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What We Read Today 03 August 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.

  • One dead, 20 hospitalized from apparent overdoses at Maryland concert (Brendan O'Brien, Reuters) A North Carolina man died and 20 people were hospitalized due to apparent drug overdoses during a pop and dance music festival in Maryland, authorities said on Saturday. The event was traveling concert series known as the Mad Decent Block Party held Saturday 02 August at Columbia, MD, about 20 miles west of Baltimore.
  • Guest post by Tara Haelle: If a 12-year-old's "breakthrough" sounds too good to be true... (Paul Raeburn, Knight Science Journalism at MIT) We listed this story in WWRT discussion some time ago. It concerns a sixth grade science project that was purported to have discovered that lion fish can live in fresh water. It now turns out that the research was not original and, even worse, the students father co-authored a paper that published the research in 2011. A sad story and even sadder that a 12-year old was probably an innocent victim in the matter but may have a lasting "regret" to stay with her for years.
  • Disappointing U.S. Jobs Data Fuels EUR/USD Short-covering Rally (James Hyerczyk, FX Empire) The seventh 200,000 plus non-farm payrolls jobs add is no longer considered good enough to satisfy the Fed's objectives for economic growth. So far this year more than 1.5 million jobs added but that's not strong enough? Go figure.
According to a study released this week by geneticists at Cornell University, substantial evidence indicates that rich people and poor people-disparate populations long thought to be entirely unrelated-may have once shared a single common ancestor. "After conducting careful DNA analysis, our research team was taken aback to discover that the wealthy and the working class actually have a considerable number of genetic similarities." - Study co-author Kenneth Chang

rich-poor-ancestry-the-onion-2014-jul-25


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  • The US Labor Market Looks Tight (Mamta Badkar, Business Insider) The number of job openings and number of unemployed people have moved down to level at which the start of competition among employers for the best job applicants might start. But it is still above the ratio from before the Great Recession. In 2007 the ratio was 1.6 and the average for 2005-2007 was 1.7. The labor market still has a way to go to get tight, because it was not considered tight in 2005, 2006 and 2007. See next article.

job-openings-ratio-unemployed-sam-ro-2014-aug-01

unemployed-job-openings

  • What The Heck Is Wrong with Big Tech? (Wolf Richter, Wolf Street) Big tech has been on an acquisition tear and what happens next? Layoffs to remove overlaps and redundancies. That is Richter's bottom line.
  • Is It Time To Switch from Buy the Dip to Sell the Rip? (Lee Adler, The Wall Street Examiner) Lee Adler contributes to GEI. This excerpt from Lee's Professional Edition (for paid subscribers) ends with a question: "Will the Fed be forced to bring QE back or are we at risk of the Fed's non-action and a crash in equities?"

hi-yld-ETF-outflows-matt-fuller-forbes-2014-jul-31

  • Let's Calculate How Much Money Facebook Just Lost During Today's Outage (Polly Mosendz, The Wire) Facebook was down for about 19 minutes during the noon hour in New York and the outage was shorter, longer or intermittent in some parts of the world. This was the second outage for FB in the past several weeks, the previous one in June coming in the middle of the night (New York time). The June occurrence was apparently worldwide "blackout" lasting about half an hour. Polly Mosendz estimated that the latest down-time cost FB "roughly 426,607" based on second quarter revenues and 19 minutes "off the net".
  • Microsoft Sues Samsung Over Android Royalty Payments (Nick Wingfield, The New York Times) In a suit filed Friday (01 August), Microsoft says that Samsung stopped making royalty payments on time last fall and is refusing to pay interest for the delay, as required by their 2011 agreement, which related to Samsung's use of Microsoft's intellectual property in its Android smartphones and tablets. Microsoft says that Samsung is threatening to continue to violate the three-year old agreement because, Samsung says, Microsoft's acquisition of Nokia's mobile business amounts to a breach of contract. Microsoft denies that the Nokia deal violated the 2011 agreement.
  • How Do You Spell "Inflation Hawks on the Warpath?" ECI (Dean Baker, Center for Economic and Policy Research) Dean Baker has contributed to GEI. Baker says the latest Employment Cost Index data (ECI) has inflation hawks excited (see next article). He provides the following graph and asks if you can see anything different in 2014 from what occurred in the previous four years.

employment-cost-index

  • Traders Are Blaming Thursday's Big Sell-Off On 1 Stat (Sam Ro, Business Insider) Repeated from a couple of days ago. A jump of 0.7% in the second quarter (and 2% year-over-year) of the employment cost index has been suggested as the cause of yesterday's big sell-off. Economists had been expecting 0.5% for the quarter and 1.8% y-o-y. It is argued that this is both a sign of inflation as well as labor-market tightness. These factors could put put pressure on the Federal Reserve to tighten monetary policy sooner than later. Econintersect: What? Employment costs rising at about the same rate as CPI is a market buster? NO way. The market is simply ready for a correction. (But probably won't get the healthy 10% to 20% that it needs to get properly shaken out.) See also previous article. That shows what the Employment Cost Index looks like over time compared to the quarterly changes in the graph below. The problem with the graph below is that it is plotting the very small differences between large numbers (0.3 to 0.8 calculated from numbers over 100). Thus you are essentially looking at noise.

employment-cost-index-2014-2q

"The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment."

Summers has suggested that the government can provide work to fill the void. Wadha suggests that if there is only half enough work that the work week be reduced to 20 hours. If less work than that is needed he even mentions 10 hours a week.

Econintersect: When everything has been automated then the automaton efficiency experts will discover that humans are no longer needed at all for production and will decide that the world can be downsized. Of course with the automaton bosses eliminating people that will reduce the market for products and that could end up with a downward spiral leading to no need for production other than the maintain the remaining robots who would otherwise do no work, following humans into a pit of obsolescence. Is this the logical progression of Say's Law to its ultimate disproof?

With respect to 10-year yields, the frictions from the end of QE should continue to support the Treasury market and we expect the next step lower in yields to be taken as the markets stroll into August.

tlt-spx-2014-jul-aug-600x400


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