10 Thursday AM Reads

Almost recovered. Who ever would have imagined it would be this easy?! Don’t relax just yet — you still have our morning train reads:

• Margin Calls Bite Investors: Banks Loans secured by investment portfolios have become a booming business for Wall Street brokerages; the bill comes due (WSJ)
• Corrections: What Do People Hear? (Irrelevant Investor)
• Dudley Puts The Kibosh On September (Tim Duy’s Fed Watch)
• Pushback on Buybacks: A closer look at the numbers indicates buybacks aren’t as good for the companies, the market, or investors as previously thought (Barron’s)
• America’s unique gun violence problem, in 17 maps and charts (Voxsee also America’s Top Killing Machine: Gun deaths are poised to surpass automobile deaths in the United States this year. (The Atlantic)

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  1. Concerned Neighbour commented on Aug 27

    “China Intervened Today to Shore Up Stocks Ahead of Military Parade”

    Shanghai was negative again until the last moments when the “hand of God” raised it 5% near instantaneously. No doubt this blatant manipulation/mockery will be enough to restore confidence in all “markets”, and we’ll soon rally to new highs.

    In fact, the massive spike is rather reminiscent of the massive 3% spike late afternoon yesterday in US markets, but of course, in the land of the free, no manipulation was involved.

  2. rd commented on Aug 27

    A couple of questions on the portfolio-as-collateral lending:

    1. Are these loans included in the published margin loan numbers?
    2. Is this going to be the 10% version of the sub-prime mortgage crisis from the mid-2000s? Fewer people, but much higher net-worth at the core of the Fed’s “wealth effect” strategy.

  3. rd commented on Aug 27

    Re: Dudley backing away from rate hike.

    If today’s Q2 GDP print of 3.7% is real and sustainable, then shouldn’t the Fed be moving the Fed Funds rate towards matching the current inflation rate (say towards 1%)? 3.7% GDP growth is serious even in the olden days. If they aren’t moving the Fed Funds rate up soon, then they must believe that these GDP numbers are not sustainable.

    • Concerned Neighbour commented on Aug 27

      Agreed, 3.7% is a great number for a developed economy. If memory serves though, we’ve had similar good quarters since 2009, but “escape velocity” has never been achieved. Estimates for Q3 are in the 1.5-3% range IIRC.

      But yes, you’d think six years on, we could finally shelve the “emergency, temporary” interest rate policy. I doubt it though. After all, those buybacks at record highs don’t fund themselves.

  4. A commented on Aug 27

    Gun control: two points

    Showing statistics is a waste of time. It has accomplished nothing in the past. Nothing is going to happen to this barbaric and outdated amendment (1871 for God’s sake) until corrupt congress people decide the public is their focus rather than career protection. Case closed. Murder on, America.

    Secondly, the gun problem is seeping across the northern and southern borders creating similar problems for America’s neighbors. Canada’s statistics would be even lower if it weren’t for the illegal guns building in some of its major centers – ie: Toronto.

  5. rd commented on Aug 27

    Re: Gun vs auto deaths

    One of the reasons that auto deaths have been plummeting is that people are legally required to carry liability insurance for their vehicles. That means that the private sector (insurance companies) provide market-based mechanisms for improving safety in many ways. Vehicle safety has become a major selling point for vehicles to the point that the Toyota Camry was redesigned three years in a row from 2012-15 because of the poor IIHS small overlap front collision tests. Vehicles with poor NHTSA and IIHS test results generally don’t survive long on the market these days without redesigns – we just bought a new car recently and crossed several potential ones off of our list because of poor IIHS collision test results. The massive ignition switch and air bag recalls are rocking the auto industry and forcing major supply chain re-adjustments.

    A simple solution to the problem of gun deaths would be to require gun owners to have liability insurance for any gun that they buy. The free market (beloved of the radical right) would then come up with solutions to keep that liability insurance low cost that ultimately would center around having far fewer third-party deaths and injuries. I can just imagine an entrepreneur coming with an air-bag type of concept for handguns. You could still carry guns etc., but you would have to be able to produce proof of insurance.

    • Molesworth commented on Aug 27

      Brilliant rd!
      You can have as many guns as you want; you just need liability insuance on them.
      Why is that idea not a “thing” in today’s discussion?

    • Iamthe50percent commented on Aug 27

      Interesting. I doubt if it would work because auto fatalities are not deliberate and gun fatalities are, but I see no harm in trying it.

    • JKoen commented on Aug 27

      Home owner’s policies already cover accidental gun related deaths. I think the market based solution you are looking for would be to repeal the Protection of Lawful Commerce in Arms Act. Gun manufactures should be liable for the injuries their products cause.

    • reedsch commented on Aug 27

      How could a gun manufacturer be liable when the product is performing exactly as it is supposed to? Do they have to put a warning label on the barrel, “Only intended to kill humans who are actively engaged in a criminal act” ?

    • JKoen commented on Aug 27

      reedsch – What a great question. Wouldn’t it be nice if we could have it debated in a court of law by experts on the subject, rather than in the comment section of an economic blog?

    • OkieLawyer commented on Aug 27

      I pulled some stuff from a course outline of strict products liability tort law from New York University:

      Here is an example from a gun case (I have added some explanations for the abbreviations and symbols in parentheses):

      a) Consumer Expectations and Product Performance
      i) Analysis – Absolute Liability (Focus entirely on PL (products liability) – product failure)
      (1) Consumer expectations are frustrated if the product performs differently than expected – open and obvious risks thus cannot frustrate expectations
      (2) Product is defective where the product is in a condition not contemplated by the ultimate consumer which will be unreasonably dangerous to him
      (a) Focus is entirely on product performance without consideration of cost
      (3) Policy of risk spreading by Δ which leads to the conclusion that any harm would result in liability irrespective of the cost of making changes
      ii) Cases
      (1) Halliday v. Sturm, Ruger & Co. (MD 2002) (holding that there was no COA (cause of action) against Δ (defendant) when Π’s (plaintiff’s) child shot himself with Π’s gun)
      (a) Rejected arguments that gun didn’t have safety features: Grip safety, heavy trigger pull, child-resistant manual safety, trigger lock, etc.

      This is not even getting into the issue of the gun manufacturers and the NRA, GOA, etc. working to prevent liability even for accidental deaths that are preventable (such as trigger locks to prevent children from using them to kill themselves or their friends they are playing with).

  6. VennData commented on Aug 27

    China Sells U.S. Treasuries to Support Yuan – Bloomberg


    So all the anti-Obama “traders” who say “the bond market is telling us something” based on “charts” and “resistance levels” are putting their financial reputations, careers, “free market philosophy,” and personal investment stakes at risk where a foreign dictatorship can yank billions out of the market?

    That is hysterical! THAT is why I watch CNBC to see these “conservatives” yammering on about “messages” from the bond markets!

    Tell us more about what interest rates are telling “us” you GOP genuflectors. Hahaha.

    • VennData commented on Aug 27

      Is Trump’s proposed tax hike on the rentier class that didn’t build this country the cause of the snap back?

      Are we living through the Trump rally?

  7. Bjørn commented on Aug 27

    Too many guns or too much mental illness? These charts argue that mental illness is the culprit. No wonder gun rights advocacy is growing, protecting family and self is paramount. The politicians do not have a clue how (nor the funding) to address the human mentality factors.

    • VennData commented on Aug 27


      What data do you have to say it’s growing?

    • Jojo commented on Aug 27

      From all the postmortem I am watching on TV news about the most recent killings, even the psychiatrists are saying that this shooter did not exhibit enough craziness for him to have been forced committed previously (thus getting a mental record) or to have the police keep watch on him.

      It is awfully hard to recognize mental health problems, especially if the person works to hide them.

      Therefore, since it is next to impossible to recognize most people who are only marginally mentally ill but still capable of going postal, the only real solution is to reduce the availability of guns.

    • reedsch commented on Aug 27

      So we just have to outlaw nutcases.

    • Bjørn commented on Aug 28

      No, we have to look deeper at the problem.
      The Atlantic article discusses technology as the culprit. Sadly many innocent SANE people died from corporate neglect. Should we outlaw corporations or the deadly technology they create?
      What people don’t realize is that controlling firearms is not working, and will never work.

      See this from the Atlantic article

      Data complexities aside, there is much to learn about a culture from the technologies that kill its people. In the 19th century, before modern labor laws were established, thousands of American workers died in textile mills and other factories. Heavy machinery was hazardous—and violent deaths often made headlines—but chemicals and asbestos killed many workers, too. Workers who made baked enamelware died after inhaling powdered glaze, and textile workers warned of the “kiss of death” from a loom that required its operator to suck a thread through the shuttle’s needle—which meant breathing toxic lint and dust, too.

  8. VennData commented on Aug 27

    GDP Numbers Reveal Underlying Momentum, Possible Headwinds for U.S. Economy – WSJ

    “…Indeed, GDP growth averaged only 2.2% during the first half of the year​…”


    GDP 3.7%​ but Rupert Murdoch’s Tabloid says there’re head winds, quote the first half after the quarter is reported.

    Why do you pay money for this rag?

  9. NoKidding commented on Aug 27

    Year Auto Gun
    1975 20.6 ?
    1976 20.9?
    1977 21.7 ?
    1978 22.6 ?
    1979 22.7 ?
    1980 22.5 ?
    1981 21.5 14.8
    1982 19 14.2
    1983 18.2 13.3
    1984 18.8 13.3
    1985 18.4 13.3
    1986 19.2 13.9
    1987 19.1 13.6
    1988 19.3 13.9
    1989 18.5 14.1
    1990 17.9 14.9
    1991 16.5 15.2
    1992 15.4 14.8
    1993 15.6 15.4
    1994 15.6 14.8
    1995 15.9 13.7
    1996 15.9 12.8
    1997 15.7 12.1
    1998 15.4 11.4
    1999 15.3 10.6
    2000 14.9 10.2
    2001 14.8 10.4
    2002 14.9 10.5
    2003 14.7 10.4
    2004 14.6 10.1
    2005 14.7 10.4
    2006 14.3 10.3
    2007 13.7 10.4
    2008 12.3 10.4
    2009 11 10.2
    2010 10.7 10.2
    2011 10.4 ?
    2012 10.8 ?
    2013 10.3 ?

    • NoKidding commented on Aug 27

      Terrible formatting, but the data says what it says. Both forms of death are declining, cars faster.

      Try to find this simplest raw side-by-side data somewhere. Gun data is a political nightmare.

      Pro: Break it into types of death, urban rural, ethnicity, hide the deaths.
      Anti: Split it out by mass murders, by state, versus third world countries, shame and guilt.

      If I read one more article that explains the universe “in one simple chart” and no link to data, I might add to the stats.

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