Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.
5 in China Army Face U.S. Charges of Cyberattacks (Michael S. Schmidt and David E. Sanger, The New York Times) Hat tip to Rob Carter. Specific members of the Chinese People's Liberation Army have been charged by the U.S. Department of Justice of hacking into the networks of Westinghouse Electric, United States Steel and "other companies". The hackers are accused of trying to steal commercial secrets and "intellectual property". The indictment did not include any allegations associated with the Department of Defense or U.S. defense contractors, perhaps because the U.S. would not want to open the possibility of "Chinese revelations about American attacks on similar targets in Beijing, Shanghai and Hong Kong".
Uncapping education fees and unleashing the unscrupulous (John Rice, The Conversation) The Australia federal budget proposal to uncap university fees could be taken as a blank checkbook for both universities and self-accrediting colleges offering higher education services. Oz will be on track to duplicate the abuses resulting from similar actions taken in the U.S. to "make higher education subject to market forces" with a similar disregard for regulation. The author details some of the fraudulent activities that have occurred in the for-profit higher education schemes foisted on the American public in the last couple of decades. And the Australian proposal has the government backstopping the fraud to make sure the fraudsters don't lose money. See also GEI Opinion.
House, Senate lawmakers promise review of AT&T-DirecTV deal (Jim Puzzanghera, Los Angeles Times) The merger, worth almost $50 billion, would be the fourth largest telecommunications merger in history and raise lots of questions about competitive forces in that space. See the next article (repeated from 'behind the wall' yesterday) and see further discussion on the related net neutrality issue extensively discussed 'behind the wall' today.
"The number of 1% down days for the S&P 500 in any given year has averaged 27 since 1969; the S&P 500 has seen just 16 1% down days over the last 12 months. It has now been 468 days since a market correction of 10% or more, the fourth longest period on record, and, as we show below, the annualised peak to trough loss has only been 5% compared to typical annual drawdown of 15%."
Only a ‘black swan’ will bring back stock volatility (Wallace Witkowski, MarketWatch, The Wall Street Journal) Volatility reacts to market price direction (see chart below). When the market goes up volatility declines. When the market goes down volatility increases. When the market goes sideways volatility generally fluctuates. But in 2014 the market has been basically sideways and volatility has declined noticeably With two minor spikes on small pullbacks. Another sign of complacency?
Tax Trick: Smart Way to Harvest Losses (Allan S. Roth, Financial Planning) Harvesting tax losses is simply following a strategy benefit from a credit today with the possibility of paying it back in the future. The advantage? You get to use the money in the meantime. To be successful the taxpayer must avoid the "wash rule" which is what Roth discusses here.
Net Neutrality and the Idea of America (Tim Wu, The New Yorker) An article written by the man who invented the term "network neutrality" which led to the passage of the 2010 law defining a federal Net Neutrality rule. He sees the current FCC (Federal Communication Commission) proposals as defining the end of the internet as frontier and the establishment of a structure for the advantage of those with power to control the territory at the expense of the homesteader. (Econintersect analogies in the last sentence, paraphrasing what is interpreted as Wu's intent.) Some key excerpts from the Wu article:
[T]he mythology of the Internet is not dissimilar to that of America, or any open country-as a place where anyone with passion or foolish optimism might speak his or her piece or open a business and see what happens. No success is guaranteed, but anyone gets to take a shot. That's what free speech and a free market look like in practice rather than in theory.
It may be one thing for the rich to drive better cars; it would be another to divide public roads between rich and poor, ostensibly to avoid "congestion." The prospect that the F.C.C. might allow a "fast lane" for some traffic, leaving everyone else in a slower lane, has ignited the argument that private inequality must have its limits, and that some public spaces must remain open to all.
The fear is that industrial consolidation, as it has before, will diminish opportunities for the new, idealistic, and optimistic, leaving behind the established, tested, and cynical.
Some in the net-neutrality debate argue that the Internet should be understood as a "public utility," which has restarted another old debate. Calling something a public good or utility is to declare that there are some services that are not mere luxuries, but essentials-goods that might be said to form part of the country itself and which shape what it offers its citizens. It would be a strange, poorer vision of a nation, for example, if the fire department didn't bother with less affluent neighborhoods, or if electricity were available to some but not all. The Internet isn't as essential as electricity, but it has become almost as necessary to contemporary life.
This Chart Is The Fate Of Housing In America As Student Loans Bankrupt A Whole Generation (Wolf Richter, Testosterone Pit) Over the past ten years student debt has soared 362% to more than $1.1 trillion. Over the same interval mortgage debt has increased by 65% to $8.2 trillion. The former latter debt (mortgages) has been issued to borrowers a majority of which are expected to fully repay. The former loans (student debt) has been issued to a cohort for which a majority may be unlikely to fully repay. Richter points out that the average student loan balance is $33 k. Econintersect gives as an example (hypothetical) calculation that the $33 k repaid over 20 years at 5% (some loans have higher rates) means the total of all repayments (if made on schedule) is $52k. That puts the repayment value of today's $1.1 trillion at more than $1.7 trillion. This rising yoke of debt-slavery keeps surging as shown by the graphic (data through 2012) Richter presents, showing the debt load going up and the income going down.
Switzerland's $25 minimum wage wasn't such a crazy idea (Danielle Kurtzleben, Vox) The Swiss have voted down the proposal to raise the country's minimum wage to $25 an hour by a margin greater than 3:1. The proposal sounds outrageous but this article points out that on a PPP (purchasing power parity) basis the number corresponds to $14 an hour. But any value of minimum wage would be a big jump for Switzerland which has no national minimum wage. It can't be too big a problem though - the Swiss are the happiest people in the world.
Demographics: Now and Later (Benjamin Shepherd, Investing Daily) Benjamin Shepherd has contributed to GEI. The aging of the baby boomers along with a slow-growth economy combine to create very low inflation pressures. But the children of the baby boomers will be producing a little bubble of their own, according to Shepherd, and another wave of increased inflation will follow, also driven by demographics. He doesn't give the timing but based on the shape of the birth bubble, 1978-2000, the middle of the bubble hitting age 30 will be right around 2020 so Econintersect suggests that if the Shepherd thesis is correct inflation should be picking up before then.
Data Pirates of the Caribbean: The NSA Is Recording Every Cell Phone Call in the Bahamas (Ryan Devereaux, Glenn Greenwald and Laura Poitras, The//Intercept) Hat tip to Rob Carter. Using documents released by Edward Snowden the authors come to the conclusion that the NSA is undertaking comprehensive surveillance in areas where there is "little to no threat facing Americans from domestic (Bahamian) terrorism, war, or civil unrest". The objective seems to be off-shore banking, "international narcotics traffickers and special-interest alien smugglers".
The three deadliest drugs in America are all totally legal (German Lopez, Vox) Of course if illegal substances were made legal then there would be more deaths reported because it is likely far more people would partake. And some illegal drugs are far more deadly per incidence of use than are tobacco and alcohol. Of course non-fatal health issues also need to be considered for a full comparison. But here is some data on mortality:
But it's already established that it takes less relative doses to die from alcohol than it does to die from marijuana and even cocaine. An American Scientist analysis gauged the toxicity of drugs by comparing a drug's effective dose - the amount it takes to get a desired effect - to its deadly dose. The analysis found alcohol is deadly at 10 times its effective dose, while heroin is deadly at five times, cocaine is deadly at 15 times, and ingested marijuana is deadly at more than 1,000 times. (In practical terms, it's nearly impossible to overdose to death on marijuana because a user would most likely pass out before reaching a fatal dose.)
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