A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
FT Alphaville's Cardiff Garcia highlights the disturbingly large number of factors holding back global inflation pressure. The short list includes demographics, high debt loads, shale oil and low corporate investment.
These deflationary factors are all problematic in that government policy responses are either impossible – they can't reverse aging – and self-defeating (shale oil reduces U.S. dependency on the Middle East).
"Global disinflationary pressures" – FT Alphaville
"It is UGLY in Italy" – Business Insider
"Japan real earnings fall 5.4 per cent y-o-y in August, consumption down 4.7 per cent." – Statistics Japan
In a related story, the Harvard Business Review disappoints with a post blaming slow economic growth entirely on "corporate fat cats" enriching themselves with share buybacks. Everyone loves a scapegoat – they give the illusion that problems are easily fixable with the removal of the bad guys – but the truth is always far more complicated.
In this case, there's no doubt that CEOs enjoy increasing their wealth and that low borrowing costs have helped fund share repurchases that have helped in this regard. But the inference, that greed is the only reason companies are not investing to expand their businesses, is simply not true. Slow economic growth, in large part because of demographic factors, means that expansionary investment in many cases would be unprofitable even with low borrowing costs.
"Profits without prosperity" – Harvard Business Review
Mohammed El-erian, former co-head at Pacific Investment Management Co. LLC, penned a column detailing the importance of the ongoing protests in Hong Kong for the global economy. He concludes, "the Chinese government is likely to prevail over the Occupy Central movement in Hong Kong. But in doing so, it will probably be inclined to slow certain economic reforms for now, seeking instead to squeeze more growth from the old and increasingly exhausted model … this would be part of a broader political strategy to defuse tensions and avoid an immediate growth shock to both China and the global economy, it would undermine the longer-term economic vibrancy of both. "
"What Hong Kong means for the global economy" – Bloomberg
Apple Inc.'s future profits are likely to take a significant hit from a big European tax bill. After an investigation, the European Commission has informed the government of Ireland that it deems its corporate tax policy towards Apple as illegal. The BBC reports, "Ireland's corporate tax rate is set at 12.5 per cent, but Apple enjoys an effective rate of tax of 2 per cent, due to the way it channels overseas sales through its subsidiaries."
"Apple's Irish tax deal may be state aid, says Europe" – BBC
Tweet of the Day, (and yes, it supports the argument in my column today): "@robinwigg After the briefest of breathers, the dollar has jumped to a new four year high. on.ft.com/1vsz8sk pic.twitter.com/rDK7GrzPx2 "
Diversion: "The internet is broken, and shellshock is just the start of our woes" – Wired
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Scott Barlow