.

If things don’t change, Geier writes, Europe and America could see “rates of inequality and wealth concentration that will not only match but exceed their nineteenth-century peaks”. — Ryan McCarthy

On to today’s links:

Yikes
Moving to wealthier neighborhoods gives young boys PTSD – Sarah Sloat

UGH
Why is US infrastructure so expensive? “Our greedy and opaque political culture” – Ryan Cooper

Wonks
How aid to the poor is also an investment – Jared Bernstein
The US is two and a half years away from full employment – Matt Busigin

Primary Sources
Jolts: more jobs data, more of the same, consistently muted recovery – BLS

Reminders
There’s no such thing as “easy money” – Josh Brown

FWIW
It’s hard to measure internet innovation in GDP statistics – Joe Stiglitz

Alpha
Hedge fund investors now have to use passwords, aren’t pleased – Reuters

Equals
Women may be hurting their earning potential by avoiding tougher majors – Catherine Rampell

Oxpeckers
Explainers, explained – The Awl

Pivots
SAC Capital has a new name – DealBook

Want to sign up for the Counterparties email? Click here.

Follow Counterparties on Twitter. And, of course, there are many more links at Counterparties.


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European role pay http://blogs.reuters.com/counterparties/2014/03/05/european-role-pay/ http://blogs.reuters.com/ryanmccarthy/2014/03/05/european-role-pay/#comments Wed, 05 Mar 2014 22:50:52 +0000 http://blogs.reuters.com/ryanmccarthy/?p=384 Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

Screen Shot 2014-03-05 at 4.18.01 PM.png

(Via the Telegraph)

Earlier this week, the European Commission put in place the biggest reform in banker pay since the financial crisis: caps on banker bonuses. Jenny Anderson has a good summary and a link to the rules themselves. Bonuses will be capped at 100% of a European bank employee’s salary, regardless of whether the employee is located in Europe, but can be raised to double that amount with shareholder approval. The UK is considering alternative restrictions, and is challenging the EU’s rules, claiming they’ll make the financial system riskier.

Which isn’t to say Europe’s bonus caps are all that ironclad. First, bankers who earn more than €1 million will have the ability to appeal to the European Banking Authority for an exemption. Second, European banks have already figured creative workarounds  — mostly, it seems, by using euphemisms. “Allowances” and “role-based pay” are the new bonuses. The WSJ has a good Q&A that explains the ins and outs of this.

Barclays CEO Stephen Jenkins said he was forced to raise bonuses — despite falling profits — to stop a “death spiral” of executive departures. It was, Jenkins said, the “hardest decision” he’s had to make since taking over as CEO 2012. This is the opposite of what’s going on at Standard Chartered, where the bonus pool fell 15%. HSBC CEO Stuart Gulliver, meanwhile, received some £1,664,000 in allowances, plus a salary of £1.2 million, the Guardian reports, leading one critic to say the bank “hadn’t so much circumvented rules on bonuses as driven a coach and horses through them.” Matt Levine writes that “perhaps the regulatory theory is to combine tough talk with loose regulation.”

In January, Fitch said that the caps will simply be “avoided” by banks, and that the rules won’t cut compensation costs. The Economist argues the banking industry is in secular decline, and compensation is falling mainly because shareholders are clamoring for banks to cut compensation to improve returns.

Philip Augar argues that banker pay is the symptom, not the cause, of the continent’s banking problems. For now, the industry offers just too much potential profit to reform, he says, calling for separation of trading and advisory businesses in Europe’s banks. “In any other sector that had just been bailed out, customers and shareholders would have demanded that employee remuneration drop to levels comparable with other professions.” — Ryan McCarthy

On to today’s links:

Legal Arcana
Corporate risk factors are really worrying if you take them literally, guacamole edition – BI

Oxpeckers
Marc Andreessen’s news business fairytale – Ryan Chittum
Best. BuzzFeed. Meeting. Ever: “What about, like… 14 Ways to Know You’re Standing?” – Funny or Die

Remuneration
Ben Bernanke made $250,000 for a 40-minute speech yesterday – Reuters

Alpha
How hedge funds are using appraisal rights suits (as a way to park cash) – Steven Davidoff

Memento Ponzi
JPMorgan officials seem to have a “pattern of forgetfulness” about Madoff – Ben Protess and Jessica Silver-Greenberg

You Say That Now
Rogue trader goes on pilgrimage from Rome to Paris to protest the “tyranny of the markets” – IBT

Takedowns
Tyler Cowen rips the Paul Ryan report on the War on Poverty – Marginal Revolution

Ugh
Visualizing how much the 0.01% make – Barry Ritholtz

Niche Markets
Why Sony’s SRF-39FP dominates the prison-radio market – New Yorker

RIP
Helvetica: “it’s all about the interrelationship of the negative shape” – Guardian

Cosmic
You are 40% stardust, 60% big bang – Physics Central

Nothing New Under the Sun
There’s a market for Mt Gox asset claims – Wired

Regulations
The latest development in swaps regulation: “it’s the status quo” – Bloomberg 

Want to sign up for the Counterparties email? Click here

Follow Counterparties on Twitter. And, of course, there are many more links at Counterparties.

 

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European role pay http://blogs.reuters.com/counterparties/2014/03/05/european-role-pay/ http://blogs.reuters.com/ryanmccarthy/2014/03/05/european-role-pay/#comments Wed, 05 Mar 2014 22:50:52 +0000 http://blogs.reuters.com/ryanmccarthy/?p=383 Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

Screen Shot 2014-03-05 at 4.18.01 PM.png

(Via the Telegraph)

Earlier this week, the European Commission put in place the biggest reform in banker pay since the financial crisis: caps on banker bonuses. Jenny Anderson has a good summary and a link to the rules themselves. Bonuses will be capped at 100% of a European bank employee’s salary, regardless of whether the employee is located in Europe, but can be raised to double that amount with shareholder approval. The UK is considering alternative restrictions, and is challenging the EU’s rules, claiming they’ll make the financial system riskier.

Which isn’t to say Europe’s bonus caps are all that ironclad. First, bankers who earn more than €1 million will have the ability to appeal to the European Banking Authority for an exemption. Second, European banks have already figured creative workarounds  — mostly, it seems, by using euphemisms. “Allowances” and “role-based pay” are the new bonuses. The WSJ has a good Q&A that explains the ins and outs of this.

Barclays CEO Stephen Jenkins said he was forced to raise bonuses — despite falling profits — to stop a “death spiral” of executive departures. It was, Jenkins said, the “hardest decision” he’s had to make since taking over as CEO 2012. This is the opposite of what’s going on at Standard Chartered, where the bonus pool fell 15%. HSBC CEO Stuart Gulliver, meanwhile, received some £1,664,000 in allowances, plus a salary of £1.2 million, the Guardian reports, leading one critic to say the bank “hadn’t so much circumvented rules on bonuses as driven a coach and horses through them.” Matt Levine writes that “perhaps the regulatory theory is to combine tough talk with loose regulation.”

In January, Fitch said that the caps will simply be “avoided” by banks, and that the rules won’t cut compensation costs. The Economist argues the banking industry is in secular decline, and compensation is falling mainly because shareholders are clamoring for banks to cut compensation to improve returns.

Philip Augar argues that banker pay is the symptom, not the cause, of the continent’s banking problems. For now, the industry offers just too much potential profit to reform, he says, calling for separation of trading and advisory businesses in Europe’s banks. “In any other sector that had just been bailed out, customers and shareholders would have demanded that employee remuneration drop to levels comparable with other professions.” — Ryan McCarthy

On to today’s links:

Legal Arcana
Corporate risk factors are really worrying if you take them literally, guacamole edition – BI

Oxpeckers
Marc Andreessen’s news business fairytale – Ryan Chittum
Best. BuzzFeed. Meeting. Ever: “What about, like… 14 Ways to Know You’re Standing?” – Funny or Die

Remuneration
Ben Bernanke made $250,000 for a 40-minute speech yesterday – Reuters

Alpha
How hedge funds are using appraisal rights suits (as a way to park cash) – Steven Davidoff

Memento Ponzi
JPMorgan officials seem to have a “pattern of forgetfulness” about Madoff – Ben Protess and Jessica Silver-Greenberg

You Say That Now
Rogue trader goes on pilgrimage from Rome to Paris to protest the “tyranny of the markets” – IBT

Takedowns
Tyler Cowen rips the Paul Ryan report on the War on Poverty – Marginal Revolution

Ugh
Visualizing how much the 0.01% make – Barry Ritholtz

Niche Markets
Why Sony’s SRF-39FP dominates the prison-radio market – New Yorker

RIP
Helvetica: “it’s all about the interrelationship of the negative shape” – Guardian

Cosmic
You are 40% stardust, 60% big bang – Physics Central

Nothing New Under the Sun
There’s a market for Mt Gox asset claims – Wired

Regulations
The latest development in swaps regulation: “it’s the status quo” – Bloomberg 

Want to sign up for the Counterparties email? Click here

Follow Counterparties on Twitter. And, of course, there are many more links at Counterparties.

 

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Quixotic Camp http://blogs.reuters.com/counterparties/2014/02/28/quixotic-camp/ http://blogs.reuters.com/ryanmccarthy/2014/02/27/quixotic-camp-2/#comments Thu, 27 Feb 2014 23:06:38 +0000 http://blogs.reuters.com/ryanmccarthy/?p=379 Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

House Ways and Means chairman Dave Camp, a moderate Republican from Texas, has released a 979-page tax reform bill — and, in the journalistic parlance of the Times, it’s a “sweeping” one. The bill promises what Camp calls a “simpler, fairer tax code”, cuts middle class taxes, and eliminates some of the more common tax breaks. It also seems to have no realistic chance of passing. Senate majority leader Mitch McConnell — also a Republican — said, “I have no hope for that happening this year”.

However futile, Camp’s bill is notable in that it changes the economic conversation on tax reform. Reihan Salam is excited about the bill, even if it’s doomed. Jonathan Chait says the bill “may be the most impressive and ambitious domestic policy proposal crafted by a major Republican in a generation”. Instead of the standard Republican rhetoric on cutting taxes, Chait says, the Camp bill focuses on eliminating tax breaks.

MarketWatch has a list of some of the major tax breaks that would be affected: the mortgage interest deduction would be capped at $500,000, state and local income taxes wouldn’t be deductible, and the bill would end breaks for sports leagues (take note, Roger Goodell). The measure would also end tax breaks for many private equity partnerships (take note, Blackstone).

Felix writes that the bill resurrects the long-dead idea of a bank tax, which was an Obama priority in 2010. “It is Pigovian tax on something (too-big-to-fail financial institutions) we don’t want, and often Pigovian taxes are more effective than regulation when it comes to minimizing such things”. The Cato Institute’s Mark Calabria worries that the 0.035% tax on assets above $500 billion would “turning the banks into a revenue stream for the federal government” — a la Fannie and Freddie.

The Center on Budget and Policy Priorities writes that the plan relies on some budget gimmickry to be revenue neutral over the first 10 years. Perhaps more troublingly, the CBPP says that by cutting the Earned Income Tax Credit, the bill could leave a working mother with $2,000 less each year. For what it’s worth, studies have found the EITC is quite effective at alleviating poverty and promoting work.

James Pethokoukis says the bill marks the end of an era: “the Age of Tax Cuts is over. But the Age of Tax Reform has not yet arrived”. Stan Collender says the bill destroys any hope of getting tax reform done this year — the bReill raises taxes on key Republican constituencies, he says, and Camp is on his way out as chairman of the House Ways and Means Commission.

To Joshua Green, the most surprising thing about the bill is that it was put forth at all: both parties have mostly stopped making laws for the year and are preparing for the midterm elections. — Ryan McCarthy

On to today’s links:

Charts
Young companies create (and destroy) more jobs – Atlanta Fed

Oxpeckers
The NYO approached an ice cream shop manager about doing a hit piece on NY’s AG – NYT

Crisis Retro
How the Fed let the world blow up in 2008 – Matthew O’Brien

Remuneration
The rise of non-standard (and more positive) metrics in calculating executive bonuses – WSJ

Hope/Change/Etc.
Obama’s infrastructure plan is a lot smaller than he said it is – Danny Vinik

Awesome
“Everything is awesome!”: A (truly awesome) summary of today’s markets – Josh Brown

Urban Planning
Gentrification “starts – in large part – with downzoning wealthy neighborhoods” – Daniel Hertz

Wonks
“Economic growth reduces inequality of happiness” – Chris Dillow

The Fed
Jon Hilsenrath’s five takeaways from Janet Yellen’s Senate testimony – WSJ

Persistent Cliches
Things we do not say – WaPo

Education
Why college supply matters – Eduardo Porter

So Hot Right Now
Corporate economists are popular again – WSJ

FWIW
Marc Andreessen has some thoughts on the future of media he’d like to share – Andreessen Horowitz

Strangely Existential
Rasheed Wallace was a philosophy major and other details of UNC’s fake classes – Bloomberg Businessweek

Cosmic
“We’ve almost doubled today the number of planets known to humanity” – WaPo

Equals
A more equal marriage means more sex – Worthwhile Canadian Initiative

Follow Counterparties on Twitter. And, of course, there are many more links at Counterparties.

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Quixotic Camp http://blogs.reuters.com/counterparties/2014/02/28/quixotic-camp/ http://blogs.reuters.com/ryanmccarthy/2014/02/27/quixotic-camp/#comments Thu, 27 Feb 2014 23:06:38 +0000 http://blogs.reuters.com/ryanmccarthy/?p=377 Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

House Ways and Means chairman Dave Camp, a moderate Republican from Michigan, has released a 979-page tax reform bill — and, in the journalistic parlance of the Times, it’s a “sweeping” one. The bill promises what Camp calls a “simpler, fairer tax code”, cuts middle class taxes, and eliminates some of the more common tax breaks. It also seems to have no realistic chance of passing. Senate majority leader Mitch McConnell — also a Republican — said, “I have no hope for that happening this year”.

However futile, Camp’s bill is notable in that it changes the economic conversation on tax reform. Reihan Salam is excited about the bill, even if it’s doomed. Jonathan Chait says the bill “may be the most impressive and ambitious domestic policy proposal crafted by a major Republican in a generation”. Instead of the standard Republican rhetoric on cutting taxes, Chait says, the Camp bill focuses on eliminating tax breaks.

MarketWatch has a list of some of the major tax breaks that would be affected: the mortgage interest deduction would be capped at $500,000, state and local income taxes wouldn’t be deductible, and the bill would end breaks for sports leagues (take note, Roger Goodell). The measure would also end tax breaks for many private equity partnerships (take note, Blackstone).

Felix writes that the bill resurrects the long-dead idea of a bank tax, which was an Obama priority in 2010. “It is Pigovian tax on something (too-big-to-fail financial institutions) we don’t want, and often Pigovian taxes are more effective than regulation when it comes to minimizing such things”. The Cato Institute’s Mark Calabria worries that the 0.035% tax on assets above $500 billion would “turning the banks into a revenue stream for the federal government” — a la Fannie and Freddie.

The Center on Budget and Policy Priorities writes that the plan relies on some budget gimmickry to be revenue neutral over the first 10 years. Perhaps more troublingly, the CBPP says that by cutting the Earned Income Tax Credit, the bill could leave a working mother with $2,000 less each year. For what it’s worth, studies have found the EITC is quite effective at alleviating poverty and promoting work.

James Pethokoukis says the bill marks the end of an era: “the Age of Tax Cuts is over. But the Age of Tax Reform has not yet arrived”. Stan Collender says the bill destroys any hope of getting tax reform done this year — the bReill raises taxes on key Republican constituencies, he says, and Camp is on his way out as chairman of the House Ways and Means Commission.

To Joshua Green, the most surprising thing about the bill is that it was put forth at all: both parties have mostly stopped making laws for the year and are preparing for the midterm elections. — Ryan McCarthy

On to today’s links:

Charts
Young companies create (and destroy) more jobs – Atlanta Fed

Oxpeckers
The NYO approached an ice cream shop manager about doing a hit piece on NY’s AG – NYT

Crisis Retro
How the Fed let the world blow up in 2008 – Matthew O’Brien

Remuneration
The rise of non-standard (and more positive) metrics in calculating executive bonuses – WSJ

Hope/Change/Etc.
Obama’s infrastructure plan is a lot smaller than he said it is – Danny Vinik

Awesome
“Everything is awesome!”: A (truly awesome) summary of today’s markets – Josh Brown

Urban Planning
Gentrification “starts – in large part – with downzoning wealthy neighborhoods” – Daniel Hertz

Wonks
“Economic growth reduces inequality of happiness” – Chris Dillow

The Fed
Jon Hilsenrath’s five takeaways from Janet Yellen’s Senate testimony – WSJ

Persistent Cliches
Things we do not say – WaPo

Education
Why college supply matters – Eduardo Porter

So Hot Right Now
Corporate economists are popular again – WSJ

FWIW
Marc Andreessen has some thoughts on the future of media he’d like to share – Andreessen Horowitz

Strangely Existential
Rasheed Wallace was a philosophy major and other details of UNC’s fake classes – Bloomberg Businessweek

Cosmic
“We’ve almost doubled today the number of planets known to humanity” – WaPo

Equals
A more equal marriage means more sex – Worthwhile Canadian Initiative

Follow Counterparties on Twitter. And, of course, there are many more links at Counterparties.

Correction: This post has been updated to reflect the fact David Camp is in fact a representative from Michigan, not Texas.

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Is China’s red-hot housing market finally beginning to cool down? http://blogs.reuters.com/data-dive/2014/02/24/is-chinas-red-hot-housing-market-finally-beginning-to-cool-down/ http://blogs.reuters.com/ryanmccarthy/2014/02/24/is-chinas-red-hot-housing-market-finally-beginning-to-cool-down-2/#comments Mon, 24 Feb 2014 16:17:29 +0000 http://blogs.reuters.com/ryanmccarthy/?p=375 In China’s housing market — just like in its overall economy — any signs of slower rates of growth are notable. Thanks in part to action by China’s central bank to curb lending, home price growth slowed for the first time since 2012, Reuters reports:

 
Here’s Reuters with more:

 China’s home price rises eased for the first time in 14 months in January, the latest sign that the government’s more than four-year campaign to rein in property risk may finally be starting to bite.

Average new home prices in China’s 70 major cities rose 9.6 percent in January from a year earlier, easing from the previous month’s 9.9 percent rise, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS) on Monday..

House prices in China have surged in the past year but the market began to show signs of losing momentum at the end of 2013 as local governments took further tightening measures at the prompting of a central government worried about the risk of an asset bubble.

In the past few years, it’s been increasingly popular to call China’s housing market a bubble. In October, the FT’s Simon Rabinovitch  wrote For the economy, wrote that “the fear is that China is in the middle of a property bubble that will eventually burst and trigger a financial crisis.”

Beyondbrics compiled the below chart, which is a good indication of the sheer pace of the property price increases that China has seen in the last year or so. The below compares year-over-year price growth in March and September 2013. The September numbers, Beyondbrics suggests, likely reflects the impact of a July effort to boost the economy by China’s central bank:

 

 

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Is China’s red-hot housing market finally beginning to cool down? http://blogs.reuters.com/data-dive/2014/02/24/is-chinas-red-hot-housing-market-finally-beginning-to-cool-down/ http://blogs.reuters.com/ryanmccarthy/2014/02/24/is-chinas-red-hot-housing-market-finally-beginning-to-cool-down/#comments Mon, 24 Feb 2014 16:17:29 +0000 http://blogs.reuters.com/ryanmccarthy/?p=373 In China’s housing market — just like in its overall economy — any signs of slower rates of growth are notable. Thanks in part to action by China’s central bank to curb lending, home price growth slowed for the first time since 2012, Reuters reports:

 
Here’s Reuters with more:

 China’s home price rises eased for the first time in 14 months in January, the latest sign that the government’s more than four-year campaign to rein in property risk may finally be starting to bite.

Average new home prices in China’s 70 major cities rose 9.6 percent in January from a year earlier, easing from the previous month’s 9.9 percent rise, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS) on Monday..

House prices in China have surged in the past year but the market began to show signs of losing momentum at the end of 2013 as local governments took further tightening measures at the prompting of a central government worried about the risk of an asset bubble.

In the past few years, it’s been increasingly popular to call China’s housing market a bubble. In October, the FT’s Simon Rabinovitch  wrote For the economy, wrote that “the fear is that China is in the middle of a property bubble that will eventually burst and trigger a financial crisis.”

Beyondbrics compiled the below chart, which is a good indication of the sheer pace of the property price increases that China has seen in the last year or so. The below compares year-over-year price growth in March and September 2013. The September numbers, Beyondbrics suggests, likely reflects the impact of a July effort to boost the economy by China’s central bank:

 

 

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The economics of Venezuela’s unrest http://blogs.reuters.com/counterparties/2014/02/21/the-economics-of-venezuelas-unrest/ http://blogs.reuters.com/ryanmccarthy/2014/02/21/the-economics-of-venezuelas-unrest-2/#comments Fri, 21 Feb 2014 22:56:08 +0000 http://blogs.reuters.com/ryanmccarthy/?p=371 Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

At least six Venezuelans have died in clashes between anti-government protesters and the police. What started as a student outcry against crime, has turned into a larger protest against the Maduro regime, the opposition-aligned Caracas Chronicles writes. Leopoldo Lopez, a Harvard-educated economist who helped spearhead the movement, was arrested this week and initially charged with murder, but his charges were reduced to instigating arson and terrorism.

Venezuela’s protests are new, but country has long been in a state of economic upheaval. Its economic problems include, but aren’t limited to:

  • prolonged shortages of basic goods, including sugar and milk;

  • after inflation hit 56%, the highest of any of 103 countries examined by Bloomberg, Venezuela forced retailers to cut prices. Businesses must also give the government information on their profit margins;

  • it has devalued its currency several times in the last few years;

  • it ranks as one of the most crime-addled economies in the world;

  • foreign currency reserves are at a 10-year low;

  • while it pays overseas bondholders on time, Venezuela has been frequently late in making payments to domestic companies that own government bonds.

The WSJ explains how these late payments are leading to shortages — auto assembly is down 83% over last year — and shortchanging Venezuelans:

The overdue tab to private companies includes $14 billion owed to partners and contractors in the oil industry, $9 billion to importers and more than $4 billion to services companies like airlines, Ecoanalitica estimates. There also are more than $10 billion in profits that foreign companies have wanted to convert from bolívares to dollars but have been unable to since 2008.

Venezuela does have the largest oil reserves in the world. But, as, Megan McArdle writes, oil prices have fallen, production is now below pre-Chavez levels, and the country’s crude is relatively hard to extract. Less oil money, the FT writes, means less to spend on imports and social programs. As the oil industry has had less cash to invest, its production has continued to fall.

David Frum says the Maduro regime hasn’t been able to use oil money to adequately bribe potential opponents, a key tool of Chavez’s power. Raul Gallegos points out that even the Maduro government has suggested publicly that it has bungled the distribution of the country’s oil money. “What was happening was that we saw how many dollars we had, but their utilization had no planning”, Venezuela’s energy czar said.  — Ryan McCarthy

On to today’s links:

Crisis Retro
A great timeline of the 2008 Fed transcripts and the financial crisis – NYT
The newly-released Fed transcripts from the height of crisis – Federal Reserve
What the Fed suspected about LIBOR-rigging in 2008 – WSJ

Charts
What US inflation tells about how the global economy is shifting – WSJ

The Fed
The world is in the midst of “the sum of all tightenings – Barnejek’s blog

Facebook
Facebook, WhatsApp, and the difference between price and value – Aswath Damodaran
“The WhatsApp acquisition is a statement by Zuckerberg that mobile matters more than money” – Felix

Inequities
The commuting penalty of being poor and black in Chicago – Emily Badger
Chicago’s arguably racist crime-predicting algorithms – The Verge

Possibly Useless Data
The lies a beautiful map can tell – Runkeeper

Servicey
The flu is bad. The flu vaccine works. Get vaccinated – Incidental Economist
Seven fund managers your should follow on Twitter – Financial Acrobat

Correlation of the Day
Cat bites are linked to depression – PopSci

Data Points
Calculating Wayne Rooney’s salary (and a registered nurse’s) in real time – Mirror

Billionaire Whimsy
Donating $200 million to projects the Federal government probably would have funded anyway – NYT

Long Reads
The vanished queen of Scientology – Vanity Fair

Innovation
Tesla’s most disruptive product may not be its cars – Quartz

Explained
Credit card companies explain why your credit cards aren’t safer – WaPo

JP Morgan
JP Morgan shareholder wants an  “ongoing dialogue” on splitting Jamie Dimon’s jobs, not a vote – WSJ

Awful
The head of Colorado’s prisons on what a night in solitary confinement feels like – NYT

Oxpeckers
“Gawker’s reliance on journalists is, Denton believes, a fatal weakness, one he means to correct” – Jeff Bercovici

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