"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Wednesday, December 29, 2010

German CPI, Rare Earth Excitement, and Man v. Internet

There's just not a lot of market data due out today. Germany has reported its Consumer Price Index for the month of December, and the news is brutal. In November, consumer prices rose 0.1%. For December, they rose 90 bps to 1.0%. But the German economy can take comfort in the fact that the entire jump was driven by the almost irrelevant forces of home energy, motor fuel, and food. If you strip all of that out and look solely at core CPI, prices haven't changed at all![1]
The Swiss KoF Leading Indicators[2] dropped 2 bps to a 2.10%; not great news, but it still points to a reasonable amount of growth in the Swiss economy.
Everybody in the world that is not China[3] is now complaining about China's move yesterday to cut exports of rare earth minerals. The US Trade Representative's office is "very concerned" about the quota reductions. The EU is demanding that China "respect its recent assurance of a guarantee of rare earth supplies to Europe". On the other hand, everyone in the world that isn't China that has the ability to mine these rare earth minerals is ecstatic. Demand for these rare earths is set to increase by more than 125% in the next 5 years, so that's money in the bank for anyone that can supply them.
Speaking of money in the bank, Paul Allen[4] is suing the entire internet for patent infringement. His suit claims that Interval Research holds patents on how data is related to information being browsed, the way information is relayed to a computer screen in an unobtrusive manner, and the way web browsers are alerted to new items of interest based on the activity of other users. AOL, Apple, eBay, Facebook, Google, Netflix, Office Depot, OfficeMax, Staples, Yahoo! and YouTube are the major companies named in the suit, which asks for damages and a ban on products that use the disputed patents[5].
Apple is also getting sued, in what the law firm bringing the suit hopes will become a class action lawsuit, over privacy issues. It is alleged that Apple apps "leak" personally identifiable data, despite Apple's policy that only allows data sharing if an app requires the information to keep running. Google may also face a similar lawsuit.
The SEC is also getting involved in the internet, by looking into trading in privately-held internet companies (such as Facebook and Twitter). It appears that there are some online trading services that allow trading of unlisted Internet firms, and the SEC would like some information about how the shares are being valued, and whether or not this trading violates SEC rules[6]. So far, the probe is in the early stages.
[1] Yay?
[2] A composite of business surveys from the industrial, retail, and wholesale sectors, used to try to project GDP growth about 8 months into the future.
[3] Still not wanting to replace the US as the world's sole economic and military superpower.
[4] Co-founder of Microsoft and founder of Interval Research Corporation, a company you probably have not heard of.
[5] This would include Google's search engine, iTunes, AOL Instant Messenger, Apple's Dashboard, Google Talk, Google's Gmail Notifier, and Google's Android phone system, just to name a few things.
[6] Specifically, private companies must either have fewer than 500 shareholders or else publically disclose significant financial information.

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