China Bashing May Sell Well But That Doesn’t Make it Right: New at Reason

There is nothing like a little China bashing to get votes (except maybe immigrant bashing). So the fact that Bernie Chinese Calendarsand Donald have turned protectionist is no surprise. But what is surprising is that they are being aided in their efforts by the economist profession that for about 250 years since Adam Smith wrote the Wealth of Nations has been steadily moving in a pro-trade direction. Now, however, a new cohort of liberal economists, with Paul Krugman as their cheerleader (who else?), has been raising alarms that trade with China in particular may have been bad for the American working class.

 But, notes Reason Foundation Senior Analyst Shikha Dalmia, it’s far from clear that the working class is in decline or that China is to blame or that cutting trade with it will help rather than hurt. If politicos want to do something to give working Americans a leg up, they might want to rethink the policies inhibiting their animal spirits.

View this article.

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Thanks Obamacare: This Is What Americans Spent Most Money On In 2015

We have been covering the consumption tax, pardon, endless spending black hole that is Obamacare for over a year, so we doubt it will come as a surprise to anyone that in 2015 healthcare was the second biggest use of US consumer funds, soaking up a record $1.9 trillion in real dollars, and more importantly for US economic “growth”, the single biggest source of incremental spending by nearly a factor of two.

Incidentally, with spending on healthcare (courtesy of the Supreme Court’s Obamacare tax) soaring, while outlays on the traditionally most consumption-intensive category, housing and utilities, going nowhere for the past several years, it is only a matter of 2-3 quarters before Healthcare surpasses Housing as the biggest use of American cash.

Putting this in context, a recent report from Freedom Partners Health found that health insurance premiums have increased faster than wages and inflation in recent years, rising an average of 28 percent from 2009 to 2014 despite the enactment of Obamacare, or rather “because of.” Obama signed the Affordable Care Act into law on March 23, 2010, and Wednesday is the law’s sixth anniversary.

So, without further ado, this is what drove American consumer spending in the officially concluded, for GDP purposes, 2015. We show this just in case there is still any confusion why US households are unable to channel more spending into “discretionary”, non-mandatory purchases unlike Obama’s “health insurance” tax, pardon, noble venture.


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Valeant Pharmaceuticals and Pershing Square`s Learning Points (Video)

By EconMatters

Pershing Square`s Investor Letter provides the backdrop for an analysis or case study on Valeant Pharmaceuticals.

© EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle    


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U.S. GDP Rose 1.4% In Final Estimate Of Fourth Quarter Growth

While the final revision to Q4 2015 GDP was so irrelevant it was released on a holiday when every US-based market is closed, even the futures, it is nonetheless notable that according to the BEA in the final quarter of 2015 US GDP grew 1.4%, up from the 1.0% previously reported, and higher than the 1.0% consensus estimate matching the highest Q4 GDP forecast. The final Q4 GDP print was still well below the 2.0% annualized GDP growth reported in Q3.

 

The figure marks a slowdown from the 2.2% average pace in the first three quarters of 2015. For all of last year, the U.S. economy grew 2.4% matching the advance in 2014.

The reason for the change was largely due to upwardly Personal Consumer Spending, which rose from a contribution of 1.38% to the annualized bottom line to 1.66%. In CAGR terms, personal consumption rose 2.4%, following the 3.0% increase in Q3, higher than the 2.0% previously estimated.

Stripping out inventories and trade, the two most volatile components of GDP, so-called final sales to domestic purchasers increased at a 1.7 percent rate, compared with a previously estimated 1.4 percent pace. 

The rest of the GDP components were largely unchanged, with Fixed Investment adding 0.06% to the bottom line, up from 0.02% in the previous estimate, Private Inventories contracting fractionally more than previously estimated (-0.22% vs -0.14%), net trade subtracting 0.1% less from growth (-0.14% vs -0.25%), and finally government spending largely unchanged and hugging the unchanged line at 0.02%.

 

But while the “resilient consumer” once again carried the US economy in the fourth quarter, largely due to an estimated jump in spending on Transportation and Recreational services, which added an annualized $13 billion to the US economy vs the prior estimate, more disturbing was the drop in profits which we already knew courtesy of company reports and is known confirmed by the BEA whose GDP report also showed that corporate profits dropped in 2015 by the most in seven years.

As Bloomberg writes, the earnings slump illustrates the limits of an economy struggling to gather steam at the start of this year. Some companies, encumbered by low commodities prices and sluggish foreign markets, are cutting back on investment while a firm labor market and low inflation encourage households to keep shopping.

Pre-tax earnings declined 7.8 percent, the most since the first quarter of 2011, after a 1.6 percent decrease in the previous three months. The estimate of nonfinancial corporate profits was reduced by a $20.8 billion settlement, considered a transfer to the government, between BP and the U.S. after the 2010 oil spill in the Gulf of Mexico.

Profits in the U.S. dropped 3.1 percent in 2015, the most since 2008. Corporate earnings are being weighed down by weak productivity, rising labor costs and the plunge in energy prices. Economists at JPMorgan had expected a 9.5 percent drop in pre-tax earnings in the fourth quarter.

“The pace of growth slowed as we ended 2015, though consumer spending is still the primary underpinning of this economic expansion,” Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. “Any pickup we might see is still likely going to be capped given the overall global picture.”

And now that we can put 2015 GDP growth to rest, it’s time to focus on Q1 2016, where as the Atlanta Fed reported yesterday, growth is on pace to match the anemic 1.4% GDP growth of Q4.

“If profits remain depressed, the prospects for capex and hiring will come under greater pressure,” Wells Fargo’s Bullard said in a research note. Corporate outlays for equipment declined at a 2.1 percent annualized pace, subtracting 0.12 percentage point, the Commerce Department said.

Finally, the upward revision to Q4 consumer spending primarily on services, likely means pulling forward some of the growth that was supposed to prop up Q1 GDP growth, and as such we expect Wall Street economists to promptly revise lower their first quarter growth forecasts as soon as they come back from vacation, which however considering the Fed is now looking for excuses to have cut its dots as drastically as it did a week ago, will be very welcome by Janet Yellen.


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Republicans Sour on Election Process, Two Americans Killed in Brussels, Indiana Bans Sex-Selective Abortion: A.M. Links

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France Foils Imminent Terror Attack; Belgium Detains Six, Will Arrest First, Ask Questions Later From Now On

European authorities are scrambling to avert further terrorist attacks across the bloc in the wake of Tuesday’s bombings in Brussels that killed nearly three dozen people and wounded hundreds more.

14 months after the January 2015 raid in Verviers that left two men with links to Paris mastermind Abdelhamid Abaaoud dead, Belgian authorities are apparently still no closer to dismantling the ISIS cell responsible for the attacks in France and the bombings that unfolded in the Brussels airport and metro earlier this week.

Paris fugitive Salah Abdeslam was captured last Friday, but at least two other suspects escaped a March 14 raid on a residence in Forest that was rented by one of the Bakraoui brothers. Revelations that the Bakraouis may have been involved in collecting the surveillance footage of a Belgian nuclear official found in a November 30 raid on an Auvelais home rented to Mohamed Bakkali (who may have sheltered Abaaoud and others) as well as the realization that a man seen with Abdeslam in September and previously known as “Soufiane Kayal,” was actually bomb maker Najim Laachraoui suggest authorities in Europe were either horrible at “connect the dots” as kids, simply didn’t take the threat of further attacks by the team seriously, or were willfully ignorant.

(Ibrahim el-Bakraouis ca. 2015)

Indeed, Khalid El Bakraoui was also the subject of an Interpol red notice as was Laachraoui. Ibrahim El Bakraoui was deported from Turkey, where President Erdogan swears he notified Belgian authorities of the danger. There are conflicting reports as to how Belgium and the Netherlands handled the information.

On Thursday and Friday, in an apparent effort to make up for lost time (and lost life), Belgian and French authorities conducted anti-terror raids that netted six arrests in Belgium and one in Paris.

Information on the Belgian arrests is sparse, but we do know that three people in a car were arrested outside the prosecutor’s office, another two were rounded up in Jette, and one person was detained in a different part of the Belgian capital. Further details weren’t available but one has to wonder if perhaps someone is trying to get to Abdeslam who suddenly wants to be extradited to France “as soon as possible,” so he can “explain himself.”

(police sketch of second metro suspect)

Abdeslam claims he had no knowledge of Tuesday’s attack and did not know Laachraoui even though, as noted above, the two were seen together last year. “The apparent lack of urgency in questioning him heightened concern over Belgium’s handing of the terror threat,” The Telegraph writes adding that “Abdeslam denied knowing Najim Laachraoui, “despite [the fact that] Abdeslam is known to have accompanied him from Hungary to Belgium in September as Laachraoui travelled back from Syria under an alias, ‘Soufiane Kayal’”.

Additionally, Spiegel reports that two men were arrested in Giessen and Dusseldorf by German police in connection with the Brussels attacks.

It’s also emerged that police questioned Abdeslam for only two hours after his arrest. Trump would not be happy.

Meanwhile, French police arrested a man they say was in the “advanced stages” of launching an attack. The French national, identified as Reda Kriket, was convicted in absentia in Brussels last summer of colluding with terrorists and planning to wage jihad in Syria. Also found guilty in that trial: Abdelhamid Abaaoud. Explosives and heavy weapons were found at Kriket’s Argenteuil residence.

“Mr. Kriket was convicted last July in Belgium along with more than 30 other members of a network of Islamist radicals for terrorist crimes,” WSJ notes. “The network had operated for several years before authorities tried to shut it down, and many of its members were already in Syria when they were convicted, plotting attacks against targets back home.”

Kriket was also tied to the Belgian recruiter known as “Father Christmas.”

(Father Christmas)

Hilariously, authorities are still hanging on to the notion that all of this isn’t inextricably intertwined. The Bakraouis as well as Laachraoui are being treated as belonging to a second cell that’s separate and distinct from Abaaoud’s cell despite voluminous evidence that suggests making distinctions here is largely meaningless and almost certainly counterproductive. “In May, a Brussels court is expected to deliver a verdict on a second group of alleged jihadists, which includes Najim Laachraoui, identified by U.S. and European officials as the second bomber killed in the suicide attack on the Brussels airport,” WSJ continues. “There’s no tangible evidence” linking the Paris arrest to the Brussels cell, French Interior Minister Bernard Cazeneuve said. 

Anyway, more information is expected either today or over the weekend on the arrests made by Belgian anti-terror police on Thursday and Friday, although we’re resonably sure it will make no difference whatsoever in averting future attacks. What it will do however, is enshrine extra-legal search and seizure into European authorities’ standard operating procedure.

The tactic of detaining people first and asking questions later will likely become increasingly common,” CNN national security analyst Juliette Kayyem said last night. “There will be lots more of them. They are going to be what’s called over-broad. They are going to just try to find people or evidence that may stop the next terrorism attack, and they will figure out who they have under custody.”

Now that’s a policy the rising tide of right-wing nationalist politicians can get behind.


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Young people: definitely listen to this [audio]

It’s no secret that the conventional model of success no longer works.

Go to school, get good grades, get a good job, work your way up the ladder, and then enjoy life when you retire.

This idea has been drummed into our heads since we were young, but today it’s totally defunct.

Following that path means you’re likely to end up with a mountain of student debt and an incredibly expensive piece of paper that guarantees neither job security nor even a real education.

In my mind, the best model for education and success is the oldest one: mentorship.

It’s the best way to learn real skills– studying directly under someone who has mastered the skills that you hope to develop.

It’s the way the world worked for thousands of years, and it’s the way that still makes the most sense today.

For seven years in a row we’ve built our annual Liberty and Entrepreneurship camps around this concept of mentorship.

And in today’s podcast, I make a departure from our normal topics and discuss business mentorship with two of the instructors from this summer’s upcoming camp.

If you’re an energetic, talented young person, you won’t want to miss this podcast… or this year’s Liberty and Entrepreneurship camp.

The camp is an incredible opportunity to learn and be mentored by incredibly successful, knowledgeable entrepreneurs, as well as network with other like-minded, talented young people.

As a reminder, there is no charge to attend the camp; our foundation pays for the entire event.

But don’t think of this as some kind of charity.

For us, this an investment… an investment in relationships with the next generation of bright, talented people. I can hardly think of a better use for paper currency.

Listen in here to the podcast as we discuss specifically what young people will get out of this year’s camp.

And, once you listen to the Podcast, head over to SovereignAcademy.org to apply for this year’s camp. The application deadline is only days away.

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Holiday Market Summary

With all of Europe and the Americas closed for holiday, what little market action there was overnight came out of Asia, where China once again was engaged in its last hour “National Team” market manipulation, which saved the SHCOMP from a red close after the now traditional last hour buying spree, pushed the Shanghai Composite from red on the session an hour before close to near the highs of the day.

Elsewhere Japan’s Nikkei rose 0.7% after tracking the weakening yen as it always does tick for tick, which in turn dropped on some more BOJ jawboning (BOJ board member Harada says negative rate can go lower and there is room for more easing), although the biggest weekly gain in the USDJPY in two months was driven by news that Japanese investors bought record sum of foreign bonds and stocks last week as local investors continue their “silent bank run” (first noted two months ago) in an attempt to get away from Japan’s oppressive negative rates.

And since this, by definition, is Yen-negative, and since the entire Japane stock market is a function of currency strength, Japan’s capital flight from local stocks was…. bullish for local stocks.

Ah, the magic of centrally-planned markets.

To summarize, the MSCI Asia-Pacific Index adds 0.2%, as gains in consumer shares across the continent outweighed weakness in telecom and health care stks.

Away from Asia, in less than an hour the BEA will release its final revision to Q4 GDP; as a reminder the second revision was for a 1.0% print but since this data is woefully old, the markest will certainly ignore it – especially since it is closed – and will be far more focused on the Q1 GDP which yesterday the Atlanta Fed estimated has tumbled as low as 1.4% after hitting 2.7% just over a month ago.

Market Wrap

  • MXAP Index +0.2%
  • MXAPJ Index -0.2%
  • Nikkei 225 +0.7%
  • Topix +0.9%
  • Yen spot -0.3% to 113.15
  • Shanghai Composite +0.6%
  • Kospi -0.1%
  • KLCI -0.5%
  • SET Index -0.3%
  • TWSE -0.4%
  • VNI Index -0.2%

Top News

  • ChemChina’s Syngenta Bid Needs Broad Scrutiny, U.S. Senators Say
  • Nomura Said to Plan Cutting About 20% of North America Staff
  • China’s Money-Market Operations Inject Most Cash in Seven Weeks
  • USD/JPY rises 0.1% to 113.00 and gains 1.3% on the week; pair continues to test 21-DMA, now at 113.01
  • BOJ board member Harada says negative rate can go lower and there is room for more easing
  • Yen tomorrow/next repo rate falls to lowest since at least 2007
  • BOJ’s 4Q flow-of-funds data shows overseas investors own almost half of Japan’s T-bills, and public pension funds slow overseas investment
  • Prime Minister Abe says he doesn’t believe economy in dire circumstances
  • BlackRock Downgrades Japan Stocks Amid Volatility, Stronger Yen
  • Global Funds Cut Thai and Korean Debt, Buy Indonesian Bonds
  • Shanghai Tightens Non-Local Home Buyer Rules as Prices Soar
  • Syngenta Says ChemChina Deal Poses No Food Safety Risks: WSJ

Key Ecocnomic Data

  • Thailand’s Feb. Exports Rise 10.27% Y/y; Est. 8.70% Drop
  • Malaysia Feb. Consumer Prices Rise 4.2% Y/y; Est. +4.1%
  • Japan Feb. Core Consumer Prices Unchanged Y/y; Est. 0%
  • Japan’s Household Assets Rise 1.7% Y/Y at End-Dec., BOJ Says
  • S. Korea 4Q GDP Rose 0.7% Q/q, Revised from 0.6% Prev. Estimate

Movers

  • Advancers incl. Highwealth Construction Corp +9.9%, Siliconware Precision +6.8%, Acer +6.6%, GS Retail +4.9%
  • Decliners incl. Samsung SDS -7.5%, Kakao -4.4%, Hyundai Development Co-Enginee -4.2%, Casetek Holdings -3.7%, LIXIL Group Corp -3.4%, LG Display -3.2%

Commodities/Currencies/Bonds

  • Gold spot little changed to $1216.99/oz
  • Brent futures little changed to $40.44/bbl
  • WTI Futures little changed to $39.46/bbl
  • Euro spot -0.1% to 1.1160
  • Australian dollar -0.1% to 0.7522
  • NZ dollar -0.1% to 0.6692


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Movie Review: Batman v Superman: Dawn Of Justice – New at Reason

Batman(This is a movie review, so there are spoilers ahead. Beware, I guess.)

There are interminable stretches of Batman v Superman: Dawn of Justice in which the logjam of pricey digital effects and the garbled plot and jumbled visuals conspire to overwhelm our senses and weaken our will to carry on.

Well, maybe that’s exaggeration. The movie’s a mess, but it’s not a total fiasco. Director Zack Snyder conjures up a sky full of winged demons at one point that testifies to his gift for dark visions; and when Gal Gadot’s Wonder Woman finally leaps into the fray, deep into the picture’s second half, she more than passes the audition, writes Kurt Loder.

View this article.

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Celebrity Doctor Insists on Misleading Smokers About Vaping Hazards

Activists and public health officials frequently misrepresent the relative hazards of vaping and smoking, but usually not as blatantly as celebrity doctor Margaret Cuomo did in a recent Huffington Post video. In my latest Forbes column, I explain why the video, even after it was hastily edited to remove embarrassing errors, is still dangerously wrong:

Like most professional pundits, Margaret Cuomo has perfected the art of speaking authoritatively even when she does not know what she is talking about. Unlike most professional pundits, Cuomo is in a position to cause real damage. As a celebrity doctor spreading misinformation about the hazards of vaping, she is actively discouraging smokers from making a switch that could save their lives, thereby undermining her avowed goal of A World Without Cancer.

That’s the title of a book that Cuomo, a radiologist who is the sister of New York Gov. Andrew Cuomo and CNN anchor Chris Cuomo (as well as the daughter of former Gov. Mario Cuomo), published in 2012. Given Cuomo’s medical degree and her experience in diagnosing and writing about cancer, any layman unfamiliar with the subject would be inclined to believe her statement, in a Huffington Post video posted last week, that “e-cigarettes will raise your risk for lung cancer but also other cancers, like liver cancer.” But as Boston University public health professor Michael Siegel (who is also a physician) was quick to point out, “there is absolutely no evidence to support this claim,” which Cuomo retracted after The Daily Callers Guy Bentley asked about it.

A new, hastily edited version of the video omits the cancer claim. Also gone: claims that tin has been detected in the aerosol produced by e-cigarettes and that vaping generates hazardous chemicals that are not found in tobacco smoke (which Siegel called “an outright lie”). But the corrected video still features a statement that sums up Cuomo’s take on vaping. “Because of their chemical composition,” Cuomo says as the video begins, “e-cigarettes are at least as harmful to your health as regular tobacco cigarettes are.” A caption drives the point home: “They’re not a safer cigarette.”

How does Cuomo know that? She doesn’t, because it’s not true.

Read the whole thing.

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