Tesla stockEmerging Markets: SKAM (South Korea And Mexico) And The Rest

Last week was rough for emerging markets: “The benchmark MSCI Emerging Market Index (.MSCIEF) dropped nearly 4 percent over the last five trading days, and after Wall Street’s dramatic selloff on Friday it is expected to fall further on Monday. Investors have pulled money out of emerging markets stocks funds in six of the last seven weeks, including a $422 million retreat in the week ended January 22.”  The Economist argues that even though the “rich world’s central bankers do not have much of a clue how to tame the beast they have created in the form of ultra-loose monetary policy,” the “doom-mongers are too pessimistic” for, more or less, one reason: the sell-off has been discriminating.  Whereas before, Brazil, Turkey, Argentina, Mexico and South Korea were all likely considered equal parts of the same “Emerging Markets” category, we should take notice of how they are splintering away from one another in terms of financial reforms and social upheaval.  The Financial Times agrees, and says “there are clear divisions emerging, and understanding which countries influence into each other more directly than others matters now more than ever.”  Brazil, for example, may be hit rather hard with both the tapering as well as China’s slowdown as much of its economy relies on basic material exports to China.  On the flip side of the coin are countries like South Korea and Mexico, whose “exporters earn revenue in dollars, reducing their exposure to volatility in local currencies.“  Speaking of Mexico, Finance Minister Luis Vadagaray believes the Mexican economy “will grow nearly four percent this year and is looking forward to attracting significant investment due to a string of economic reforms passed by President Enrique Pena Nieto.”  And as the Federal Reserve “steers policy based on only domestic economic considerations…the Fed is likely to trim its bond purchase program further at this week’s meeting.” But its hard to imagine they wouldn’t at least consider the global deflationary risks: “with inflation rates already worryingly low in the euro zone and uncomfortably so in the U.S., there’s a risk the emerging markets currency crisis will drag them lower still.  Labor costs in these crisis economies will fall as will import demand which will feed into global deflationary pressures.”

DOJ Would Like To Choke Out Online Shadow Lending

“Federal prosecutors are trying to thwart the easy access that predatory lenders and dubious online merchants have to Americans’ bank accounts…in the new initiative, called ‘Operation Choke Point’…As a growing number of states enact interest rate caps that effectively ban the loans, the lenders increasingly depend on the banks for their survival.  With the banks’ help, the lenders that typically work with a third-party payment processor that has an account at the banks are able, authorities say, to automatically deduct payments from customers’ checking accounts even in states where the loans are illegal…The more questionable the merchant, the greater fees Four Oaks stood to collect, prosecutors say.  Every time consumers spot an unauthorized withdrawal and request money back, the bank makes money to process the return.  And fees for processing returns, according to prosecutors, can dwarf the fees Four Oaks earned for processing the original withdrawals.”

Onshoring: Foxconn Chairman Says U.S. Is A “Must-Go Market”

“Taiwan’s Foxconn Technology Group, the major supplier of Apple Inc.’s iPhone and iPads, may build high-tech factories in the United States and low-cost plants in Indonesia as the appeal of ‘made in China’ fades into a burden.”

USA: That Jamie Dimon Raise

Income inequality is kind of a big deal these days (but not for the folks partying in Davos), and what better way to frame the discussion then a 74 percent raise for Jamie Dimon?  Financial Times likes it.  Reuters doesn’t.  This guy thinks the American one-percent are akin to Jews in Nazi Germany.  Move along.

USA: Tesla Stock Killed A Guy With A Ph.D. In Economics From Harvard

Official Wizard Of Walla Walla Prediction: Google is building a robot butler/services bot…

Check out the list of Google’s recent acquisitions and tell me I’m wrong.  Technologies purchased include security, facial recognition, package delivery, social prediction, deep neural networks, natural language processing, gesture recognition technology, humanoid robots, home automation and, as of yesterday, an artificial intelligence company dedicated to “machine learning and systems neuroscience.”

USA: New Home Sales Fall For Second Straight Month In December

“The Commerce Department said on Monday sales fell 7.0 percent to a seasonally adjusted annual rate of 414,000 units…Economists polled by Reuters had expected new home sales, which are measured when contracts are signed, to slow to a 457,000-unit pace in December.  The second straight month of declines in sales was likely payback after October’s outsized 14.9 percent increase and may have reflected some drag from cold weather that blanked most parts of the country last month.”

USA: Working Age Americans Make Up Majority Of Food Stamp Households

“Since 2009, more than 50 percent of U.S. households receiving food stamps have been adults ages 18 to 59, according to the Census Bureau’s Current Population Survey.  That compares to 1998, when the working-age share of food stamp households was at a low of 44 percent, according to researchers at the University of Kentucky.  The food stamp program now covers 1 in 7 Americans.”


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