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The First Socialists: The Saint-Simonians and the Utopians

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At the turn of the nineteenth century, classical economics—as represented by Adam Smith in Britain and Jean-Baptiste Say in France—seemed unassailable. The American Revolution, to many people, demonstrated the failures of the old economic order of mercantilism and colonialism. The flourishing trade after the war proved protective tariffs useless, and the rise of industrial production encouraged the expansion of trade networks. Smith and his acolytes seemed proven right in their calls for free trade and economic competition.

Industrialization ushered in rapid increases in national productivity and, with it, the uncomfortable disruption of traditional ways of life. In 1815, English manufacturers had a surplus of stockpiled goods that they could not export during the War of 1812, forcing them to reduce production and lay off workers. The concept of unemployment was effectively unknown at this time, and displaced workers—following the 1811 example of Ned Lud and his Luddites—rioted and destroyed the industrial machines they blamed for their misery. In 1825, following a period of significant credit expansion, the market crashed, leading to the collapse of dozens of provincial banks. People began to question whether there were yet undiscovered flaws in the new economic system of industrialization and free trade.

Among the thinkers who developed an interest in these “commercial crises,” as he called them, was Simonde de Sismondi, a follower of Smith and Say. After observing the early economic crises in Europe, Sismondi began to question the prevailing economic doctrine. Although he did not become a socialist, strictly speaking, his critiques of laissez-faire laid the foundation for various socialist doctrines that would be developed later.

Sismondi began with a critique of the classical method. He offered the earliest criticism of David Ricardo’s abstract deductive method. Anticipating the German historical school, Sismondi argued that economics should be studied in historical and political context, that the consequences of government policies may vary according to time and place. Rejecting Ricardo’s use of Robinson Crusoe to derive the laws of human nature (a theoretical and pedagogical tool that survives today exclusively in Austrian economics), Sismondi believed that the study of isolated man was inadequate for understanding a complex industrial society.

With his new methodological approach, Sismondi took shots at two sacred concepts of classical theory: individual self-interest and free competition. “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner,” Adam Smith famously wrote, “but from their regard to their own interest.” Sismondi agreed, but he believed Smith erred in only applying the concept of self-interest to production, without considering the distribution of property. Industrialization produced new economic classes, the proletariat (those who work) and the capitalist (those who possess). Free competition compelled capitalists to produce cheaper goods, but it also required workers to compete with each other for employment. Because lower labor costs meant cheaper goods, the interests of the capitalist and the wage worker were in conflict.

The classical economists celebrated the increase in production that self-interest and competition engendered, but Sismondi argued that the conflict between individual interests and the “general interest” of society yielded overproduction, which was the cause of economic crises. Free competition encouraged constant downward pressure on wages, as workers underbid each other for employment and producers constantly worked to lower the cost of production. As some capitalists drove their competitors out of business, former capitalists would join the ranks of the nonpropertied proletariat, and capital would concentrate in the hands of a dwindling number of property owners. To cure these ills, Sismondi called for state intervention—anathema to advocates of laissez-faire—to constrain competition and regulate labor.

Although Sismondi did not call for the abolition of private property, and therefore was not a socialist, his ideas offer the first expression of several concepts that would prove integral to socialist thinkers later in the century. The first is his notion that society had a collective, or “general,” interest that differed from the individual interests of its members. Second, he is the first expositor of the fallacy eventually named the “iron law of wages”—the idea that free competition will suppress wages to subsistence levels. He also formulated a class theory of the proletariat and the capitalist. Related to this was the “law of concentration” that would prove so integral to Marxism. Finally, Sismondi introduced the idea of labor legislation, which was the first modern reaction against laissez-faire absolutism. Although Sismondi’s proposed interventions were modest by modern standards, he opened the door for new ideas about the state’s function and duties that could logically be extended ad infinitum.

In addition to Sismondi, another thinker working at roughly the same time gave birth to other key elements of socialist theory. Henri de Saint-Simon is often considered the father of socialism, though it was his followers who truly produced the first formal socialist doctrine. One of them, Pierre Leroux, apparently even coined the term “socialism” to describe their system.

Saint-Simon had something of a messiah complex, and what he founded was less of an economic theory than a religious cult. A child of the Enlightenment, he was fascinated by Newton’s law of gravity, which Saint-Simon held as the single “universal law” from which all truths—material and spiritual—could be deduced. If God is the center of the universe, gravity was the “law of God,” that governed all phenomena. Saint-Simon believed that the purpose of religion was to direct the masses toward the improvement of society. Christian leadership had served this function before industrialization, but Saint-Simon—after God spoke to him in a vision—called for replacing the antiquated Christian clergy with a “Council of Newton,” consisting of experts from various fields of science.

If Newton was God’s prophet for physics, Saint-Simon was the prophet for the social sciences. Anticipating the positivists, he thought that the empirical method of physics should be adopted for the study of man. By observing the past, social scientists should be able to anticipate the future, thus allowing them to scientifically derive the best political policies. Saint-Simon also theorized that society would progress through specific stages of development. Although a predictive philosophy of history was nothing new—the Christian philosophy of history had long held such a view in anticipation of the return of Christ—Marx, among other socialists, would adopt a similar stages doctrine of history to argue the inevitability of socialism.

Unlike Sismondi, Saint-Simon was an apologist for industrialization. As industrialization expanded, all classes would disappear until society was left with only workers and idlers. Although this seems similar to Sismondi’s proletariat-capitalist distinction, Saint-Simon’s “idlers” were not the capitalists but the landowners of the feudal past. Eventually, they would disappear, and the world would consist only of workers. Related to this, Saint-Simon criticized property, by which he specifically meant landed property. Society under the new system should be modeled after the factory, operating as a “national association,” and the state’s function should be limited to protecting workers from the indolent and securing the freedom of producers.

The genuine socialism of Saint-Simonianism came from the modified doctrine espoused by his acolytes. Saint-Simon criticized the privilege of feudal landlords—his idlers—but his followers extended this logic to the owners of capital. Private property in capital, even more than land, privileged capitalists at the expense of the workers. Land and capital are both tools of production, so there was no need to distinguish between the landlord and the capitalist; both were idlers, the Saint-Simonians said: the capitalist earned interest just as the landlord earned rent. Thus, the new worker-idler dichotomy more closely resembled the proletariat-capitalist model of Sismondi. With industrialization, workers were exploited by the capitalists just as serfs were exploited by landlords.

The Saint-Simonians thus established the first formal doctrine of socialism (though socialistic ideas have existed since at least the ancient Greeks). They laid the groundwork for important elements of socialist theory. One is their theory of exploitation, in which proprietors live off the labor of their workers. More importantly, though, was the Saint-Simonian critique of private property in both land and capital. They called for the abolition of private ownership by way of private inheritance. If the state were the sole heir, then eventually all property would be controlled by the Council of Newton, who would know best how to manage production and distribution in the national workshop of society. Finally, with Saint-Simon’s philosophy of history, they founded the tradition of preaching the ordained inevitability of socialism according to stages of human development.

While Sismondi was theorizing and Saint-Simon was evangelizing, other early socialists were working to put their ideas into practice. Although they are most often referred to by the label Marx bestowed on them—utopian socialists—they have also been called associative socialists, as their theories were based on collective associations that we would today recognize as communes. The two most influential representatives of this category of socialism are Robert Owen and Charles Fourier.

Most early socialist thinkers were French, but Robert Owen was British. If we looked for the precedents for his ideas, we might turn to William Godwin, whom Murray Rothbard considered (by inference) the first communist anarchist. Godwin called for abolishing the state, law, and property. Like all preindustrial socialists, Godwin was concerned with justice, as he understood it, rather than economics. Owen, although his ideas lacked sophistication, was concerned with both morality and economics.

Owen was a wealthy British industrialist, and it would be wrong to call him anticapitalist. He believed that capitalists should use their wealth to establish better societies. To his credit, Owen put his money where his mouth was. He purchased land in the United States and Great Britain to establish cooperative communities based on the principles of communism. Owen called his communes “parallelograms,” and the basis of his economic system was the equitable exchange of labor via labor notes.

The terms communism and socialism were originally employed interchangeably. In Britain, communism enjoyed greater currency at first, whereas the French preferred socialism. Marx and Engels wrote The Communist Manifesto in Britain, but they used both terms interchangeably in their writings, reflecting their familiarity with continental writers. Robert Owen typically used the word communism, but he was the first person to use the word socialism in the title of a published work—What Is Socialism? —and he likely thought he had coined the term. The first terminological distinction was introduced by Lenin and modified by Stalin.

Charles Fourier had similar ideas that were put into practice by his followers. Instead of Owen’s parallelograms, Fourier had his phalanstére, which resembled a large hotel with private living quarters but communal areas for meals, work, and recreation. One important difference from Owen was that his community was modeled after joint-stock companies, where inhabitants purchased shares of stock that allowed them to enjoy varying standards of living. Owen, with his labor notes, believed that people could specialize in trades according to the division of labor as long as they exchanged equitably. Fourier, by contrast, believed that all members of the phalanx, as he called his community, should equally contribute to all areas of work. In this way, he believed that he could avoid class conflict because everybody would be a member of all classes simultaneously, including the capitalist class.

Unsurprisingly, the utopian communities failed, but the utopians shared two important ideas that survived in later theories. The first is their theory of human nature. Derived from John Locke’s notion of tabula rasa, thinkers increasingly considered the role of the social environment in shaping human behavior. Owen and Fourier represent extreme social determinism. This was an important basis of their society. They held that if they could create the right “social milieu,” pesky elements of human nature such as individual self-interest would disappear.

In contrast to Sismondi’s idea of a conflict between the individual and general interest, Owen and Fourier believed that individual interests would become naturally subordinate to the collective. This is the second important idea that linked the utopians. While collectivism was implied in Sismondi’s idea of a “general interest” and had historical roots in Christian monasteries, Owen and Fourier offered the first formal expression of full socialist collectivization.

Socialism on Life Support – The Revolution of 1848 and the Incentive Problem

Louis Blanc’s ideas started to circulate in France in 1841 with the publication of his treatise on French social organization and the working class. Blanc was greatly influenced by Simonde de Sismondi. He accepted that competition was destructive and resulted in the iron law of wages (a term still not coined). He also believed in the necessity of state intervention. Blanc’s belief in the necessity of a strong state arguably makes him the father of state socialism, though earlier thinkers of lesser influence had already proposed similar ideas. Blanc is also sometimes classified with Owen and Fourier as an associative socialist, and he shared the important similarity of social determinism. He believed, in common with Owen, that human nature could be changed through proper education.

But the nature of Blanc’s “association” was very different from that of the utopian commune, and it is here that we find his original significance. Blanc advocated for “social workshops,” in which workers were associated by industry. To prevent the evils of competition, though, the state should regulate production, acting as the sole entrepreneur, and oversee the distribution of profits back to the workshops. The workshops themselves, though, were to be run democratically by the workers. In Blanc’s unique conception of association, we find the seeds of syndicalism and British guild socialism.

Around the same time that Blanc was earning notoriety, Pierre-Joseph Proudhon was making a name for himself with the publication of What Is Property? In this work, he popularized the phrase “property is theft,” and until Marx published Das Kapital, Proudhon was the most influential socialist in France. His system, known as mutualism, did not advocate the abolition of property; Proudhon, instead, wanted to abolish the privilege that he believed property granted to its owners. He thus advocated usufruct, which meant the right for people to use somebody else’s property, so that the proprietor—capitalist or landlord—could not live off the fruits of somebody else’s labor. To later socialists, Proudhon’s influence was marginal; the slogan Property Is Theft! became a nice platitude, but it circulated without the theoretical nuance of usufruct laws. He is instead most famous today as the father of anarchism, and his critiques of the state influenced anarchists throughout Europe and the United States.

The French Revolution of 1848 offered both Blanc and Proudhon an opportunity to try to implement their ideas. In late February, Louis Blanc, on behalf of the revolutionary Provisional government, drafted a “right to work” decree claiming that the first duty of every government was the guarantee of employment for its citizens. The following day, he announced the formation of national workshops according to the theories he had outlined earlier in the decade.

Instead of solving the economic crisis, the national workshops invited unemployed laborers into Paris. The Provisional government grossly underestimated how many workers would enroll in the program—they anticipated ten thousand enrollments, and instead they received nearly a hundred thousand. When they could not find work for all of them, Blanc’s plan effectively turned into unemployment welfare, with the government offering modest pay for idle workers. To worsen matters, the surplus of unemployed men they unwittingly drew into Paris used their spare time for political agitation.

Proudhon saw the revolution as an opportunity to pursue his ideas as well, though he was even less successful than Blanc. In considering the most immediate practical reform for abolishing proprietor privilege, Proudhon came up with the idea of an “exchange bank,” backed by existing commodities, that would provide unlimited interest-free loans. The theory itself was rife with fallacies, but Proudhon believed that it would eliminate the unjust income of capitalists—the interest earned on capital. Instead of workers accepting immediate payment from the capitalist, who later enjoyed the returns on selling the commodity produced, workers could accept loans from the bank that would be paid back without interest. The idea of the exchange bank led to the public debates between Proudhon and Frédéric Bastiat on the ethics of charging interest on loans.

However, Proudhon’s bank never came into existence. The Revolution of 1848 had, to many people, thoroughly discredited socialism. With the exception of Robert Owen in Britain and a handful of other thinkers of marginal influence, socialism had been almost entirely a French product. The decline of socialism in France might have signaled the death knell of socialism everywhere, but there were two men in Britain who, with the publication of a pamphlet in 1848, would resuscitate socialism and give it the most complete (if utterly fallacious) theoretical framework the world had yet seen: Karl Marx and Friedrich Engels.



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Betsy DeVos’ Deadly Plan to Reopen SchoolsTrump education…

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Betsy DeVos’ Deadly Plan to Reopen Schools


Trump education secretary Betsy DeVos is heading the administration’s effort to force schools to reopen in the fall for in-person instruction. What’s her plan to reopen safely? She doesn’t have one. 

Rather than seeking additional federal funds, she’s using this pandemic to further her ploy to privatize education — threatening to withhold federal funds from public schools that don’t reopen.

Repeatedly pressed by journalists during TV appearances, DeVos can’t come up with a single mechanism or guideline for reopening schools safely. She can’t even articulate what authority the federal government has to unilaterally withhold funds from school districts — a decision that’s made at the state and local level, or by Congress. But when has the Constitution stopped the Trump administration from trying to do whatever it wants? 

DeVos is following Trump’s lead — prematurely reopening the economy, which he sees as key to his re-election but is causing a resurgence of the virus.

Let’s get something straight: Every single parent, teacher, and student wants to be able to return to in-person instruction in the fall — but only if no one’s life is put at risk. 

Districts need more funding, not less, to implement the CDC’s guidelines. Given that state and local governments are already cash-strapped, it’s estimated that K-12 schools need at least $245 billion in additional funding to put safety precautions in place — funding that Republicans in Congress and the Trump administration refuse to give.

One might think an education secretary would be studying what kind of safety precautions would work best, and seeking emergency funding for those safeguards. Not DeVos. Just like her boss in the Oval Office, she’s been hard at work shafting working families to advance her personal agenda.

In late April, she issued rules for how states should use the $13 billion allocated in the CARES Act for schools. Her rules would divert millions of dollars away from low-income schools into the coffers of wealthy private schools. It’s such a blatant violation of federal law that several states are suing her and her department.

DeVos’ entire tenure has centered on shafting low-income students and their families — the very people she’s supposed to protect.

She has repeatedly empowered the predatory for-profit college industry at the expense of the students they prey upon. Why? She has considerable financial stakes that are rife with conflicts of interest. Her financial investments are a web of holdings in for-profit colleges and student loan collectors.

When DeVos took office, she repealed an Obama-era rule imposing stricter regulations and higher standards on for-profit colleges. She also stopped canceling the debts of students defrauded by these institutions — a move that has prompted 23 states to bring a lawsuit against her. In the process, she was even held in contempt of court for violating a federal court order.

Now, in the middle of the worst public health crisis in more than a century, she’s jeopardizing the safety of our students, teachers, parents, bus drivers, and custodians, while rerouting desperately needed public school funds towards the private schools she’s always championed.

Remember, when you vote against Trump this November — you’re voting against her, too. It’s a win-win.



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Framing Your Investments for Context & Clarity

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Source: JP Morgan Asset Management

 

The above is one of my favorite charts.

This version comes from a JPM discussion on “Framing Bias.” It raises interesting issues about how decisions are influenced by the way information is presented:

“What level of returns should we expect from equity markets? The answer changes depending on the time period – when investors allow an incomplete picture to influence their decisions, it is an example of framing. While it appeared the market had climbed to untenable highs post-GFC, [but] if we take a slightly longer view, the overall market return was actually flat between 2000 and 2012. During that time period, the market had an average annual total return of 0.6% per year and a cumulative total return of 6.8% – effectively a sideways market.”

I draw a slightly different conclusion from the long term series of secular bull and bear markets. (Assuming you are not a trader), when you consider the chart above, investors are presented with several choices:

1. Time the market, moving in and out before long bear markets;

2. Buy & Hold, waiting out the decade (or longer) poor returns;

3. Reduce Risk, by making tactical moves to modestly shift asset class exposure.

The discussion of framing suggests there are other alternative contexts for these choices: For example, you can use tactical allocation shifts to manage behavior rather than to affect risk or returns.

Having now lived through two bear markets that were a decade+ long, I wanted to find a new way to think about what Buy & Hold investors should do during bear markets.1   To stick with the concept of framing, these investors should also pay attention to inflation, compounding, and how the idea of longer cycles negatively impacts our comprehension of valuation and prices.

A quick real estate story:

When we were purchasing our first suburban home in the late 1990s, we had narrowed it down to two houses. One was in Sea Cliff, a charming town on the North Shore of Long Island. The other was about 5 minutes south in Greenvale, in the Roslyn school district, which was a highly ranked (but became a notorious scandal-ridden) district.

Both homes cost about $250k. Sea Cliff was more quaint, but in front of that house was a bus stop. It was noisy, from inside you could hear the chuffing of the bus as it stopped, brakes squealing, diesel engine rumbling. I could not get past that, and so we ended up in Greenvale.

But the house I truly fell in love with was a Double Dutch Colonial in Sea Cliff. It was exorbitantly expensive at $400k. Now, if $250k and $400k don’t sound that far apart, you are being affected by your framing of current pricing. At the time, $400k — well over half again as expensive as our price range — was a giant gap far beyond what we could afford for a starter home.

I don’t see that house on Zillow, but a home next door (not as nice) is now up for sale at $1.795m.

That pricing reflects several real estate bull and bear markets, where prices advanced three steps, and then retreated one. But it also reflects how our comprehension of compounding and inflation creates valuations and prices that are difficult to grasp. Mortgage rates fell, suburbs became more attractive, and suddenly an asset appreciating 4X does not seem so wild. Around the same time (97?), the S&P 500 Index was about 800, and it is also 4X today.

One last thing: I have a very vivid recollection around this time of people taking a little off the table from appreciated equity and rolling that into real estate — trade up homes, vacation properties, etc.

Which makes me wonder about this: Maybe equity investors should think about bear markets — or even the last innings of bull markets — as opportunities for long-term accumulation phase with expected returns of zero or negative over the short term.

That sounds counter-intuitive. But given what we know about how unsuccessful investors are when it comes to market timing, what other choice do they have but to reframe the low return and/or expensive part so of the market cycle?

Buyers during the 1966-82 and the 2000-13 bear markets were essentially accumulating assets for the next bull market run. It surely felt awful to be a Buy & Hold stock accumulator in the 1970s, just as it did int he 2000s. But boy, did it pay off when the next bull cycle began.

I expect that when we look back at the end of this cycle (the 2013 – ?? bull market) and past the next bear cycle, if we might draw the same conclusion. Just an idea I am noodling around with.

~~~

More on this (eventually) . . .

 

 

 

______

1. I have done better than okay via market timing, but I keep coming back to Michael Mauboussin‘s question: Was it skill  or luck? Not knowing for sure, I am willing to dabble with a little fun money but unwilling to risk real capital on trying to time in and out.

 

The post Framing Your Investments for Context & Clarity appeared first on The Big Picture.



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Market Talk – August 11, 2020

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ASIA:

China will continue to implement its part of the phase one trade deal with the United States and will fulfill financial opening-up pledges despite worsening bilateral relations between the world’s two largest economies, China’s central bank governor said in an interview with the official Xinhua news agency. US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, who led the US negotiating team, are expected to hold a video conference with Vice-Premier Liu He this week to review the implementation of the deal.

China is stepping up military drills around East Asia as a war of words with the United States heats up over Washington’s military activities and the visit of a US cabinet secretary to Taiwan. Beijing has stepped up the pace of its war games in recent weeks, after the US sent two aircraft carrier strike groups on rare dual-carrier exercises in the South China Sea twice in the month of July.

Business sentiment among workers in Japan with jobs sensitive to economic trends in July almost returned to levels seen before the coronavirus outbreak, as social and economic activities gradually resumed, government data showed Tuesday. The diffusion index of confidence among “economy watchers” such as taxi drivers and restaurant staff, released by the Cabinet Office, rose 2.3 points from June to 41.1, compared with 41.9 logged in January when the fallout from the virus outbreak in China was yet to be felt in Japan.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 420.30 points or 1.88% to 22,750.24
  • Shanghai decreased 38.96 points or -1.15% to 3,340.29
  • Hang Seng increased 513.25 points or 2.11% to 24,890.68
  • ASX 200 increased 28.50 points or 0.47% to 6,138.70
  • Kospi increased 32.29 points or 1.35% to 2,418.67
  • SENSEX increased 224.93 points or 0.59% to 38,407.01
  • Nifty50 increased 52.35 points or 0.46% to 11,322.50

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00025 or -0.03% to 0.71507
  • NZDUSD decreased 0.00072 or -0.11% to 0.65847
  • USDJPY increased 0.66 or 0.62% to 106.66
  • USDCNY decreased 0.01951 or -0.28% to 6.94185

 

Precious Metals:

  • Gold decreased 106.75 USD/t oz. or -5.26% to 1,922.55
  • Silver decreased 3.68 USD/t. oz or -12.63% to 25.454

 

Some economic news from last night:

Japan:

Adjusted Current Account increased from 0.82T to 1.05T

Bank Lending (YoY) (Jul) increased from 6.2% to 6.3%

Current Account n.s.a. (Jun) decreased from 1.177T to 0.168T

Australia:

NAB Business Confidence (Jul) decreased from 0 to -14

NAB Business Survey (Jul) increased from -8 to 0

New Zealand:

Electronic Card Retail Sales (YoY) (Jul) increased from 8.0% to 11.4%

Electronic Card Retail Sales (MoM) (Jul) decreased from 15.6% to 1.1%

Indonesia:

Retail Sales (YoY) (Jun) increased from -20.6% to -17.1%

Singapore:

GDP (YoY) (Q3) decreased from -12.6% to -13.2%

GDP (QoQ) (Q3) decreased from -2.1% to -42.9%

Some economic news from today:

China:

M2 Money Stock (YoY) (Jul) decreased from 11.1% to 10.7%

New Loans (Jul) decreased from 1,810.0B to 992.7B

Outstanding Loan Growth (YoY) (Jul) decreased from 13.2% to 13.0%

Chinese Total Social Financing (Jul) decreased from 3,434.2B to 1,690.0B

Japan:

Economy Watchers Current Index (Jul) increased from 38.8 to 41.1

India:

Cumulative Industrial Production (Jun) decreased from -0.70% to -35.90%

Industrial Production (YoY) (Jun) increased from -18.3% to -16.6%

Manufacturing Output (MoM) (Jun) increased from -22.4% to -17.1%

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 420.30 points or 1.88% to 22,750.24
  • Shanghai decreased 38.96 points or -1.15% to 3,340.29
  • Hang Seng increased 513.25 points or 2.11% to 24,890.68
  • ASX 200 increased 28.50 points or 0.47% to 6,138.70
  • Kospi increased 32.29 points or 1.35% to 2,418.67
  • SENSEX increased 224.93 points or 0.59% to 38,407.01
  • Nifty50 increased 52.35 points or 0.46% to 11,322.50

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00025 or -0.03% to 0.71507
  • NZDUSD decreased 0.00072 or -0.11% to 0.65847
  • USDJPY increased 0.66 or 0.62% to 106.66
  • USDCNY decreased 0.01951 or -0.28% to 6.94185

Precious Metals:

  • Gold decreased 106.75 USD/t oz. or -5.26% to 1,922.55
  • Silver decreased 3.68 USD/t. oz or -12.63% to 25.454

Some economic news from last night:

Japan:

Adjusted Current Account increased from 0.82T to 1.05T

Bank Lending (YoY) (Jul) increased from 6.2% to 6.3%

Current Account n.s.a. (Jun) decreased from 1.177T to 0.168T

Australia:

NAB Business Confidence (Jul) decreased from 0 to -14

NAB Business Survey (Jul) increased from -8 to 0

New Zealand:

Electronic Card Retail Sales (YoY) (Jul) increased from 8.0% to 11.4%

Electronic Card Retail Sales (MoM) (Jul) decreased from 15.6% to 1.1%

Indonesia:

Retail Sales (YoY) (Jun) increased from -20.6% to -17.1%

Singapore:

GDP (YoY) (Q3) decreased from -12.6% to -13.2%

GDP (QoQ) (Q3) decreased from -2.1% to -42.9%

Some economic news from today:

China:

M2 Money Stock (YoY) (Jul) decreased from 11.1% to 10.7%

New Loans (Jul) decreased from 1,810.0B to 992.7B

Outstanding Loan Growth (YoY) (Jul) decreased from 13.2% to 13.0%

Chinese Total Social Financing (Jul) decreased from 3,434.2B to 1,690.0B

Japan:

Economy Watchers Current Index (Jul) increased from 38.8 to 41.1

India:

Cumulative Industrial Production (Jun) decreased from -0.70% to -35.90%

Industrial Production (YoY) (Jun) increased from -18.3% to -16.6%

Manufacturing Output (MoM) (Jun) increased from -22.4% to -17.1%

EUROPE/EMEA:

Russia claimed on Tuesday it has developed the world’s first vaccine offering “sustainable immunity” against the coronavirus, as the pandemic marked another bleak milestone with 20 million infections globally. Western scientists have raised concerns about the speed with which Russia has developed the vaccine, suggesting that researchers might be cutting corners. And the World Health Organization on Tuesday warned that any approval of the Russian vaccine would require rigorous review of data to show its safety and efficacy.

Heathrow Airport’s boss has warned quarantine restrictions are “strangling the UK economy”, and renewed calls for Covid-19 testing at airports. Thousands of jobs are being lost because Britain is being cut off from key markets, said chief executive John Holland-Kaye. The warning came as Heathrow reported passenger traffic in July plunged 88%.

Investor sentiment in Germany picked up more than expected in August, a ZEW survey showed on Tuesday, reflecting hopes that Europe’s biggest economy is on the road to recovery after the devastation caused by the coronavirus pandemic. The ZEW – Leibniz Centre for European Economic Research – in Mannheim, an economic research institute and a member of the Gottfried Wilhelm Leibniz Scientific Community said in its survey report investors’ economic sentiment rose to 71.5 from 59.3 points the previous month, far exceeding a forecast for 58.0 in a Reuters poll of economists.

The major Europe stock markets had a green day:

  • CAC 40 increased 118.48 points or 2.41% to 5,027.99
  • FTSE 100 increased 103.75 points or 1.71% to 6,154.34
  • DAX 30 increased 259.36 points or 2.04% to 12,946.89

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.00089 or -0.08% to 1.17332
  • GBPUSD decreased 0.00217 or -0.17% to 1.30524
  • USDCHF increased 0.00194 or 0.21% to 0.91733

Some economic news from Europe today:

UK:

BRC Retail Sales Monitor (YoY) (Jul) decreased from 10.9% to 4.3%

Average Earnings ex Bonus (May) decreased from 1.7% to -0.2%

Average Earnings Index +Bonus (Jun) decreased from -0.3% to -1.2%

Claimant Count Change (Jul) increased from -28.1K to 94.4K

Employment Change 3M/3M (MoM) (May) decreased from 6K to -220K

Unemployment Rate (Jun) remain the same at 3.9%

Germany:

German ZEW Current Conditions (Aug) decreased from -80.9 to -81.3

German ZEW Economic Sentiment (Aug) increased from 59.3 to 71.5

US/AMERICAS:

President Trump stated that he is considering a capital gains tax cut, a move he says will help to create more jobs. The current long-term capital gains tax stands at 20%, and any change to the rate must be approved by Congress. However, the president could use a loophole that would permit him to index gains to inflation.

Joe Biden, Democratic presidential nominee, has selected Senator Kamala Harris as his running mate ahead of the November 3 election. Biden previously vowed to choose a female vice president, and Kamala’s nomination makes her the first woman of color to run for a vice president position for a major political party in the US. “You make a lot of important decisions as president. But the first one is who you select to be your Vice President. I’ve decided that Kamala Harris is the best person to help me take this fight to Donald Trump and Mike Pence and then to lead this nation starting in January 2021,” Biden stated in a campaign email this Tuesday.

Walmart announced a new partnership with Instacart that will allow the chain to offer same-day grocery deliveries across the US. The move will allow Walmart to compete with Amazon, who offers same-day delivery through Amazon Prime Now and Amazon Fresh through Whole Foods.

Former Bank of Canada and Bank of England Governor Mark Carney is assisting the Trudeau administration in handling the fallout of the coronavirus crisis. Carney’s career with the Bank of England recently came to an end, leaving many to speculate whether Carney will seek the office of finance minister or another leadership role.

US Market Closings:

  • Dow declined 104.53 points or -0.38% to 27,686.91
  • S&P 500 declined 26.78 points or -0.8% to 3,333.69
  • Nasdaq declined 185.53 points or 1.69% to 10,782.82
  • Russell 2000 declined 9.57 points or -0.6% to 1,575.1

Canada Market Closings:

  • TSX Composite declined 108.49 points or -0.65% to 16,497.01
  • TSX 60 declined 4.01 points or -0.4% to 991.09

Brazil Market Closing:

  • Bovespa declined 1,270.08 points or -1.23% to 102,174.4

ENERGY:

The oil markets had a negative day today:

  • Crude Oil decreased 0.31 USD/BBL or -0.74% to 41.6300
  • Brent decreased 0.44 USD/BBL or -0.98% to 44.5500
  • Natural gas decreased 0.01 USD/MMBtu or -0.46% to 2.1460
  • Gasoline decreased 0.0293 USD/GAL or -2.37% to 1.2050
  • Heating oil decreased 0.0004 USD/GAL or -0.03% to 1.2390

The above data was collected around  15:32 EST on Tuesday.

  • Top commodity gainers: Ethanol (14.56%), Lumber (2.49%), Orange Juice (1.73%), and Aluminum (1.55%)
  • Top commodity losers: Palladium (-4.82%), Silver (-12.63%), Gold (-5.26%), and Platinum (-4.02%)

The above data was collected around 15:35 EST on Tuesday.

BONDS:

 

Japan 0.03%(+1bp), US 2’s 0.15% (+2bps), US 10’s 0.63%(+5bps); US 30’s 1.31%(+6bps), Bunds -0.47% (+5bp), France -0.20% (+4bp), Italy 1.01% (+3bp), Turkey 13.86% (-12bp), Greece 1.08% (+3bp), Portugal 0.32% (+3bp); Spain 0.29% (+2bp) and UK Gilts 0.19% (+6bp).

  • US 3-Year Note Auction decreased from 0.190% to 0.179%
  • US 52-Week Bill Auction decreased from 0.155% to 0.140%
  • UK 5-Year Treasuy Gilt Auction decreased from -0.033% to -0.049%
  • Spanish 6-Month Letras Auction increased from -0.506% to -0.480%
  • Spanish 12-Month Letras Auction increased from -0.463% to -0.455%

 



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