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What We Read Today 27 July 2014

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 (and sometimes longer ones) 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.

  • Gold Set to Post Second Straight Weekly Loss (James Hyerczyk, FX Empire) Looks like gold has established another leg down. As Hyerczyk suggests, there may be a counter trend rally for a few days but playing it as a longer move could be dangerous.


  • Disregard Durable Goods Data (Steven Hansen, Seeking Alpha) This highlights very negative aspects to the durable goods data announced for June, factors that are missing in the mainstream media reports. This post was made as a summary of the detailed report at GEI Analysis.
  • Drought drains critical US water supply (Pilita Clark, Financial Times) This has been discussed here this past week. The FT article is a good summary of the situation. See also the following two articles, previously seen 'behind the wall'.
  • Study: Groundwater in Colorado River Basin disappears at shocking rate (Staci Matlock, Sante Fe New Mexican) Hat tip to Sig Silber. Repeated from yesterday ('behind the wall'). Severe drought and over-pumping have depleted groundwater in the southwest. Lake Mead is half empty and river flows are but a trickle. But new technology using satellites is able to monitor water level changes in real time for a large area. Just how it is done is a fascinating story. The satellites don't look toward the ground; they look at each other!


  • Email communication from John Fleck, Albuquerque Journal, via Sig Silber. Repeated from yesterday 'behind the wall'. The southwest and California are not the only areas of the U.S. suffering from water depletion. The following map shows data obtained over several years from the paired satellites for the entire lower 48 states. The title Grace is the acronym for Gravity Recovery and Climate Experiment. You will be seeing this map again in Sig Silber's future weekly weather and climate update reports.


  • Deadly 'superbug' is spreading in US hospitals (Mark Koba, CNBC) Carbapenem-resistant Enterobacteriaceae (CRE) is one of a growing group of newly recognized strains of bacteria which are mostly resistant to antibiotics. Because of the resistance these are called "superbugs". CRE is most commonly found in healthcare facilities, infects around 9,300 a year, killing about 600. Another superbug has been found at firehouses in Washington state. Known as MRSA (Methicillin-resistant Staphylococcus aureus), it causes a range of illnesses, from skin and wound infections to pneumonia and bloodstream infections that can cause sepsis and death. No deaths have been reported for the 33 firehouses in Washington that have reported one or more cases of infection. At least 2 million illnesses are reported each year from various superbugs, resulting in more than 23,000 deaths, according to the CDC. New antibiotics would help (fewer and fewer are being developed - see graph) but the effects would be only temporary as bacteria will adapt to tolerate new challenges. Perhaps bacteria have some evolutionary lessons for humans?


There are 10 articles discussed today 'behind the wall'.

The final five articles are discussion of various Obamacare issues in the news this week.

Please support all that we do at Global Economic Intersection with a subscription to our premium content 'behind the wall'.

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  • Small Caps Signaling Caution? (Chris Kimble, Advisor Perspectives In late 2006 the small-cap Russell 2000 index broke through a long-term support line. Several months later in mid-2007 the S&P 500 did the same. We all know what happened after that. The chart below shows another support breakdown for the R2000 earlier this year. So far the S&P 500 has not followed. If it does how will you react? Will this time be different?

Click on chart for large image at Advisor Perspectives

At some point in the near future look for the European Central Bank to take steps yet to be taken in an attempt to reverse the negativity in the eurozone economy and specifically in economies of France, Germany, Italy and Spain.

Total world GDP currently is north of $U.S.70 trillion. For perspective, in round numbers the United States represents just over 20% of that total. The eurozone is slightly smaller at just under 20%. Germany, France, Italy and Spain are in that order the four largest of the 18 eurozone countries measured by GDP. Those four collectively account for over 75% of total eurozone GDP.

For me it follows that the collective eurozone economies are large enough that continuing negative eurozone economic news almost certainly will at some point upset the continuing fragile economic recoveries apple carts of the U.S. and other countries.
  • Health Reform and Changes in Health Insurance Coverage in 2014 (Benjamin D. Summers, et al, The New England Journal of Medicine) This study, which included more than 420,000 adults, found that ACA (Affordable Care Act, aka "Obamacare") significantly reduced the level of uninsured with regard to health insurance for all demographic groups. The most impacted income group was the one for incomes 139% - 400% of poverty level, the group not eligible for Medicaid but eligible for premium subsidies. The study determined that that there was an increase of 10.2 million in the insured population during ACA open enrollment. The largest declines in uninsured rate were among blacks, Hispanics and adults age 18-34 years of age. Adults under 26 who obtained coverage through inclusion on their parents' policies are not included in this count.

Click on graph for image including text caption.

  • GAO Sting Finds It Easy to Fake It, Get Obamacare Premiums (Maggie Fox and Joel Seidman, NBC News) The General Accounting Office (GAO) found that 11 of 12 operatives who applied for Obamacare premium subsidies online or by telephone were approved. None were actually eligible and had submitted fraudulent low income data. All six operatives who tried to do the same in person encountered "all sorts of trouble" and "were turned away". Republicans are very vocal in saying this is another indication of the flawed construction of the ACA law.
  • Courts Disagree About Subsidies on ObamaCareís Federal Exchange (Michael Tennant, New American) Two federal courts have ruled on opposite sides of the same question: Are subsidies legal for Obamacare insurance policies obtained through the federal exchange, The D.C. Circuit Court of Appeals ruled 2 to 1 that "the ACA [Affordable Care Act] unambiguously restricts the ... subsidy to insurance purchased on Exchanges 'established by the State.'" The same day, the Fourth Circuit Court of Appeals (Richmond) panel unanimously reached the opposite conclusion that the federal exchange subsidies were permitted under the law.

Econintersect: The key to us is the wording of the statute which has the term "established by the State". One of the definitions of the word "state" in the Oxford Dictionary (and the first that refers to government) is: "A nation or territory considered as an organized political community under one government: Germany, Italy, and other European states." We attach particular significance to the capitalization of the word "State". The law does not say "a state" or "one of the states". It is the most logical interpretation that the intent of the wording was the dictionary definition of state and the capitalization of the word is clear emphasis of that.

This case is frivolous in our opinion and it is a sad commentary that the courts did not treat it as such and dismiss it. The fact that two out of six federal judges not only did not see the question as frivolous but rendered an opinion that supported a contrived contention is a condemnation of our politicized justice system. Because two circuit courts have rendered opposing positions the SCOTUS (Supreme Court of the United States) must take this case (unless they send the cases back to the circuit courts for further consideration which is probably the best course of action). If the case is not referred then we will see another test of the literacy (or illiteracy) of the justices on full display.

Note: We will probably take this discussion public at GEI Opinion in a few days. Please leave any comments you think would be appropriate. Those that are critical of our opinions (above) will be considered for inclusion in the discussion (anonymously if so requested). In the public discussion we will endeavor to mention that we do not argue ACA is the best law (or even a good law, although it is could be argued that the situation prior to the law was worse).


Also from the Athena report, the data shows dramatic differences in medical care coverage between Medicaid expansion states and non-expansion states:


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