The Real Reason Markets Crash
X-factor Report
by Lance Roberts, Streetalk Live
I wrote this past week that 'When bubbles are seen they do not exist, when disbelieved they burst.'
This is an important point to consider.
As I discussed 'Not Seeing Signs Of Market Exuberance' investors, just like amateur gamblers, are driven by the 'fear/greed' cycle.
Market Commentary: Averages Remain In Tight Trading Range On Mostly Anemic Volume
Closing Market Commentary For 07-14-2014
Markets closed after a relatively quiet day with volume mostly in the anemic range and the $VIX staying in the high11's for most of the afternoon.
By 4 pm the averages ended higher, but at a level that was about where it had opened. Investors are not sure what to do; buy, sell or just hold out for a while longer remains the question.
High Unemployment and Disinflation in the Euro Area Periphery Countries
by Thomas Klitgaard and Richard Peck- Liberty Street Economics, Federal Reserve Bank of New York
Economists often model inflation as dependent on inflation expectations and the level of economic slack, with changes in expectations or slack leading to changes in the inflation rate. The global slowdown and the subsequent sovereign debt crisis caused the greatest divergence in unemployment rates among euro area member countries since the monetary union was founded in 1999. The pronounced differences in economic performances of euro area countries since 2008 should have led to significant differences in price behavior. That turned out to be the case, with a strong correlation evident between disinflation and labor market deterioration in euro area countries.
Stratfor: Gaza Situation Report
by George Friedman, Founder and Chairman, Stratfor
The current confrontation in Gaza began July 12 after three Israeli teenagers disappeared in the West Bank the month before. Israel announced the disappearance June 13, shortly thereafter placing blame on Hamas for the kidnappings. On June 14, Hamas fired three rockets into the Hof Ashkelon region. This was followed by Israeli attacks on Palestinians in the Jerusalem region. On July 8, the Israelis announced Operation Protective Edge and began calling up reservists. Hamas launched a longer-range rocket at Tel Aviv. Israel then increased its airstrikes against targets in Gaza.
Read more >>
Blogger Sentiment Continues Bearish in July 2014
Econintersect: The latest Blogger Sentiment Poll released 14 July 2014 byTicker Senseshows bloggers have are moderately bearish in their view of the markets - this is similar to the poll results one month ago.
This blogger poll is noisy.
Market Commentary: DOW Squeaks Out New High With Obvious Market Weakness
Midday Market Commentary For 07-14-2014
The DOW made a failed second attempt to best its morning high and then wiggled its way up to 17088 although remaining in a narrow trading zone. The small caps continued to melt upwards as the $NDX made a new high as volume fell to anemic levels..
By noon the markets were showing sighs of weakness and trading sideways, but this may be simply part of the consolidation phase before moving higher.
Fans clash with police after Argentina loss at World Cup
Thousands of soccer fans clashed with police in Buenos Aires Sunday after celebrations at the Obelisco turned sour and some began breaking into stores and looting. Police used water canons and tear gas to deter fans.
Pay with Promises or Pay as You Go? Lessons from the Death Spiral of Detroit
by Minneapolis Fed
As part of compensation, municipal employees typically receive promises of future benefits. Motivated by the recent bankruptcy of Detroit, we develop a model of the equilibrium size of a city and use it to analyze how pay-with-promisesschemes interact with city growth. The paper examines the circumstances under which a death spiral arises, where cutbacks of city services and increases in taxes lead to an exodus of residents, compounding financial distress. The model is put to work to analyze issues such as the welfare effects of having cities absorb pension risk and how unions affect the likelihood of a death spiral.
Start-Up Activity Still Low But Slowly Rising
5.5% OF JOB SEEKERS STARTED A BUSINESS IN FIRST HALF OF 2014
from Challenger Gray and Christmas
An improving economy should lower the barriers to starting a business. However, it also means that more companies are hiring. Faced with the choice between entrepreneurship and traditional employment, a new survey indicates that less than 6.0 percent of out-of-work managers and executives were willing to give self-employment a shot in the first half of 2014.
Market Commentary: Markets Gap Up, DOW Sets New High, Volume Falling Off
Opening Market Commentary For 07-14-2014
Premarkets were up a half a point with some measurable volume extending the hopes of many investors this bull run was going to continue. The markets opened with the SP500 climbing 9 points and the DOW up 91 points on low to moderate volume.
Markets gaped up at the opening and then leveled off for sideways trading. The DOW managed to set a new high of 17085. the $VIX dropped to 11.40 and the volume was falling off fast by 10 am.
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What We Read Today 14 July 2014
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Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.
- Germany wins 2014 World Cup: Mario Gotze scores game-winning goal in 113th minute of extra time (Filip Bondy, New York Daily News) A substitute player scored the only goal of the match in extra time and Germany bested Argentina for their fourth World Cup. In the end, the best offensive side in the tournament bested the top defensive team. It was the first Cup as a unified Germany, the others coming in 1954, 1974 and 1990. The Daily News has some great photos.
FINRA: Wall Street Protection Racket?
Econintersect: ThinkAdvisor has conducted a number of interviews of brokers and advisors in the early to mid second quarter. They report having uncovered a pattern that "many say" is "deeply flawed, even horribly broken" with regard to the disposition of the manditory arbitration between brokers and investment advisors and the Wall Street firms that constitute the membership of FINRA (Financial Industry Regulatory Authority), a self-regulatory organization for the financial industry.
Click on image to view Vimeo lyric video: Capital Cities "Kangaroo Court".
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Still Another Way the Fed is Inflating the Market
How Low Interest Rates Allow Companies to Fake Earnings Gains and Perpetuate the Myth of Recovery
by Michael Clark, Seeking Alpha
To look at IBM's stock chart one would never guess that IBM has endured 8 quarters in a row of declining revenues. This is a depression: 8 quarters of declining sales. Why is the stock going up? Well, IBM is borrowing money at low interest rates to buy its own shares to drive up the price of the stock - and, in the process, taking on more debt, essentially making itself weaker as a company in every way except through the stock price, that it is 'fixing' at high levels. At least for the moment. When no one is buying your stock, and revenues are declining, what can you do if not cheat a little bit?
The Theoretical Foundations of the Three Percent Government Deficit Rule
by Dirk Ehnts, Econoblog101
The rules in the euro zone are clear: the government deficit should be no higher than 3% of GDP. Where is this rule coming from and on which theory it is based? In 2012 already, the following paragraph of Guy Abeille, a former French official, was quoted by Le Parisien (via voxeurop):
We came up with the 3% figure in less than an hour. It was a back of an envelope calculation, without any theoretical reflection. Mitterrand needed an easy rule that he could deploy in his discussions with ministers who kept coming into his office to demand money. [...] We needed something simple. 3%? It was a good number that had stood the test of time, somewhat reminiscent of the Trinity.
Infographic of the Day: Twenty Six Glorious Things America Gave the World
Without question, our lives would be very different without the inventions of Thomas Edison, Watson & Crick and many more scientists.
The College Bubble
Written by Brandon Croarkin
Mark Cuban has recently come out with a very interesting video, which can be found at
inc.com (see below), about the student loan bubble, which he says will burst. I found this video to be very interesting and it led me to explore the reality of Cuban's statements.
Unemployment Claims Highlight Structural Employment Problems
Further Warning Sign of Distorted, Maladjusted, Overheated Economy
by Lee Adler, Wall Street Examiner
Initial claims for unemployment remain near bubble record levels after first reaching that extreme in September of last year. The warning signs of a distorted, maladjusted, overheated economy continue.
Read more >>
Fanny Pack Mixup Unravels Massive Medicare Fraud Scheme
Special Report from ProPublica
by Charles Ornstein, ProPublica
Two secretaries in a doctor's office have pleaded guilty and a pharmacy owner faces charges in a scam that Medicare allowed to thrive for more than two years.
The fraud scheme began to unravel last fall, with the discovery of a misdirected stack of bogus prescriptions - and a suspicious spike in Medicare drug spending tied to a doctor in Key Biscayne, Fla.
Caribbean Island Buried by Eruption Goes Green with Volcano Power
by Graham Alexander Ryan, The Conversation
The eastern Caribbean island of Montserrat has suffered more than its fair share of natural disaster.
In 1989, Hurricane Hugo struck the island, causing massive destruction with more than 90% of the island's structures damaged. In 1995, just as the island started to recover, the island's Soufriere Hills volcano burst into life, entering a cycle of eruptive activity that continues to the present day. The eruption had an enormous impact on the island, killing 19 people, leaving two-thirds of the island nation uninhabitable, and in 1997 completely burying the capital city, Plymouth, under metres of volcanic rock, ash and mud. More than half the island's population of around 10,000 were compelled to emigrate.
Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.
