Whites get wealthier, while Blacks and Hispanics lag further behind

Businesses and people have recovered since the Great Recession, but only whites have actually made their wealth increase. 

While white households' average wealth increased by 2.4% to about $141900 in 2013, that of black and hispanic households are $11000 and $13700 respectively. The networth median of white households is more than 10 times of other racial groups, rising to a new record level.

There are several reasons for the growing gap. First, minority households may have not been able to sock away as much or used more of their savings to cover expenses. Also, the financial markets have recovered a lot, and whites are more likely to own stocks. Real estate makes a majority of black and hispanic households' networth, nut has declined in the last few years.

http://money.cnn.com/2014/12/12/news/economy/wealth-by-race-pew/index.html?iid=HP_River

Petrobas. Coming down with a bump.

The article goes into detail regarding the essential rise of Petrobas as a spearhead for being one of the biggest offshore oil discoveries this century. It consisted of a record breaking 70$ billion public share offering in 2010. It was a technological leader in terms of global oil giants at finding new reserves. But now its position seems very grim. Corruption scandals seem to be unearthed pretty much everyday. The most recent one represented a bribery scheme of around 3.7$ billion dollars. 
The future of its army suppliers coupled with around 2,000 employees is very much in doubt. State controlled bank have also lost confidence and with so many construction firms on the brink of total loss, it is very hard to predict Petrobas's future. Rather than a bottomless barrel of oil, Petrobras has become the complete opposite.  
sourcehttp://www.economist.com/news/business-and-finance/21636420-more-problems-are-being-revealed-brazils-oil-giant-coming-down-bump

OPEC chief defends policy, says group to try to ride out price fall

://finance.yahoo.com/news/opecs-badri-says-oil-price-080841109.html




This article mainly talks about how the recent drop in crude oil is affecting OPEC as well as the rest of the world. One of the main person who was referenced to in this article is Abdullah al-Badri the Secretary General of OPEC. Speaking at a conference in Dubai, Abdullah al-Badri defended November's decision by the Organization of the Petroleum Exporting Countries not to cut its output target of 30 million barrels per day (bpd) in the face of a drop in crude prices to multi-year lows. The price of a barrel as nearly dropped 50% sense October. From the article it was clear that their are multiple reasons for this extreme drop. One of them is opec intended to either undermine the economics of U.S. shale oil production or weaken rival powers closer to home such as Iran and Russia. The other point brought up was only a small increase in supply had lead to a sharp drop in prices, speculation must have had a major impact in deciding these prices. 

The Case for Opportunistic Inflation

http://www.economist.com/blogs/freeexchange/2014/12/what-should-federal-reserve-do?sort=3#sort-comments
In the article "The Case for Opportunistic Inflation," the author discusses some of the unique economic circumstances that currently exist in the United States, and the resulting questions it leaves for the Federal Reserve as far as what to do regarding monetary policy. The author offers the idea of "opportunistic inflation," or exploiting areas of growth in the economy to increase inflation where possible. The idea comes from the mirror idea of "opportunistic disinflation" which came into being in the 1990's as a response to the rampant inflation that was an economic concern at the time. Twenty years ago, this strategy was successful in lowering the inflation rate to 2% without deliberately pushing the economy into a recession. The author of this article believes that a mirror strategy would help increase the inflation to an adequate level that will help to limit problems the next time the economy falls into a recession. The author does acknowledge that there could be some problems associated with this strategy, such as inflation increasing more than expected or desired, or increased financial imbalances.

It will be interesting to see what strategy the Federal Reserve chooses to adopt in response to the current economic circumstances, as well as the resulting consequences.

Krugman Fighting Consensus Says 2015 Fed Rate Increase Unlikely
source: http://www.bloomberg.com/news/2014-12-14/krugman-says-fed-is-unlikely-to-raise-interest-rates-in-2015.html

Paul Krugman a famous American economists claims that the Federal Reserve will not follow through with raising interest rates as soon as they have claimed. He cites the low inflation and slow global growth as reason why they will not. Krugman has been known for wanting the government and the Fed to do more during the financial crisis. He claims Bernanke was "too timid" and Obama stimulus package was not enough to revive the economy. 10 year treasuries have came down back to mid 2013 levels and the falling oil prices will have a negative effect on inflation.

Some economists believe the spike in consumer demand related to the falling oil prices will be enough to down play the risk to inflation. Krugman as well as other economists believe the job market is not totally back either due to the slow wage growth.

Krugman said "there is a very strong case that the United States is still a very depressed economy." As for who is right, we will have to wait until the end of 2015 to know what will happen.

http://www.economist.com/news/business-and-finance/21636420-more-problems-are-being-revealed-brazils-oil-giant-coming-down-bump


The Brazillian oil giant Petrobras has apparently been funding both specific political agendas and laundering illegal money. This has been brought to light in recent publications resulting in a scandal and the head of the company resigning in 2012, the new head has apparently been doing the same thing. Due to how big of a financial influence this company has on Brazil it is worrying that the company has a 125 Billion dollar debt which led to it being downgraded by important rating agencies. The future of the company is uncertain and it is not known how this will affect the 2016 olympics.

I personally think that having the level of corruption being revealed within this company is despicable and unfortunately having a company this large fail would be a big hit on Brazil's economy that they probably can't easily afford. As far as the large debt, that can be dealt with after the economy is jump-started by the 2016 Olympics.

Today the largest private-equity buyout of the year happened when PetSmart Inc. agreed to sell their company. PetSmart agreed to sell to a group led by BC Partners Inc. for about $8.25 billion. PetSmart began considering a buyout since last summer due to pressure from shareholders. Recently struggling companies have been more inclined to undergo mergers-and-acquisitions, as opposed to a full buyout. PetSmart was founded in 1987, with roughly 1,350 stores nationwide. It was a location to purchase any of your desired pet needs for any pet across the board. However, consumers have been changing their purchasing habits to a more convenient manor. Now consumers are more likely to buy animal needs online. The internet has taken over the consumer industry, and now is the most dominant factor and competitor with retailers. 

BC Partners Inc. agreed to a deal of $83 a share. PetSmart Inc's investors were allowed to hold the majority of their stake in the company during this takeover. For example, Longview Asset Management LLC, who has been a major investor since the launch of PetSmart, controlled 9% of the company and will continue to hold some of that under the new deal. 

This buyout could just be one of many upcoming for struggling retailers. When retailers compete with the internet, the retailers lose. The rate of convenience, discount, and expedited shipping cannot be compared. The only factor that retailers are hoping to retain is the personal shopping experience, and the ability to sample out goods before actually purchasing them. it will be interesting to see how retailers try to react and compete with the booming internet shopping. 

Source: http://www.wsj.com/articles/petsmart-to-be-acquired-by-investor-group-led-by-bc-partners-1418591002

Why areas with good jobs have hard-to-afford homes

http://www.cnbc.com/id/102255780

This article describes a recent issue facing large cities with the strongest job markets. Homes in those areas are becoming too expensive for young graduates looking for work to afford. This situation is limiting the choices of prospective homeowners into areas with less than ideal work options.

After the crash in the housing market before the recession, credit restrictions have rubber-banded back and are restricting new people from purchasing a house, regardless of their income situation.

One solution suggested by the author is building more homes in the more expensive areas to drive down prices. Unfortunately, the situation might get worse before it gets better, if more jobs are created without a matching increase in housing options.

Cheap Gas and its Effect on Inflation

http://www.ibtimes.com/producer-price-index-november-2014-cheaper-gas-prices-keep-inflation-low-1751242


Gas prices have been on the decline as of late and as of this past Thursday, crude oil prices in the U.S. are now below $60 a barrel "for the first time since July 2009."

Paul Dales, a senior economist at Capital Economics, said that the "Lower oil prices will drag down headline PPI inflation" for the next few months but economists at Capital Economics also believe that "the stronger labor market will mean that core PPI inflation will have risen above 2% in the second half of next year." What Dales is trying to say is that lower prices at the gas pump have lead to lower prices from producers (PPI - Producer Price Index) due to the lower cost of production. With gasoline prices continuing to fall, there is pressure on firms to lower their prices. As a result, inflation remained below the 2 percent target that the Fed has had in place for the 30th consecutive month.

The fact that they believe the core PPI inflation rate will be over 2% next year is important because core PPI excludes "volatile food and energy components of PPI", meaning crude oil is eliminated from consideration. The strong labor market "boosts wage growth" which is the driving force to the core PPI rising.

Sony Pictures hackers promise 'Christmas gift'

        According to the article, the hackers, who call them self the Guardians of peace are threatening to release more sensitive Sony Picture’s data from last month’s massive cyber break-in. They have already exposed a trove of sensitive data from embarrassing emails between Sony executives on compensation and celebrity secret.

     Several security researchers has pointed to North Korea since there are many similarities between this hack and last year attack against South Korea banks. It could be that the motivation of the attack comes from the upcoming release of the movie “The Interview”, a comedy about a plot to kill  North Korean leader.

http://money.cnn.com/2014/12/14/technology/security/sony-pictures-hack/index.html?iid=SF_T_Lead

Draghi and the dissenters

The European Central bank is currently having an internal debate on whether or not they should start purchasing large amounts of government bonds. The president of the ECB announced they wished to increase the assets on their balance sheet by $1.2 trillion. It was a controversial topic within the ECB as six or seven of 24 board members, and three of six people on the executive board opposed the proposition. I think quantitative easing is something the ECB should enact after seeing the success it had in the U.S. The Euro zone is facing dangerously low inflation and increasing the money supply with quantitative easing could be just what they need. In an area where so many countries are intertwined, deflation could be a very huge problem, which is why most members of the ECB are so eager to act. I think if the dissenters have their way and the ECB fails to act then the Euro zone could likely see some deflation which could have negative global effects.

http://www.economist.com/news/finance-and-economics/21636107-rift-top-ecb-dangerous-draghi-and-dissenters

Electronic Drivers License?

         Recently the state of Iowa has been developing an application which will allow citizens to have a virtual driver's license on their electronic devices. Currently the security plans for the app are a pin number and a biometric identification to control who is able to access the app. Although hard copies of driver's licenses will still be valid, I wouldn't doubt that this will become very popular. The state seems to really be embracing this idea, and as the governor Terry Brandstadt said, "we are really moving forward on this."

         It's interesting that the app plans to use biometric identification, which can include any physiological identification such as fingerprint scanning. Many recent smart phones such as the two most popular, the galaxy and the iphone already have fingerprint scanners, so there wont need to be any extra changes to phones or add-ons purchased. Thus, the implementation of the app should be very cheap.

         Since people in the 21st century are so attached to their phones this app will be very appealing because if they forget their driver's license they will almost always have their phone. What else is appealing about this app is that it eliminates the need for specially made ID's that are expensive and also need to be renewed. Not only would this app eliminate the prices of purchasing driver's licenses and renewing hem but it would also eliminate all of the need for resources that go into them.

        It will be interesting to see if the state of Iowa charges for this app, since it is a privilege. On the other hand, they might make it free in order to reduce resource consumption and make showing identification easier. What will be nice about this app is people wont have to go to the DMV every time they want to get their license renewed, instead the app can automatically update it. I wouldn't be surprised if the state either charged download or renewal fees for this app in order to generate revenue.

       My one concern with this app is the ease of identity theft. Nobody really knows the size or power of the hackers in the U.S. but I wouldn't be surprised if they targeted this app because this is the identity theft opportunity of a lifetime for hackers.

http://www.bbc.com/news/world-us-canada-30442292

Legal Cannabis in U.S. Hurting Mexican Cartels

Since the legalization of marijuana in some of the United States, Mexican drugs cartels have seen drops in their illegal business. Either recreational or medicinal marijuana is now legal in over half of the U.S. and American weed has now become a serious threat to illegally imported Mexican weed. NPR did an investigation in Mexico and talked to a marijuana farmer who said 1 kilogram of weed cost $60-90 two to three years ago but now that it is legal in more states, the price for a kilo has dropped to $30-40 and it is expected that the cartels will collapse beyond recovery if the price falls to $20/kilogram. The article also states that not only is legally grown U.S. marijuana gaining popularity because it is up front and legal, it is also of higher quality. Pot has been legal for recreational use in the U.S. for 11 months now and its effect on the illegal drugs market is already apparent.

It sure seems like the "experiments" in Colorado, Oregon, and Washington have been mostly successful and this news of its negative effect on Mexican cartels is certainly yet another good sign. It will also force illegal dealers to find income from somewhere else so they will have to get jobs and pay taxes on what they make rather than off-the-books deals where they keep profit. I wonder if these numbers of the declining illegal market will encourage more states to legalize as it looks like this will be more effective than the war on drugs ever was.

11 Months After Marijuana Legalization, Here's What's Happening to Cartels

Lew: 'Great success story' that U.S. is producing so much oil

 http://www.cnbc.com/id/102259863

Speaking at the "Opportunities for Tomorrow" conference treasury secretary Jack Lew said lower oil prices are "an unquestioned positive for the US economy."  He stated that the lower oil prices have helped boost our economy which hasn't been doing so well recently.  He compared the drop in oil prices to a cut in taxes.  He also spoke about the spending battle that is going on in Washington.  The congressional Republicans are wanting to come up with a solution that allows the government to stay open and keep spending money as an opportunity to repeal part of the Dodd-Frank banking reforms.  He thinks that the president and congress is going to have to come up with a trade-off.  He spoke on several other issues as well such as tax reform.  He said "there's no question that fixing our broken tax code is in the public interest.  Another topic he talked about was employment and wages.  He basically talked about the issues that we need to fix in our economy in the short run.

http://www.nytimes.com/2014/12/14/world/after-barren-years-in-somalia-signs-of-growth-in-bananas.html?hp&action=click&pgtype=Homepage&module=photo-spot-region&region=top-news&WT.nav=top-news&_r=0

Somalia's banana industry is growing again. The industry ran into trouble when the country broke out into civil war in in 1991. The civil war caused the Somali government to collapse. Bananas then became used as a source of currency in what became known as "the banana wars". The banana trade took a huge hit, but it has just started to recover. One of the reasons for the recent recovery is that Somalia is becoming a more stable country as it has recently elected a new president and adopted a new constitution. Also, farmers are increasing security so that they are able to conduct their business. The return of the banana industry is great news for the Somali economy. In 1990, the Somali banana trade was worth $96 million. The trades return is good for all of Somalia. There is also the fact that Somali bananas are said to be the best in the world.

The rise of the banana trade will hopefully be able to boost the Somali economy so that it can recover and maybe become even larger than it was before the country went into turmoil. Currently Dole and other large banana companies are hesitant in investing in Somalia because their are still concerns about stability, but Dole has invested their in the past. Perhaps Somalia will become more stable allowing for outside investment. But for now, the Somali banana trade is growing, which is a good sign for the future of Somalia.

The Most Expensive Picture Ever Sold

     What is the most you would spend in order to buy a photograph? $100? Maybe $200? A Photographer named Peter Lik took a photo titled “Phantom” in the Antelope canyons of Arizona and made art history by selling this piece for $6.5 Million.  The black and white photo shows a beam of light coming through a hole on the ceiling of the cannon resembling a ghost like figure. The private collector who purchased this piece has decided to remain anonymous.  Art experts have different views on whether a photograph should ever be worth this much money but someone out there bought it so according to that private collector it was worth every penny.


http://money.cnn.com/2014/12/11/news/economy/peter-lik-phantom/index.html?iid=SF_E_River

"Russia's Decision to Drop Pipeline Puts EU in Tough Spot"

In the article titled “Russia's Decision to Drop Pipeline Puts EU in Tough Spot” discusses Russia’s plan to abandon the natural gas pipeline through Europe. Putin said he was going to drop the pipeline under the Black Sea to Bulgaria in favor of an alternative route. The problem is that a lot of Russia is heavily dependent on Russia’s energy, and they are very vulnerable to a cutoff of Russia’s energy. The EU’s antitrust authorities said Russia’s half owner of the pipeline could not control its entire capacity. Russia challenged EU competition and energy market rules at the World Trade organization in April, the EU stopped talks with Russia about the project. 

What do you guys believe will happen in the future? What will be the implication of this?

Obama's economy

During president Obamas presidency many opponents of his policies have claimed Obama has hurt the economy even more than when he took office. Supporters claimed it was not his fault because he took office at the beginning of the worst economic down turn since the great depression. This article just looked at the facts since Obama took office.  The opponents have claimed unemployment has shrunk due to many people leaving labor force, not people getting more jobs. While some people have left the labor force, there have not been enough people leaving the labor force to bring it down to its current level. This past year was actually the best year for hiring since 1999. Opponent’s also claimed Obama’s economic plans are too slow. While it has taken the economy a while to recover, it is important to note Regan experienced two recessions during his presidency. It’s important to just look at the facts when evaluating Obama’s presidency because many politicians are misreporting economic facts and giving the public a bad idea of how the economy is doing.

http://money.cnn.com/2014/12/05/news/economy/obama-economy/index.html

Station Owners Like Low Gas Prices as Much as You Do

http://www.dailyfinance.com/2014/12/12/gas-stations-owners-like-low-gas-prices/

Gas station owners buy gas on the wholesale market.  When the wholesale price of gasoline falls quickly, the difference between the cost of wholesale gasoline (with taxes) and the price at the pump gets wider, boosting profits for stations.  The steeper the drop, the better.  Station profitability is at its highest since 2005.

While this does mean you could be paying even less for gasoline than you already are, gas stations do not make much money from selling gasoline, averaging only 3 cents a gallon.

When the wholesale price of gasoline soars, like it did in 2012, station owners can't increase the price at the pump as fast as their costs are going up or they risk losing customers to competitors.  But when the wholesale price is going down, like it is now, there isn't the same pressure to lower the price.

Because prices are lower, consumers no longer search all over town for the lowest price and they completely fill up their tank when they stop to get gas.  Then, they spend the left-over money on what's really profitable for station owners: the drinks and snacks inside.

The real question is how much longer the low gas prices will last.

Fannie Mae, Freddie Mac detail plans for 3% down-payment mortgages

http://www.latimes.com/business/la-fi-fannie-mae-freddie-mac-mortgage-downpayment-20141208-story.html

This Monday, Fannie Mae and Freddie Mac once again announced plans to back mortgages with down payments as low as 3%, in a move containing "safeguards to protect against abuses that led to the subprime housing market crash." The finance giants were seized by the government in 2008 due to their near-bankruptcy because of the bad mortgages they backed. 187.5 billion dollars were pumped into the companies to keep them from going under. They claim that as the housing market has rebounded, the companies have returned to profitability. FHFA Director Melvin Watt announced the new low-down payment option in October, causing a stir of criticism from critics who believe the companies are too risky. Watt, however, says the 3% down payment programs come with "strong underwriting standards that provide a responsible approach to improving access to credit while ensuring safe and sound lending."