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.
France Produces ‘No Austerity’ Budget, Defying E.U. Rules (Liz Alderman, The New York Times) France says it will take longer than previously promised to reduce its fiscal deficit to the EU treaty guidelines. But the French budget still is making cuts (just smaller than needed to satisfy the deficit rules more quickly) and critics of the current government say it is still an austerity plan. The French budget is projected by the government to remain above the 3% deficit limit until 2017. But a problem with these projections is that growth often has been less than projected in eurozone countries undertaking spending reductions and so tax revenues fail to grow as anticipated, obviating the deficit reduction. There is something about a spiral in this story.
Gold Is Not In A Bear Market (Doug Eberhardt, Seeking Alpha) The author feels gold will not be in a bear market unless it moves below $850 an ounce. He is looking for a major buying opportunity at just under $1,000 but will also be nibbling in the low $1,190s.
Your Debt, Our Nation's Headache (Barry Ritholtz, Bloomberg View) Credit drives economic growth and it also destroys it. Recovery from credit crisis recessions are typically different than for normal business cycle recessions. But the current credit crisis recovery in the U.S. has some surprising deviations from other credit crisis recoveries around the world. See State of Our Recovery: Ritholtz Chart (Barry Ritholtz, The Big Picture).
What behavioural economics tells us about financial adviser greed (Uwe Dullock, The Conversation) Why is it that, if an employer pays a higher commission to an adviser for selling one product instead of another, it's likely the commission-linked product will be sold more often? A 2011 study found where such choices were presented 1/3 of advisors consistently chose the high commission option, 1/3 showed mixed behavior which indicated some sensitivity to their own compensation and only 1/3 always made the choice based on the self-interest of the client. So 2/3 of the time you may not get what is unequivocally in your interest when dealing with a financial advisor who receives commission compensation. See the 2011 results: The Economics of Credence Goods: An Experiment on the Role of Liability, Verifiability, Reputation, and Competition (Uwe Dullock, Rudolph Kerschbamer and Matthias Sutter, American Economic Review 101, April 2011, pp 526-555)
Secular Bull and Bear Markets (Doug Short, Advisor Perspectives dshort.com) Doug Short contributes to GEI. Doug Short defines a secular bull market as occurring during periods that produce a new all-time inflation adjusted market high (in blue) and periods in between as secular bear markets (in red). We are currently in the fourth secular bear market of the past 137 years. However, if the S&P 500 advances 2% from here to a monthly average close above 2028 the colors on the chart will change to reflect a blue secular bull market starting in March 2009.
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