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What We Read Today 19 November 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.

  • Comet team detects organic molecules, basis of life on Earth (Victoria Bryan, Reuters) In the limited data received from the comet 67P lander Philae before its batteries ran down were measurements indicating the presence of organic (carbon containing) molecules), essential precursors for the creation of life as we know it on earth. It is not clear yet if the data will be able to determine how complex the carbon material is, whether it could contain proteins, for example.

  • Calling Early Elections in Japan, Abe Rolls the Dice on the Economy (Martin Fackler, The New York Times) Prime Minister Shinzo Abe has called a snap election for the lower house of parliament in December, calling it a referendum on his decision to postpone another increase in the nation's consumption tax scheduled for a year from now. The schedule was established by legislation passed before Abe came into office two years ago. Japanese stocks initially surged on the news but by the end of Wednesday's session had slipped into the red with the Nikkei 225 down 0.32%. See report at
  • On Media Outlets that Continue to Describe Unknowable Drone Victims as "Militants" (Glenn Greenwald, The Intercept) Hat tip to Rob Carter. It has been more than two years since The New York Times revealed that "Mr. Obama embraced a disputed method for counting civilian casualties" of his drone strikes which "in effect counts all military-age males in a strike zone as combatants...unless there is explicit intelligence posthumously proving them innocent."
  • Articles about events, conflicts and disease around the world


Ebola outbreak: British nurse back to help after recovery (BBC News)

Is Ebola back in New York? FDNY arrives in Hazmat suits as woman who had 'recently traveled from Guinea and was being monitored for Ebola drops dead with blood coming from her face, nose and mouth' (Daily Mail)


Firestone and the Warlord (ProPublica) Document Directory

Firestone and the Warlord (ProPublica) Article


Jerusalem synagogue attack puts Israel close to brink (The Guardian)

Israel demolishes East Jerusalem home after synagogue attack (BBC News)


Condemnations of synagogue attack pour in, even from Bahrain and Turkey (The Jerusalem Post)

Russia, Turkey Inch Toward Improved Relations (U.S. News & World Report)

Turkey fears '2-3 million more refugees' if Aleppo falls (AFP, Yahoo! News)


Islamic State fighters pushed back on fronts in Syria, Iraq (+video) (Christian Science Monitor)


Iraq troops reach Baiji oil refinery besieged by IS (BBC News)

Iraq Kurdish Official: Car Bomb Hits City of Irbil (abc News)


Ukraine crisis: Russia demands guarantees from Nato (BBC News)


Putin on Ice: Creating another semi-permanent “mini-Cold War.” (Project Syndicate)

There are 12 articles discussed today 'behind the wall'.

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  • Market Topped Today (William Kurtz, email, no url) William Kurtz contributes to GEI.

Please note also that the NYSE Composite left behind, this morning, an "Exhaustion Gap." We know that Gaps act as "price magnets," and that they tend to be filled later. I think the odds are that the NYSE Composite will decline quickly to fill that Gap.

Let us also bear in mind that the NYSE Composite is unique among the Dow and the S&P 500 and the NASDAQs in that IT HAS NEVER SURPASSED ITS SEPTEMBER 4 HIGH. It has been the "Designated Driver" among this boozy crowd. It has stood back a bit from the party, watching soberly as the others play. (The S&P 600 SmallCaps and the Russell 2000 "quit the party early." They peaked way back in July, and have never surpassed those peaks).

If today's price action in the major Indexes was the final "spike High" of the Great Rally, its last gasp, then your optimum time to evict questionable equities from your portfolio and to erect defenses for the Golden stocks which you wish to retain technically expired today.


The meme out there is that lower Oil is bullish, but that completely disregards the speed with which Oil breaks down. Historically, meaningful declines in equities have been preceded by Oil breakdowns. Furthermore, the faster Oil breaks, the more likely highly leveraged shale producers go bust. Popular junk debt ETFs and indices have Oil and Gas as the heaviest sector overweight within those averages. Collapsing Oil could set off a deflationary butterfly effect whereby spreads widen and filter through to all corporates, which in turn would be a form of credit tightening forced by the market as opposed to the Fed.
  • I Can See The S&P 500 At 3000 By The End Of The Decade (David Kotok, Business Insider) Wow! 3,000! End of decade? Does he mean the end of 2019 or the end of 2020? Let's just consider the interval as six years from today: 18 November 2020. Kotok actually says he projects the S&P 500 to be between 2,600 and 3,000 by the end of the decade. At the close 18 November 2014 the index stood at 2,051. To grow to 3,000 in six years requires an average annual gain of less than 6%. If it only gets to 2,600 that is about 4% a year. So Kotok is forecasting returns well below many historical averages (6.54% over the last 50 years, 8.85% over last 40 years, 8.79% over last 30 years, 7.75% over the last 20 years or 6.58% over the last 10 years. He probably does not consider the market to be near a major peak, however. The average annual return for six years following the March 2000 peak was -2.62% and following the October 2007 peak, +0.95%; both are well below Kotok's current targets going forward from here.
  • What the Fed has Wrought (Jim Quinn, Doomstead Diner) Quinn points out that the sell-out of the U.S. to the corporate at the expense of the individual citizen is a process that has been going on for decades. He cites the comparisons of corporate vs. wage incomes, taxes and wealth. He lays the burden primarily at the door of the Federal Reserve but also finds significant complicity in corporate governance (faults shareholder-value maximization), accounting rules changes and corporate capture of all three branches of the federal government. He concludes this is all leading to a real depression. And
"Luckily for the oligarchs, most middle class Americans are already experiencing a depression and won't notice the difference."


  • It’s Easier to Measure the Cost of Health Care than Its Value (Dana GoldmanAmitabh ChandraDarius Lakdawalla, Harvard Business Review) Ultimately the best result for health care going forward will be to pay for care ("reimburse") based on value rather than price and "preserve access to that care". The authors say that is the key for everyone winning in the end. Examples of change of revenue patterns include new drugs being widely accessible at nominal costs with future return on investment (and patient cost) being increased in proportion to the success of the medication. They also argue that there are high upfront costs for some treatments that have proven to be less costly over the long run yet such treatments can be denied by accounting surgery that looks at too narrow a picture. This article is a reasoned argument for payment for results (outcomes) rather than fee for service. See also: The Real Cost of “High-Priced” Drugs (Michael Rosenblatt, Harvard Business Review) and What the U.S. Can Learn From India and Brazil About Preventive Health Care (Nidhi Sahni and Michael Myers, Harvard Business Review).
  • The West Can Only Dream Of Japan's Level Of 'Failure' (Mike Bird, Business Insider) Mike Bird says the proclamations of Abenomics' demise are not only premature, they are wrong. The biggest problem Abe has encountered is the setback for consumption occasioned by the increased consumption tax and that was not part of Abe's plan but a holdover from the previous administration which he mistakenly did not cancel. He suggests to check back after a few more months:

So there has been no shortage of people declaring that Abenomics has failed.

Here's why they are wrong. For one thing, people seem to forget that unemployment in Japan is only 3.6%, 0.1 percentage points from a 16-year low. That doesn't exactly scream "recession." In the UK and the US, it's about 6%, and in Europe it's above 10%. On that metric, the West can only dream of the Japanese level of "failure" (more on that later).

Forecasts for the Japanese economy in Q3 were absolutely awful, as the Financial Times' Ben McLannahan noted. Even the most bearish forecasters missed the drop by miles. Japan's sales tax was raised to 8% from 5% in April, something that wasn't expected to have such a debilitating effect on the economy.

However, one group did get it pretty much bang on. Now-Casting, developed by Lucrezia Reichlin at the London School of Economics, called the slump. And they see a "dramatic improvement" on the way in November and December. The effects of the tax hike won't last forever, and the Bank of Japan jump-started its already large QE programme at the end of October.


  • Piketty Didn't Change Economics When He Argued For Income Redistribution (Tim Worstall, Forbes) Worstall has the following just below his byline: "I have opinions about economics, finance and public policy." No argument. It is just unfortunate that sometimes he should also have the facts and misses that part. In this case he has a reasonable conclusion (his disagreement with Mark Thoma about how much Thomas Piketty has really changed economics) but then wanders off to discuss how tax policy is for raising the money the government needs to operate. He may have lots of company in that belief but when it comes to facts he (and his company) had better examine the difference between facts and assumptions (aka beliefs). If he was dealing with a fact then WW II could not have been fought, the U.S. interstate highway system could not have been built and quite a number of other advancements not made.
  • The remarkable rise of big data economics (Matt Phillips, Quartz) Because so-called "big data" sources are often sensitive records, such as proprietary corporate data, personal income taxes, medical records or government welfare records (which contain personal information on individuals) there have been increasing numbers of exemptions given by the prestigious American Economic Review to the requirement that data used in research published must be publicly available so others can examine the findings. This article points out that some of the accessibility to restricted data can come with a price of producing a finding favorable to the data source owner.


  • Other Economics and Business Items of Note and Miscellanea

Keynes’s disastrous contribution to economic theory (Institute of Economic Affairs)

How Carl Menger Put Consumers at the Center of Economic Science (

Harold Meyerson: 'Blue' economics flopped at polls (Columbus Ledger-Enquirer)

The Dark Stain on Bangladesh's $1 Billion Leather Export Industry (Bloomberg Businessweek)

Democrats to Obama: You broke the party, now fix it (Politico)

Don’t Bother Complaining About High-Deductible Health Plans (Harvard Business Review)

'Unbelievable, Terrible': Forest Service OKs Fracking in Largest National Forest on East Coast 'The President can protect the climate and public health, or he can continue to promote fracking. He cannot do both.' (Common Dreams)

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