No Clever Title Today

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Aug 21, 2012 11:04:20 AM

and tagged Politics and the Economy, Yesterday's News

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For the first time in a while, there don’t seem to be meta-stories that can be cleverly (?) tied together. It is beyond me to connect an incredibly stupid comment in Missouri, finally modern membership at Augusta National, and a suspended death sentence in China, not to mention the economic stories. So we will have to take them one by one.

The big story, which made the front pages, is the remark by the GOP Senate candidate from Missouri that “legitimate” rape victims don’t get pregnant, because their bodies prevent it somehow. To the surprise of no one outside the Missouri Republican Party, many took exception to this. The Financial Times (FT) has a photo and paragraph headed “Rape rage,” the Wall Street Journal (WSJ) has “Crucial Senate Race in Uproar,” and the New York Times (NYT) has “GOP Is Pressing Candidate to Quit Over Rape Remark.” This Senate race was considered one of the easiest for Republicans to win and is crucial to their chances to take over the Senate. The papers report that the candidate is being pressured by the party to step down, but as of this morning, he was refusing. Not sure where this story goes, but I find it hard to think of a way that it’s good for the Republicans. I may have to change my bets on the Senate on Intrade.

Women got some good news with the selection of the first female members at Augusta National Golf Club, as seen on the front page of the WSJ with “It’s Tee Time for Women at Augusta National,” followed by “The Gender Barrier Falls At Augusta” (p. B1), and on the front page of the NYT with “Host to Masters Drops a Barrier With Its First Female Members.” This is not economic, but it certainly reflects changing times.

The other across-the-board story is also about a woman, Gu Kailai. She was given a suspended death sentence for her conviction for murdering a British businessman, as reported on the front page of the FT in “Gu escapes death sentence” and in the WSJ with “For China’s Gu, Leniency Still Not Ruled Out” (p. A6). The reason this is important is that Gu is politically very well connected, and her suspended sentence is creating waves in China, as reported in “Gu verdict provokes internet uproar” (FT, p. 3) and “Public Scorn for Reprieve in Murder Trial Wasn’t Part of the Script” (NYT, p. A6). Giving a well-connected murderer a break to prevent a full airing of political dirty laundry is a lot harder in the Internet age, even in China, as its government is finding. Stable governance is harder when your population gets angry.

There were also a couple of economic stories today. The unimportant one is that Apple became the most valuable company ever in the U.S., as reported by the FT (p. 11), WSJ (p. A1), and NYT (p. B1). I say it is unimportant because who is at the top changes over time, and unless it represents a systemic change in the structure of the economy or the markets, it is just one more data point.

There are two potentially important economic stories as well, although they didn’t make the front pages. In Europe, the European Central Bank (ECB) denied plans to cap rates on sovereign debt, as reported by the FT with “ECB denies plans for bond caps” (p. 2), the WSJ with “Europe Bank Quashes Bond Buy Talk” (p. A6), and the NYT with “Europe’s Bank Rejects Speculation on Its Bond Buying” (p. B2). I think this was the right decision, but the expectation of ECB support for the bond markets was one of the key components of the recent recovery of confidence in Europe. With that removed—if, in fact, the ECB can make this decision stick—the confidence may also be at risk. This isn’t front-page news today, but keep an eye out; it may be soon.

The final story to watch going forward concerns the regulators versus the markets again. We have had multiple discussions about how the financial institutions keep providing regulators with opportunities to smack them, and now we have another example. The WSJ has “Audits of Brokers Found Deficient” (p. C3) and the NYT has “Regulator Says Broker Audits Fail to Include Required Work” (p. B1). Let’s be candid here: honest and verified financial accounts are critical to the markets, and if the auditors aren’t doing their job—well, it can’t be good. One more point for the regulators. I suspect you will be hearing a lot more about this story as well.

Have a great day!

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