Lots of Stories, Little That’s New

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Aug 27, 2012 10:13:10 AM

and tagged Debt Crisis, Europe, Yesterday's News

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Many stories today that deal with issues we have discussed before, with only two new things really worthy of note.

The first is the passing of Neil Armstrong, which was covered in the Financial Times (FT) with “Reluctant hero who believed he was just doing his job” (p. 2), the New York Times (NYT) with “Neil Armstrong Dies at 82; Made ‘Giant Leap’ as First Man on the Moon” (p. A17), and the Wall Street Journal (WSJ) with “He Left Big Footprints on Both the Moon, Earth” (p. A2). My first reaction was that this should have received more coverage—I mean, stepping on another world for the first time is something that has only happened once, ever, to one human being, among the billions of human beings that have been and will be. Given Armstrong’s modesty and humility, however, perhaps the coverage was appropriate after all. I was four years old when he walked on the moon, but I stayed up to watch, and I still remember the gray, scratchy TV picture. Godspeed, Neil, and all the best to you and your family.

The second noteworthy item today is more worrisome. I mentioned in a previous post (“Economic Shock,” June 14) that a couple of years ago, I attended a conference where protectionism was raised as an issue that would become a problem if things didn’t get better. That post highlighted some articles and reasons why the problem was getting worse, and today we find not one, but two stories with examples.

Both are on page B1 of the WSJ: “Backdating of Tariff Fuels Fight Over Chinese Tires,” which deals with U.S. tariff measures, and “France Claims Hyundai Dumps Cars.” The really interesting one is the U.S. story. In response to a court ruling that struck down a previous tariff aimed at cheap Chinese goods, Congress passed a retroactive law that imposes tariffs back to an earlier period during which the court had just ruled they did not apply. There are a couple of takeaways here. First, Congress listened to the manufacturers and passed a law specifically designed to overrule a court decision. This is very protectionist. Second, the law arguably directly violates the Constitution, which prohibits ex post facto laws. So what you have here is a protectionist measure that violates the Constitution and benefits the manufacturers, passed at the directive of those manufacturers to replace a law that was explicitly declared invalid by a court. This is a bad sign, and the second story just proves that it is not limited to the U.S.

Other common stories include Europe, which continues to be a mess, as shown by headlines in the FT: over the weekend in “Tax shortfall imperils Portugal’s deficit target” (p. 2) and on Monday in “Budget hole undermines Spain’s plans” (p. 3), “French PM tells left not to oppose EU treaty” (p. 3), and “Belt tightening reaches heart of Germany” (p. 14). The NYT and WSJ both had similar or related articles. Once again, the problems have not been solved, and this realization is hitting the markets—again.

Quick hits include Libor scandal lawsuits, with “Suits Mount in Rate Scandal,” as I predicted, which made the front page of the WSJ; more financial scandals with “US Investigates Unicredit on Iran” in the WSJ (p. C3) and “UniCredit in US sanctions probe” in the FT (p. 11); and the money market regulatory failure, with “Regulator’s Key Role in Failed Fund Reform” in the NYT, which focuses on the ties between the regulator who sank the reforms and the mutual fund industry that opposed them.

Have a great day!

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