The U.S. Economy Slowed Sharply in Final Months of 2015 - Time Business

The U.S. Economy Slowed Sharply in Final Months of 2015

Posted: 29 Jan 2016 06:53 AM PST

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(WASHINGTON) — The U.S. economy’s growth slowed sharply in the final three months of 2015 to a 0.7 percent annual rate. Consumers reduced spending, businesses cut back on investment and global problems trimmed exports.
The slowdown could renew doubts about the durability of the 6½-year-old economic expansion, though most economists expect growth to rebound in the current January-March quarter.
The government’s estimate Friday of the economy’s expansion in the October-December period was less than half the 2 percent annual growth rate in gross domestic product in the third quarter of 2015. It was the weakest showing since a severe winter reduced growth to a 0.6 percent annual rate in last year’s first quarter.
Much of the weakness last quarter reflected a slowdown in consumer spending, which grew at an annual rate of just 2.2 percent, compared with a 3 percent rate in the previous quarter. Spending on both durable goods, such as cars, and nondurable goods, such as clothing, slowed.
Consumer spending accounts for about two-thirds of economic activity, and analysts are counting on the strong employment growth to fuel a rebound in the current quarter. Some, however, worry that China’s economic troubles and sinking oil and stock prices could continue to dampen the U.S. expansion.
Friday’s estimate of fourth-quarter growth was the first of three that the government will issue.
Besides consumer spending, another source of weakness last quarter was a drop in exports. It reflected in part a stronger dollar, which has made U.S. goods pricier and therefore less competitive on overseas markets. Persistent weakness in such key export markets as China and Europe hurt, too. A wider U.S. trade deficit cut annual growth for the quarter by 0.5 percentage point.
Another drag came from cutbacks in business investment spending, which fell at a 1.8 percent annual rate, with spending on structures down 5.3 percent. That reflected a 38.7 percent plunge in spending in the oil and gas industry, which has slashed drilling and exploration in response to the plunge in oil prices.

In addition to their reduction in investment, businesses cut spending on stockpiles to try to pare unwanted inventories. That effort trimmed growth by 0.5 percentage point in the fourth quarter.
Home construction grew at a solid 8.1 percent annual rate. Government spending slowed to a growth rate of just 0.7 percent. Spending by the federal government grew by a 2.7 percent annual rate, while state and local governments cut back on spending at a rate of 0.6 percent.
For all of 2015, the economy grew 2.4 percent, matching the growth in 2014. Both years improved on a 1.5 percent increase in 2013. The 2015 growth continues the economy’s pattern of subpar growth since the Great Recession officially ended in June 2009.
For 2016, economists have forecast another year of modest growth of around 2 percent. At the same time, they have nudged up the likelihood of a recession this year. While still low, the likelihood is now put at around 20 percent, though most analysts still see an outright recession as unlikely.
This week, the Federal Reserve issued a cautious assessment of the economy. The Fed left interest rates unchanged after having raised its benchmark short-term rate in December from record lows. Many analysts think that economic weakness, subpar inflation and global pressures will cause the Fed to slow its pace of rate hikes this year from what had been expected to be four increases to perhaps only two.
Economists expect strength in the domestic economy this year to offset weakness in export sales and in the U.S. energy sector.
While economic growth was lackluster last year, hiring was not. The economy added an average of 284,000 jobs a month in the final quarter of last year. The unemployment rate ended the year at a low 5 percent.
Mark Zandi, chief economist at Moody’s Analytics, has said he expects strong job growth to keep lowering unemployment and to help boost wages, which have lagged in this recovery. He said the extra consumer spending, which will be aided by lower gas prices, will likely support economic growth of around 2.5 percent in 2015.
Growth at that level is above the economy’s potential right now, which many analysts put at around 2 percent, reflecting a slower pace of people entering the job market and slower productivity growth.

These Companies Are Working on a Zika Vaccine - Fortune

These Companies Are Working on a Zika Vaccine Posted: 29 Jan 2016 07:59 AM PST More Chase ATMs Will Now Let You Withdraw Cash With a PhoneReddit’s CEO Is Planning a Major Change The Zika virus has spread rapidly across the Americas, arriving in Brazil last May and creeping into 22 other countries and territories around the region. The virus’ spread has been accompanied by a steep increase in babies born with abnormally small heads and in cases of Guillain-Barre syndrome, an uncommon nervous system disease. This has raised the alarm among public health officials around the world—and launched the quest for a vaccine that could stop its spread. The U.S. and international governments are pushing forward with programs for Zika vaccines, and at least three pharmaceutical companies are either considering or actively pursing programs, including giants GlaxoSmithKline, and Sanofi . But the company that appears to be the farthest along is a relatively small $500 million market cap biotech named Inovio Pharmacuetucals. Wall Street has shown interest in the company. Inovio’s stock was up about 8% today on news that it is entering clinical trials with its MERS vaccine, which could also hold promise for a future Zika vaccine. Nonetheless, even Inovio is likely a ways off from developing a human Zika vaccine. “It is important to understand that we will not have a widely available, safe, and effective Zika vaccine this year, and probably not even in the next few years,” Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases (NIAID), said in a press conference. The advantage of Zika vaccine programs is that they can use similar mosquito-based diseases, part of a family called flaviviruses, like dengue, West Nile virus, and chikungunya as a “jumping off” point. While researchers are currently trying to learn more about the basics of the Zika virus and its effects on the human body given how new the disease is, they can already use past vaccine development platforms from other flaviviruses as a foundation since they spread in similar ways. NIAID is already working on two approaches: a DNA-based vaccine, similar to a strategy used for West Nile virus, which has been found safe and effective in a phase one trial. It is also working on a more traditional killed virus-vaccine, similar to those already developed to prevent dengue. Traditional killed-virus vaccines, also called live-attenuated vaccines, are what most of us are used to. They are grown in eggs using live viruses, and then made inactive by a chemical process, and are the basis for the vast majority of vaccines we take as children and annually to prevent the flu. They are time intensive to develop, typically requiring between 10 and 15 years before they are approved, according to GlaxoSmithKline. DNA-based vaccines, on the other hand, can reduce that development time by creating a synthetic DNA sequence in a lab that can trigger the human body to create the same antigens as from a killed virus. This cuts development time since it doesn’t need to grow a live virus, which can have unpredictable development pathways. Inovio Pharmaceuticals has also been working on a DNA-based vaccine for Zika since December. In that time, Inovio has created a DNA strand that can potentially prevent the virus, using its knowledge from its dengue virus program. It is now testing the vaccine in mice and plans to move into testing primates “in the next few weeks,” said Inovio CEO J. Joseph Kim. Once its safety is confirmed, the vaccine will move into phase one testing in humans—as soon as the end of 2016. “The beauty of this technological platform is that the vaccine is simply a DNA sequence developed in water,” said Kim. “It cuts through all the difficult handling and complex development times of traditional vaccine approaches.” Inovio has taken this same approach with an Ebola vaccine, going from “bench to clinic”—researcher terms, meaning from initial creation to human testing—in just over 18 months. That program attracted the interest of the U.S. Defense Advanced Research Projects Agency (DARPA), which gave the company $45 million to support the program’s ongoing development. The biotech is also working on a DNA-based vaccine for MERS, which has gone from its creation in a lab to a phase one trial at Walter Reed Army Institute of Research in just over a year. Still, while animal applications of these preventatives have been approved in animals, DNA-based vaccines are one of the latest medical advancements, and one has yet to be approved for use in humans in the U.S. Even though Inovio has attracted fans on Wall Street, it still has a lot to prove. This article originally appeared on Fortune.com

The One Economic Book You Must Read Now - Time Business

The One Economic Book You Must Read Now

Posted: 28 Jan 2016 05:39 AM PST

One of the most disturbing things about our economic era is its juxtapositions. Wages are flat, yet corporations are flush. Interest rates remain at nearly unprecedented lows, yet investment lags. Growth is there – barely – yet it’s not coming from the places that we expected (the emerging markets) and is slower than expected in the U.S. and Europe, despite unthinkable money dumps by governments since the financial crisis. The economic gap between Main Street and the markets, which are increasingly volatile, is as big as it’s ever been.
If you want to understand this bifurcated world and where it’s headed, there is no better interpreter than Mohamed El-Erian. El-Erian is the former CEO of PIMCO, the world’s largest bond trading firm, and now the chief strategist for insurance giant Allianz. His new book, “The Only Game In Town: Central Banks, Instability and Avoiding the Next Collapse” (Random House), is an excellent primer on how we got here. It’s also a guide on what to expect as the world struggles to cope with slower, less equal growth and the resulting populism, nationalism and ugly partisan politics that we see in countries from the U.S. to France to China.
At the center of it all is an unglamorous institution: The central bank. Central banks are in charge of controlling the world’s money supply and how quickly and easily it can move between countries, companies and the pockets of consumers. In the wake of the 2008 financial crisis and Great Recession, they were forced, in large part thanks to political gridlock in many countries that made larger fiscal stimulus plans impossible, to pump unthinkable amounts of cash into the global system—around $22 trillion in total ($4 trillion from the U.S. Federal Reserve alone)—and slash interest rates to zero. It worked, in the sense that rather than a Great Depression, we got a “new normal” of slower growth. But hey, at least it was growth.
But that New Normal—a term that El-Erian himself coined while at PIMCO—is coming to an end. What replaces it will likely be a period of economic and political volatility. That, along with instability of the sort that we have only just begun to see, with roller coaster markets rising and falling on the latest jittery news from China or the oil markets, and formerly unimaginable politicians like Donald Trump or Marine Le Pen taking advantage of people’s fears that tomorrow will be worse than today.
How did we get here? In a phrase, too much finance — a topic near and dear to my heart, and the subject of my own upcoming book, “Makers and Takers: The Rise of Finance and the Fall of American Business” (Crown, May). In the 40 or so years leading up to the 2008 financial crisis, the economic policy makers and powers that be focused way too much on promoting and encouraging the financial sector – and the growth of credit – to the detriment of Main Street and society as a whole.

As El-Erian writes, “Even the common labeling of the industry itself changed—from “financial services” to just “finance.” Instead of seeing Wall Street for what it is and should be – a helpmate to business – it became the tail that wagged the dog. “Suddenly, the highest level of capitalistic achievement involved finance,” writes El-Erian.
There are many important and growth-hindering ramifications of this. But the one El-Erian focuses on most closely is the growing power of global central bankers over the last several decades. From Alan Greenspan onwards, they’ve lowered interest rates, eased and smoothed the business cycles, and lulled us all into thinking that markets should go in only one direction: Up. But it’s been a sugar high. Investment into the real economy has lagged. Now, the disconnect between markets and Main Street has become so disconcerting that, in El-Erian’s view, businesses are scared to invest and consumers are scared to spend. Nobody knows what the future will bring. So we are all, in some sense, turning Chinese – saving for not just a rainy day, but the prospect of another economic hurricane.
What can get us back on the right track? There are some positive developments. New technologies in the energy sector, the sharing economy, innovations in healthcare and biotech, as well as the industrial Internet all offer hope of a higher growth future. But harnessing their power will require political will. In order for prosperity to be shared, governments have to figure out a way to train a 21^st century workforce, rebuild trust in global institutions, create legislative frameworks that spread wealth more equitability (think major tax reform, for example), and so on. As El-Erian admits, policymakers have shown almost no ability to do so over the last few years. That’s why his most likely new “New Normal” is an ongoing era of rocky markets and unpredictable growth.
Market geeks will appreciate the investment tips for navigating this world that he presents at the end of his book. But one of the most interesting and insightful bits of advice he offers to corporate leaders is to, in the words of Steve Jobs, “think different.” In a world in which old economic and political paradigms are no longer relevant, companies will need to overcome the decision biases that lead them to follow the same old path, again and again, to their demise, in a new economic era. Success in the New New Normal will come from unexpected places. That means corporations need much, much more diversity in their workforces – in terms of gender, nationality, educational and economic background and so on. El-Erian cites companies like Google, which have taken diversity hiring to a new level, focusing more on passion, intellect and character than the schools and workplaces on a résumé. If more firms follow, then the age of volatility will have at least one upside.

China’s GDP Growth Could Be as Low as 4.3%, Top Economist Says - TIME

China’s GDP Growth Could Be as Low as 4.3%, Top Economist Says

Posted: 27 Jan 2016 12:46 AM PST

Official data last week showing that China’s economy is growing at its slowest rate in a quarter of a century has investors worldwide concerned.
But one Chinese economist reckons the figures provided by the country’s National Statistics Bureau — which have long been treated with some suspicion — could be inflated by almost 3 percentage points, the Wall Street Journal reports. That would make the outlook even gloomier.
Xu Dianqing, an author of several books on China’s economy and economics professor at Beijing Normal University and the University of Western Ontario in Canada, has been sifting through data on the country’s manufacturing sector, which accounts for some 40.5% of the world’s second largest economy.
The sector officially grew by 6% during 2015, but Xu believes that number could be wrong “no matter how the number is counted,” the Wall Street Journal quoted him as saying. Monthly figures released by the government that include the output of thermal power stations and factories making railway freight, iron ore, plate glass and steel suggest that many industries contracted significantly, according to Xu.
Xu argues that China’s overall GDP growth — barring any other gaps in the official data — was in fact between 4.3% and 5.2% in 2015, compared with the official year-on-year growth rate of 6.9%.
After the release of the latest data, the National Statistics Bureau was quick to head off any suggestion that the the growth figures might be overoptimistic, with an official giving a “warning that the use of unofficial methods and incomplete data fail to give a complete picture.”
In a possibly unrelated — but still intriguing — twist, the head of the National Statistics Bureau, Wang Baoan, is now being investigated for a “severe disciplinary violation,” Chinese state media said Tuesday, using the Communist Party terminology normally used to refer to corruption probes.

Has Apple Peaked? - TIME

Has Apple Peaked?

Posted: 26 Jan 2016 03:00 AM PST

When Apple reports its earnings on Tuesday, it’s virtually certain that the tech giant will report record quarterly profits. Apple almost always does.
The question is, are overall iPhone sales growing or shrinking? And if they’re on the rise, will the pace of that growth be enough to cheer Wall Street and stem the recent drop in Apple’s stock, which has tumbled nearly 5% this year and 25% from its all-time highs?
Despite the recent slump, Apple APPLE INC. AAPL -1.29% is still trading at around $100 per share, and investors have made the consumer electronics giant—with a total market value of $562 billion—the most valuable company on earth.
That doesn’t mean they quite believe in it, though.
For one thing, Apple now faces stiff competition for the title of world’s most valuable company. Thanks to Apple’s decline and the 40% gain in shares of Alphabet ALPHABET INC. GOOGL -1.59% since the start of 2015, Google’s parent company is closing in on Apple, with a total market value of $507 billion.
Moreover, the stock’s price is less than 11 times the earnings analysts expect for next year. That compares with a P/E ratio of 16 for the S&P 500, and 19 for rival Microsoft. In other words, the “E” in Apple’s P/E is so high that its total value must be similarly stratospheric, but investors are skeptical that Apple’s profits can grow quickly from here.
Apple does have enormous strength.
The iPhone, which represents two-thirds of the company’s revenues, grew sales 52% over the past year. Continuous upgrades give Apple a regular source of huge cash flow, plus it can still set a premium price “despite a deflationary environment for smartphone prices,” says Motley Fool Asset Management portfolio manager Dave Meier, who holds the stock.

 MoneyOn the other hand, smartphones are a maturing business, and it’s hard for new products to move the needle at a company of Apple’s size.
“There is no next big thing at Apple that will suddenly dwarf the iPhone,” concedes Michael Sansoterra, portfolio manager of RidgeWorth Large Cap Growth, another Apple owner. Sales of the iPad and digital music have been soft, and the Apple Watch wasn’t the massive hit Apple fans were hoping for. Retailers were offering steep discounts on the watches over the holidays.
What to do: The iPhone-driven corporate leap that brought Apple from about $30 a share six years ago to triple digits today won’t be repeated. But the stock could be compelling for investors seeking tech exposure with a bit less drama.
Apple’s comparatively modest P/E means it doesn’t have to keep shooting out the light to keep its share price rising. And its enormous cash stake — some $200 billion — means investors can expect to steadily get paid back in dividends and stock buybacks. It’s also a business you can get your arms around conceptually.
“It’s not like Microsoft, with lots of different businesses,” says Lamar Villere of Villere Balanced Fund. “It’s straightforward, high-cash, and high-profit margin, and yet it’s valued as though it’s going to be shrinking.”

Tesla CEO Elon Musk Says Cheap Oil Will Hurt Electric Cars - Fortune

Cheap oil—and in turn, lower gas prices—usually means costs savings for drivers, a lower U.S. trade deficit, and increased sales of gas-guzzling trucks and SUVs. But not everyone—or industry—is a winner.

Electric vehicle sales have already slowed as oil prices have dropped nearly a third in the past 12 months. The average price for regular has fallen from $2.74 per gallon in June to $1.85 a gallon as of Monday, according to the U.S. Energy Information Administration.

Elon Musk, the CEO of electric carmaker Tesla  TSLA -3.05% , expects the suffering to continue. The electric car industry, as a whole, will take a hit from lower oil prices, Musk told CNN’s Kristie Lu Stout in an interview Monday. “It just makes economic sense.”

But Musk argued that Tesla’s luxury, higher-priced electric vehicles will better withstand the effect of cheap oil prices than its lower-priced rivals. Musk didn’t elaborate, but the assumption is that consumers of his high-priced luxury cars—they start at $70,000 before incentives—aren’t buying them just for fuel savings.

Automakers that produce models that come in gas or electric will be hardest hit, Musk predicted. Under that scenario, consumers have no compelling economic reason to pick the electric vehicle over the gas-powered one.

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Major automakers such as Ford and General Motors  GM -0.17%  are adding more plug-in hybrid and all-electric cars to their portfolio. And while, electric vehicle sales may slow, it’s not exactly hurting their bottom line.

GM delivered a 8% more vehicles in 2015 than the year prior largely because of the high demand for SUVs, crossovers, and trucks. A similar story played out at Ford  F -1.32% .

“Overall low gas prices are good for our business” because pickups are a big part of Ford’s business, Ford CEO Mark Fields said during a Fortune Brainstorm Tech event in January. However, he did add an important caveat: Consumers know that gas prices will eventually rise, so Ford’s aim is to have the best fuel economy in every segment it’s in.

Unlike Tesla, which is a pure all-electric business, major automakers are investing in both fuel sources, some more heavily than others. GM, Ford, Volvo, and now Volkswagen have all made public commitments and investments in developing electric vehicles.

GM CEO Mary Barra unveiled the new Chevrolet Bolt EVat CES, the annual consumer electronics trade show held in Las Vegas in early January. By this time next year, the hatchback will be in full production and sitting in showrooms across the U.S. Audi introduced its first all-electric car, the A3 Sportback e-tron, to U.S. markets this year and has plans to produce an all-electric SUV by 2018.

Cheap oil has already forced the Obama Administration to reexamine its electric vehicle goals. U.S. Energy Secretary Ernest Moniz said Thursday that sales of electric vehicles in the United States may not top one million until 2020, in part due to low gas prices.

President Barack Obama set a goal in 2008—when gas prices hovered round $4 a gallon and he was still just a candidate—to have one million plug-in electric vehicles on the roads by 2015. He repeated that goal during his 2011 State of the Union address. But only 400,000 electric vehicles have been sold in the U.S. to date.

Three Top Executives Are Leaving Twitter, Reports Say - Fortune

Three Top Executives Are Leaving Twitter, Reports Say Posted: 25 Jan 2016 03:37 AM PST The executives in charge of Twitter’s product, engineering, and media divisions are on their way out, according to multiple reports published on Sunday. Alex Roetter, Twitter’s senior vice president of engineering, Kevin Weil, the company’s senior vice president of product, and Katie Jacobs Stanton, its vice president of global media, are leaving the company, according to reports in the New York Times and technology website Re/code. Together, that’s three of 10 executives that comprise Twitter’s leadership team. Twitter is expected to announce their replacements on Monday, according to the reports, in addition to two new board members—one a “high-profile media personality,” according to the Times. Twitter also is expected to appoint a new chief marketing officer. (The company has not yet responded to the reports.) The social media company has struggled since co-founder Jack Dorsey became CEO in October 2015, replacing Dick Costolo. Dorsey, who also serves as chief executive of newly public payments company Square, was expected to give the challenged company a stronger sense of vision, particularly with regard to its product. Thought it has made some changes—it announced “Moments,” an aggregation of thematically similar tweets about current events, a day after Dorsey took the top job—investors continue to penalize the company. Twitter stock most recently closed at $17.83, down considerably from Dorsey’s first day as CEO ($28.15) and drastically since its first day as a public company in 2013 ($41.65), let alone from its all-time high of $69 two years ago this month. Through it all the company has battled criticism that its service will never see adoption as wide as rival Facebook—. All three executives—Roetter, Weil, and Stanton—are well-regarded in the industry. Roetter is responsible for software and hardware engineering, analytics, and operations. He joined Twitter in 2010 and was previously director of engineering at the Laufer Wind Group, which develops radar technology for renewable energy applications. Weil is responsible for product development and design. He joined Twitter in 2009, led Twitter’s analytics team and later product development for Twitter’s advertising platform. He previously worked at web media startup Cooliris. Stanton is responsible for Twitter’s partnerships with news, television, sports, music organizations around the world. She joined Twitter in 2010 and ran the group responsible for establishing overseas offices—the UK, Germany, Japan, Brazil, Australia, and India, among others, opened during her watch. Before Twitter she worked for the White House. This article originally appeared on Fortune.com

Does Coca-Cola Contain Cocaine? - Living Science

Does Coca-Cola Contain Cocaine?

by Elizabeth Palermo, Associate Editor   |   December 16, 2013 11:27am ET

There's nothing quite like the sugary rush that accompanies a cold glass of Coca-Cola — but did you know that the aptly named Coke used to deliver an even bigger kick? Until 1903, the world-famous soft drink contained a significant dose of cocaine.

While the Coca-Cola Company officially denies the presence of cocaine in any of its products — past or present — historical evidence suggests that the original Coca-Cola did, in fact, contain cocaine.

Coca-Cola was first created in 1886 by Atlanta pharmacist John Pemberton, who modeled his beverage after a then-popular French refreshment, coca wine, made by mixing coca-leaf extract with Bordeaux wine. To avoid liquor regulations, Pemberton chose to mix his coca-leaf extract with sugar syrup instead of wine. He also added kola-nut extract, lending Coca-Cola the second half of its name, as well as an extra jolt of caffeine. [6 Party Drugs That May Have Health Benefits]

7 Numbers That Put This Market Madness In Perspective - TIME

7 Numbers That Put This Market Madness In Perspective

Posted: 21 Jan 2016 08:20 AM PST

If you’ve been paying attention to the frantic stock market headlines—or doing your best to ignore them—you know about the recent carnage on Wall Street.
Both the Dow Jones industrial average and Standard & Poor’s 500 index were down more than 9% so far this year when trading began today. And both major U.S. stock indexes were off around 13% from their May 2015 highs, which means that domestic equities are officially in a “correction,” defined as a loss of at least 10%.
But here are some important numbers that may be less familiar—and can help you put the market’s wild gyrations into perspective.
14,650
This is the level that the Dow Jones industrial average would have to fall below to trigger an official bear market, which is defined as a drop of 20% or more. As of Wednesday’s close, the Dow stood at 15,766.
The last time the Dow traded below 14,650 was in 2013, when the economy was still working through the aftermath of the global financial crisis.
1,705
This is the level the S&P 500 would have to sink to for it to be snared by the bear. The benchmark index closed on Wednesday at 1,859. The last time the S&P 500 fell to these levels was in 2014.
1.67%
This was the lowest yield for 10-year Treasuries last year; right now it’s 1.97%. Why look at bonds when the stock market is sinking? Often, stock investors look to what the bond market is doing to seek confirmation of their own fears.
If the 10-year Treasury yield dips below its 2015 lows, that would suggest that fixed-income investors are more scared than they were during last year’s worst panic — a sign this could be the bear market everyone is waiting for.
$36
Crude oil prices dipped to below $27 a barrel on Wednesday, triggering the panic on Wall Street. A good deal of the drop has to do with the glut of oil on the market, especially now that economic sanctions on Iran have been lifted, potentially adding to supplies. But economists are equally worried about the state of future demand for oil, especially as China’s economic growth slows more quickly than expected.
In the U.S., it costs roughly $36 a barrel to produce a barrel of crude oil, compared to more than $40 a barrel in Canada and nearly $50 a barrel in Brazil. If crude oil were to climb back above $36, it would support the prospects of the U.S. energy sector, which has been a drag to corporate profit growth in the S&P 500. Oil above $36 would also go a long way toward reassuring U.S. investors that the domestic economy is unlikely to slip into recession anytime soon.

2
Heading into the year, the Federal Reserve looked as if it might raise short-term interest rates modestly four times this year, as part of its gradual effort to “normalize” interest rates given the expanding U.S. economy.
But the market sell-off may put a crimp in the Fed’s plans. “The stock market clearly views four rate hikes as too much too fast,” noted Ed Yardeni, president and chief investment strategist at Yardeni Research. Fed officials “should be starting to have second thoughts about hiking rates again,” he added, “especially given the unrelenting rout in stock prices and the free-falling price of oil.”
A January survey by Bank of America Merrill Lynch found that a majority of fund managers now think that the Fed will hike rates only twice this year, and a growing number think there could be only one rate increase in 2016.
If the Fed were to telegraph that change in mindset, it could help the markets recover. European Central Bank president Mario Draghi hinted at the possibility of yet more stimulus for the Eurozone, lifting the European markets.
12%
The $64,000 question is whether the U.S. is headed for a recession or not. Why? In most cases, bear markets in stocks foreshadow a recession in the real economy that’s either begun or is about to start in the coming weeks or months.
Yet only 12% of fund managers surveyed by Bank of America Merrill Lynch believe this economy is likely to go into reverse in the next 12 months.
That’s key. Major sell-offs that didn’t precede recessions have averaged losses of around 20%. That pales in comparison to the 50% or greater losses in the last two bear markets. And bear markets that don’t foreshadow a recession typically last only seven months, far shorter than most bears.
40
In past market panics, the CBOE Volatility Index approaches or climbs above a reading of 40. That’s roughly double the historic level. But on Wednesday, when the Dow fell as much as 566 points at one point in the day, the so-called “fear index” closed at less than 28.
So there’s hope yet.

North Korea Says It Has Arrested an American University Student for ‘Anti-State Acts’ - Associated Press

(SEOUL, South Korea) — North Korea said Friday that it had arrested an American university student for alleged anti-state acts.

Pyongyang’s Korean Central News Agency reported that authorities are investigating the student who it says entered the North as a tourist with a plot to undermine a unity among the North Koreans. It said the student has links to the U.S. government.

KCNA identified the person as Warmbier Otto Frederick, a student at Virginia University. North Korea has sometimes listed English-language surnames first.

The announcement came as Washington, Seoul and others are pushing hard to slap North Korea with tougher sanctions for its recent nuclear test. In the past, North Korea often announced the arrests of foreign detainees in times of tension with the outside world in an apparent attempt to wrest concessions.

Earlier this month, CNN reported that North Korea had detained another U.S. citizen on suspicion of spying. It said a man identified as Kim Dong Chul was being held by the Pyongyang government and said authorities had accused him of engaging in spying and stealing state secrets.

The U.S. State Department said it could not confirm the CNN report. It declined to discuss the issue further or confirm whether the U.S. was consulting with Sweden, which handles U.S. consular issues in North Korea because Washington and Pyongyang do not have diplomatic relations.

The United States and North Korea are in a technical state of war because the 1950-53 Korean War ended with an armistice, not a peace treaty. About 28,500 American troops are stationed in South Korea.

Federal Budget Deficit Will Rise to $544 Billion This Year - Time Business

Federal Budget Deficit Will Rise to $544 Billion This Year

Posted: 19 Jan 2016 08:34 AM PST

(WASHINGTON)—A government report released Tuesday estimates that this year’s budget deficit will rise to $544 billion, an increase over prior estimates that can be attributed largely to tax cuts and spending increases passed by Congress last month.
The estimate from the Congressional Budget Office also sees the economy growing at a slower pace this year than it predicted just a few months ago. It projects the economic growth will slow to 2.7 percent this year; it foresaw 3.0 percent growth in 2016 in last summer’s prediction.
Over the coming decade, CBO predicts deficits totaling $9.4 trillion. That’s up $1.5 trillion from its August estimate, with much of the increase mostly due to last month’s tax legislation, which permanently extended several tax cuts that Congress had typically renewed temporarily.
Last year’s deficit registered $439 billion, the lowest of President Barack Obama’s term in office.
The deficit increase to $544 billion is due to several factors, CBO said, particularly the retroactive extension of tax cuts that had expired at the beginning of last year and additional spending for the Pentagon and domestic agencies that’s a result of last year’s budget deal. A timing shift are large payments is also at work. The current budget year ends Sept. 30.
The deficit issue has largely fallen in prominence in Washington in recent years, due in large part to its fall from record highs and a sense of resignation that Obama and congressional Republicans simply can’t agree on ways to cut it after some failed attempts in recent years. At 2.9 percent of the size of the economy, most economists don’t believe the deficit is very worrisome in the short term.
But the picture over the long run is more dire, CBO says in its report. As deficits rise over the decade and the national debt grows, interest rates are likely to be forced up, economic growth could slow, and policymakers may have no choice but to raise taxes and cut spending more sharply than if they acted now.
Deficits would rise to about 5 percent of gross domestic product within 10 years, CBO expects, and the resulting debt could cause big economic problems.
“Such high and rising debt would have serious negative consequences for the nation,” CBO said.

Individual Investors Are Staying Calm Despite the Stock Slide - TIME

Individual Investors Are Staying Calm Despite the Stock Slide

Posted: 19 Jan 2016 03:30 AM PST

So far this year, the Dow Jones industrial average has sunk more than 1,436 points, amounting to an 8% loss in stock market wealth. If you go back to the market’s highs last year, the Dow is now down nearly 13%, while the Standard & Poor’s 500 index is off nearly 12%.
Yet individual investors appear to be surprisingly calm. How can we tell? First, a new survey of of investors with at least $10,000 in their accounts, conducted between January 6 and 11 by the online broker E*Trade, found the following:
Investors are growing more bearish…
55% of self-directed investors described themselves as being “bearish”—meaning they believe the stock market is going to decline—up from 44% last summer.
… but a majority remain positive.
In total, 54% of investors think the market will either “stay basically where it is” or “rise” in the next three months. By contrast, only 23% expect a 5% drop and just 16% are bracing for a 16% decline.
Very few investors are forecasting armageddon.
Only 2% of respondents said they expect a 20% decline or greater.
And investors remain positive about the economy.
One third of investors describe the underlying economy as being “good” or “great” and another 47% describe it as “fair.” In all, only 20% describe the economy as being poor, which is important.
Why? First, it reduces the odds of a full-blown bear market, since equities foreshadow what’s to come in the economy six to nine months down the road. And even if the selling continues, a growing economy decreases the likelihood of a grisly crash. Major sell-offs that didn’t precede recessions have averaged losses of around 20%. That pales in comparison to the 50% or greater losses in the last two bear markets.
Meanwhile, a Jan. 14 survey of investor sentiment by the American Association of Individual Investors also reveals something interesting.
While bearishness is on the rise…
Right now, less than 18% of investors in this survey described themselves as being “bullish,” while more than 45% say they are “bearish”. The ratio of self-described bulls to bears has fallen to the lowest levels in history.
…bears are not in the majority.
The AAII survey does something interesting. In addition to letting investors describe themselves as bullish or bearish, it gives respondents a third choice: “neutral.” If you add the number of “neutral” respondents to the bulls, about 55% of investors are bullish or neutral.
And that’s roughly the same percentage of neutral-plus-bullish investors as in March 2009, when this bull market began.

China’s Economic Growth Slowest in 25 Years - TIME

China’s Economic Growth Slowest in 25 Years

Posted: 18 Jan 2016 09:25 PM PST

(BEIJING) — China’s economic growth edged down to 6.8% in the final quarter of 2015 as trade and consumer spending weakened, dragging full-year growth to its lowest in 25 years.
Growth has fallen steadily over the past five years as the ruling Communist Party tries to steer away from a worn-out model based on investment and trade toward self-sustaining growth driven by domestic consumption and services. But the unexpectedly sharp decline over the past two years prompted fears of a politically dangerous spike in job losses.
Full-year growth declined to 6.9%, government data showed Tuesday. That was the lowest since sanctions imposed on Beijing following its crackdown on the Tiananmen Square pro-democracy movement caused growth to plummet to 3.8% in 1990.
The October-December growth figure was the lowest quarterly expansion since the aftermath of the global financial crisis, when growth slumped to 6.1 percent in the first quarter of 2009. Growth in the July-September quarter of 2009 was 6.9 percent.
Growth in investment in factories, housing and other fixed assets, a key economic driver, weakened to 12% in 2015, down 2.9 percentage points from the previous year. Retail sales growth cooled to 10.6 percent from 2014’s 12 percent.
“The international situation remains complex,” said Wang Bao’an, commissioner of the National Bureau of Statistics, as a news conference. “Restructuring and upgrading is in an uphill stage. Comprehensively deepening reform is a daunting task.”
Growth was in line with private sector forecasts and the ruling Communist Party’s official target of about 7% for the year.
Beijing responded to ebbing growth by cutting interest rates six times since November, 2014, and launched measures to help exporters and other industries. But economists note China still relies on state-led construction spending and other investment.
December exports shrank 1.4% from a year earlier, well below the ruling party’s target of 6% growth in total trade. For the full year, exports were down 7.6%, a blow to industries that employ millions of Chinese workers.
Forecasters see indications retail sales and other activity accelerated toward the end of 2015, suggesting Beijing’s efforts to put a floor under the downturn are gaining traction.

“The growth picture remains two-sided. The real estate construction slump and weak exports continued to weigh on activity,” said Louis Kuijs of Oxford Economics in a report.
“Meanwhile, though, consumption continued to expand robustly, supported by solid wage growth,” said Kuijs. “The robust growth in the consumption and services nexus is key for policymakers. They need it to avoid labor market stress.”
Spending on online commerce grew by 33.3% over 2014. Wang said the share of total economic activity accounted for by consumption rose to 56.4%, up 15 percentage points from 2014.
Forecasters expect economic growth to decline further this year, with the International Monetary Fund targeting a 6.3 percent expansion.

Google’s Self-Driving Cars Still Need Human Help - TIME

Google’s Self-Driving Cars Still Need Human Help

Posted: 13 Jan 2016 09:07 AM PST

Google’s fleet of self-driving cars have now traveled millions of miles, while some version of autonomous vehicles are expected to go on sale in the next few years. Before that happens, though, they’ll have to get better at navigating traffic without the need for human intervention.
The search giant has issued a report to California regulators showing how often its autonomous driving software malfunctioned while on the state’s public roads between September 2014 and November 2015. During that period, Google’s self-driving cars reported 341 safety-related “disengagements,” or instances when a human driver sitting in the vehicle needed to take control.
The vast majority of these disengagements had to do with technical glitches. Google reported that hardware issues like a broken wire, or software problems like an inaccurate GPS, led the self-driving car to disengage 272 times during the period. The test drivers who sit in the cars were alerted to these disengagements by audio and visual signals and claimed control of the vehicle in 0.84 seconds on average.

There were also 69 instances when a human driver preemptively took control of a self-driving car in order to ensure the vehicle’s safety. Thirteen of those incidents would have resulted in collisions if the self-driving software was left to act by itself, according to Google. In the other cases, the car performed an incorrect action, like running a traffic light, but wasn’t in danger of a crash.
Google uses a simulator to recreate the driving conditions after the fact to determine whether its cars would have crashed without driver intervention.
While the new data illustrate that Google’s cars aren’t perfect, the number of disengagements has been steadily decreasing over time. Disengagements caused by technical glitches or failures fell from one per 785 miles in the fourth quarter of 2014 to one per 5,318 miles a year later.
Overall, Google has clocked more than 420,000 miles on California public roads. The vast majority of Google’s incidents occurred on city streets in the Mountain View area, near the company’s headquarters. The company is focusing on learning to navigate city streets because the number of obstacles in an urban environment (traffic lights, pedestrians, cyclists) is significantly higher than the number encountered on a freeway.
Other automakers such as Mercedes-Benz, Volkswagen and Nissan also reported disengagements on their self-driving vehicles, but they’ve driven significantly fewer miles than Google’s cars.

Prominent Bitcoin Developer Declares the Digital Currency a Failure - Fortune

Prominent Bitcoin Developer Declares the Digital Currency a Failure

Posted: 15 Jan 2016 12:14 AM PST

One of digital currency Bitcoin’s long-time supporters and developers has decided to walk away from it. His reason: Bitcoin has failed.
Mike Hearn, devoted long-time Bitcoin enthusiast who eventually quit a job at Google to work on Bitcoin’s technology full-time, wrote a long blog post on Medium on Wednesday outline why he’s lost faith in it. “The fundamentals are broken and whatever happens to the price in the short term, the long term trend should probably be downwards. I will no longer be taking part in Bitcoin development and have sold all my coins,” he said.
Hearn offers a detailed and lengthy explanation of his gripes with Bitcoin and its community, but they really boil down to internal politics. Sure, the technology has some shortcomings that have in turn caused problems for users, but infighting and politics have also prevented these issues from being resolved.
Most of the disagreements are around whether a key piece of Bitcoin’s technology should be adjusted so that it can support more transactions (remember, Bitcoin is a network that processes transactions between computers, which is how Bitcoin is made and traded). The Bitcoin community has essentially been split between those in favor of increasing this limit and those opposed to it.

Hearn is part of the camp in favor. He even helped build an alternate but compatible version of Bitcoin’s software called Bitcoin XT that lets developers “cast a vote” in favor of raising the limit by using Bitcoin XT instead of the original. Unfortunately, Bitcoin XT has faced a lot of critics and opposition from the get-go, which has further alienated Hearn. He says he has now sold all his Bitcoin and is walking away from it all.
This article originally appeared on Fortune.com

3 Reasons Wall Street Is Panicking, and 3 Reasons You Shouldn’t - TIME

3 Reasons Wall Street Is Panicking, and 3 Reasons You Shouldn’t Posted: 15 Jan 2016 08:56 AM PST The Dow Jones industrial average was down nearly 500 points in early afternoon trading Friday, pushing the Dow below 16,000 for the first time since last summer. This marks the 7th time in the fledgling year that the benchmark index has sunk by triple digits in a day, raising fears that the near-7-year-old bull market may be nearing an end. Why the panic? Wall Street seems to be focusing on the following three numbers this morning: $30 Crude oil prices fell below $30 a barrel, hitting levels not seen since 2004. Falling energy prices are usually viewed as a bullish trend, as it lowers the cost of doing business for a wide assortment of industries, ranging from manufacturing to transportation. But oil prices can also be a foreshadowing signal—and in this case investors are worried that historically cheap crude is an ominous sign that global demand is far weaker than economists think. Indeed, the last two times that crude oil prices even came close to piercing $30 a barrel was in 2008, amid the global financial crisis and Great Recession; and in 2000, when the bursting of the tech bubble pushed the U.S. economy into a recession. -0.2% The Producer Price Index, a key gauge of inflation at the wholesale level, fell 0.2% in December and sank 0.1% over the 12 months ended Dec. 31. No one wants rampant inflation. But the whole point of the Federal Reserve’s multi-year effort to stimulate the economy through near-zero interest rates and bond purchases was to create enough inflation in the economy to ensure that the economy doesn’t slip into a deflationary spiral. This morning’s Labor Department report confirms that the Fed may not have been fully successful at achieving its goal. And that, plus other disappointing economic data — including a report that showed industrial production fell by 0.4% in December — raises fears that the U.S. might well slip into another recession if the global economy continues to deteriorate. 12% With this morning’s 400-point plunge, the Dow is now down about 12% from its 2015 highs, meaning the U.S. stock market is in an official “correction,” which is defined as a drop of 10% to 19.9%. The Standard & Poor’s 500 index is also off by about the same amount. This has triggered a new set of worries that the bull market that began in March 2009 could be on its way out. And that fear has led to even more selling. But while Wall Street fixates on those bad numbers, investors should be focusing on this set of figures to put things in context: 5  Since 2009, this bull market has withstood five market pullbacks of near-equal or greater levels — and lived to tell the tale. Most recently, the bull lost 12.4% during the late August market slide which took place for the exact same reasons the market is jittery today — a combination of global slowdown fears and cheap oil. From those lows, though, the Dow climbed more than 11% through the end of last year, rewarding investors who hung in there. 7.7% The sell-off in the market that accelerated on Jan. 4 has led to a new wave of bearishness on Wall Street. Why might some see that as good news? Wall Street is a counter-intuitive place, and peak market pessimism often coincides with the market hitting bottom—from whence there’s nowhere to go but up. Have we reached that inflection point? Jack Ablin, chief investment officer for BMO Private Bank, studied the ratio of self-identified “bulls” and “bears” in surveys by the American Association of Individual Investors. The current ratio of bulls to bears is flirting with its lowest reading in the survey’s history, Ablin says, “which from a contrarian perspective is positive for stocks looking forward.” Historically, he notes, the S&P 500 has advanced 7.7% in the six months after reaching this level of bearishness. By contrast, stocks have historically gained only 2.7% in the six months following the most bullish readings among individual investors. The odds of a rebound would certainly improve if the Fed leaves interest rates alone for the rest of the year rather than raising them four times in 2016, as some have predicted. And Ed Yardeni, president and chief investment strategist at Yardeni Research, says the market swoon makes it much less likely that all those rate hikes will happen. “Another year of one-and-done seems much more likely to us,” he says. 40 When the market is in full-blown panic mode, the CBOE Volatility Index—a.k.a. the “fear index”—approaches or climbs above a reading of 40. That’s roughly double the historic level. This happened in 2008, during the global financial crisis, and in the late 1990s, leading up to the 2000 tech wreck that triggered a global bear market. So far this year, the VIX has been on the rise. But at a reading of nearly 28, it’s nowhere near panic levels.

Dollar in Best Run Since July on Haven Bid Even as Fed Odds Fall - Bloomberg

January 15, 2016 — 11:11 AM AEDTUpdated on January 15, 2016 — 10:58 PM AEDT

Turmoil in global markets is boosting the dollar, even as it pushes back market expectations for when the Federal Reserve will next increase interest rates.

An index of the U.S. currency against 10 of its peers rose for a third week, the longest stretch since July, amid demand for haven assets as oil dropped below $30 for the first time in more than a decade and Chinese stocks led a global rout. Futures show 26 percent odds the Fed will tighten policy by its March meeting, down from 41 percent as of the end of last week.

“Trading has switched from monetary policy divergence to growth and commodity concerns with a sprinkling of geopolitical risk,” said Peter Rosenstreich, head of market strategy at Swissquote Bank SA in Gland, Switzerland. “We are increasingly seeing rotation from nations which will be stressed by this backdrop into dollar and yen -- safe havens.”

The Bloomberg Dollar Spot Index rose 0.1 percent to 1,247.54 at 6:55 a.m. New York time, headed for a 0.6 percent gain this week. The three-week run of gains is the longest since the period ended July 24.

The dollar strengthened 1.5 percent to 68.84 cents per Aussie and gained 1.2 percent to 63.99 cents versus its New Zealand peer as Chinese stocks resumed declines Friday. The Shanghai Composite Index slid 3.6 percent, taking this year’s drop to 18 percent and making it the worst performer among major global benchmark measures tracked by Bloomberg.

Bad Neighborhood

“The U.S. will remain the ‘best house in a bad neighborhood’ and will attract capital flows from abroad,” Morgan Stanley analysts led by London-based Hans Redeker wrote in a research note dated Jan. 14. “We remain convinced U.S. dollar bulls. The secular U.S. dollar bull market has more legs.”

The U.S. economy expanded across most of the country in the past six weeks as the job market showed strength that’s failing to stoke broad wage pressures, a Federal Reserve survey released Wednesday showed. It underscored the challenge facing Fed policy makers heading into a meeting later this month: The strong labor market has as yet failed to trigger signs of broader inflation, while sliding commodities put downward pressure on price expectations.

Bullard Cautious

St. Louis Fed President James Bullard, one of the most vocal policy makers in recent months arguing to raise rates, sounded a more cautious note on Thursday by saying the latest tumble in oil prices may delay inflation from returning to the central bank’s 2 percent target.

“The associated decline in market-based inflation expectations measures is becoming worrisome,” Bullard, who votes on policy this year, said in a speech in Memphis, Tennessee.

Two-year Treasury note yields have dropped to as low as 0.86 percent, a level last seen before the U.S. central bank raised rates in December. Even so, investors are still finding the greenback attractive.

“The U.S. dollar still got a bid even though short-term interest rates are falling, simply because of the safe-haven flows,” said Imre Speizer, a markets strategist at Westpac Banking Corp. in Auckland. “We all know China has issues, and those issues have been a partial cause of the risk aversion -- and you suspect that there may be more of these to come throughout the year.”

Tesla’s Elon Musk Says Apple Car Rumors Are True - Fortune

Tesla’s Elon Musk Says Apple Car Rumors Are True

Posted: 12 Jan 2016 06:49 AM PST

According to Elon Musk, CEO of carmaker Tesla, the rumors are true: Apple plans to enter the automobile business.
The CEO described Apple’s rumored foray into designing an electric car as “obvious” in a recent interview with the BBC. “It’s pretty hard to hide something if you hire over a thousand engineers to do it,” he said.
Apple has not officially announced any intention to build such a vehicle, though reports began surfacing about the prospect last February. The company’s supposedly code-named project “Titan” has poached talent from a number of automakers, including Tesla.
Tellingly, Apple recently registered a trio of car-related Internet domain names, including Apple.car, Apple.cars, and Apple.auto, according to records published online and discovered by Apple-tracking site MacRumors.
When asked by Charlie Rose on CBS’s 60 minutes last month whether Apple has designs on the car business, Apple CEO Tim Cook merely shrugged and laughed.
In the BBC interview, Musk welcomed Apple to the field. “It will expand the industry,” he said, echoing comments he has previously made. “Tesla will still aspire to make the most compelling electric vehicles, and that would be our goal, while at the same time helping other companies to make electric cars as well.”
Previously, Musk has called Apple a “Tesla graveyard.”

“They have hired people we’ve fired,” he told the German newspaper Handlesblatt in Oct. “If you don’t make it at Tesla, you go work at Apple. I’m not kidding”
Apple did not immediately reply to Fortune’s request for comment about whether it is designing an electric car.
This article originally appeared on Fortune.com

Blame Politics for China’s Market Meltdown - TIME

http://time.com/4170984/china-stock-market-drop-fall-economy-politics/

Investors aren't sure what Beijing will do next

China’s second trading halt in days, coming on the heels of a 7%-plus market plunge and followed by five-year currency lows, is being covered largely as an economic story. In some ways, that’s right. After all, China is in the middle of a debt crisis of epic proportions. The situation dwarfs even the U.S. subprime crisis if you think of it in terms of the pace of debt run up, the surest predictor of financial crises. Chinese debt has increased nearly three times faster over the last few years than U.S. debt did in the period between 2003 and 2007, leading up to the Great Recession.

But in an even more important way, China’s debt crisis and the global market crash that has followed is a political story. Investors are worried about debt, sure. But China has the financial resources to cover its debt, at least in the short term. What investors are really worried about is: What the heck is going on in Beijing? And, more particularly, is Xi Jinping, the power-consolidating Chinese president, a reformer who is helping China transition to a richer and more prosperous future, or a new emperor who will turn back the progress his country has made towards openness and market capitalism?

It’s the question that every investor is worried about right now. China, which has long past the days of double digit GDP growth, is now facing the most difficult economic transition that a country can make. It’s trying to go from being a poor nation to a middle income one. That’s a shift only three countries in Asia have made: Japan, South Korea, and Singapore. All three have much smaller and more manageable populations and political systems. The question is whether China, where unemployment is actually higher for college graduates than for factory workers, can create the sort of upmarket service economy needed to employ more skilled workers — and raise incomes to global middle class levels.

The jury is still very much out on whether this can happen. That’s in part because most every country in the world that has attempted this transition has had to open up its political system. That shift tends to go along with the type of economy that can produce the high-level intellectual property, legal stability, and personal and business security associated with middle income levels.

Xi and the Party claim that the recent consolidation of power is all about trying to make those changes. But the reality is their moves have also come with a rollback of press freedom, the jailing of business leaders and a pushback against those in the Party who disagree with the President’s decisions. Meanwhile, the stop-and-start government support for markets lends a haphazard quality to economic policy management. All of it has raised a big question about Chinese leadership. Is Xi Jinping the new Deng, a reformer who will help China make a true great leap forward? Or is he the new Mao, an autocrat who is undermining economic and political stability

The truth is, nobody yet knows. Beijing, along with the Party itself, is a notorious black box. Official economic figures can’t be trusted. Most outside economists say Chinese growth may be as low as 2-4%, as opposed to the official figure of 7%. What is known is that debt run-ups of the kind that China has undergone rarely end well.

Ruchir Sharma, the head of macroeconomics and emerging markets for Morgan Stanley Investment Management, has run the numbers since 1960 for 150 countries. He isolated the 30 most severe credit binges, defined as a rapid growth in the private debt of a country over a five-year period

In every case, he found that countries with major debt run-ups experienced a significant slowdown over the next five years, with GDP growth more than halving on average. Meanwhile, 18 out of these 30 countries also suffered a financial crisis in the next five years.

The U.S. did not even make Sharma’s list for its 2003-07 period debt binge,when its debt increased around 25%. That’s compared to the 40% or higher increases for the 30 most extreme cases. The increase in China’s debt to GDP between 2008 and 2013 was around 70% — the largest for any developing country in history. That alone is reason for the Chinese markets to be dropping.