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What We Read Today 23 December 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.

Medicare Cuts Payments to 721 Hospitals With Highest Rates of Infections, Injuries (Jordan Rau, Medscape)  In its toughest crackdown yet on medical errors, the federal government is cutting payments to 721 hospitals for having high rates of infections and other patient injuries, records released Thursday show.

Some of the nation's top hospitals have been penalized, including:  Cleveland Clinic, Brigham and Women's Hospital in Boston, the Hospital of the University of Pennsylvania in Philadelphia and Geisinger Medical Center in Danville, Pa.  The penalty amounts to a 1% reduction in Medicare payments from 01 Ocrober 2014 through 30 September 2015.  One out seven of U.S. hospitals have been asessed the penalty. (Note: Free subscription may be required to access.)  

Foreign Brands Struggle To Enter China Via Alibaba: WSJ (Shuli Ren, Barron's)  International merchants are not finding success on Alibaba.  The Chinese website is a giant e-commerce site within China and for Chinese merchants but so far it has flopped globally.  Ten months ago it launched Tmall Global but is simply not getting customers and foreign companies are slow to sign up.  One reason is the cost of entry for merchants is very high compared to other Alibaba storefronts.  Another reason is that almost all of Alibaba's business is with Chinese customers and both prices and delivery times are not favorable compared to domestic merchants.  From Kathy Chu of The Wall Street Journal:

Traffic on Tmall Global is a fraction of that on Alibaba’s other marketplaces: The site ranks No. 311 out of about 3,500 in terms of popularity in China, while Alibaba’s Taobao and mainland Tmall sites rank Nos. 2 and 5 respectively, according to data provider Alexa Internet.

A review of the site for The Wall Street Journal suggests about 70% of the stores are doing “almost no volume,” said Jacob Cooke, chief executive of Web Presence in China, a digital marketing agency. “That platform is really going to damage [Alibaba’s] reputation,” he said.

Articles about events, conflicts and disease around the world

Ferguson and Related News







Hong Kong


North Korea


Will SLV Reach A New Low? (Lior Cohen, Seeking Alpha)  The basic hypothesis here is that low inflation is holding down the price of silver.  Yet the graphic shown (below) shows silver continuing to decline after inflation moves higher.  The author's rationalization is that the CPI (Consumer Price Index) increase over the past seven months is insufficient to scare investors into buying silver as an inflation hedge.


Draghi Starts Squaring Stimulus Circle in Month of Persuasion (Jana Randow and Alessandro Speciale, Bloomberg)  The day of final judgment for Mario Draghi is near.  He will either get the go ahead to implement QE (which he has been saying is about to start for nearly a year) or he will be out.  If it is the latter there will be turmoil in global stock markets, the U.S. dollar will spike (our wild guess is the dollar index will surge well past 100 from current level near 90) and U.S. bond rates will be driven down sharply as everyone tries to "fly" to safety.  See next article.  From this article:

Draghi’s chief mission in the next 31 days will be to counter arguments that a QE package designed to revive inflation will instead see the ECB loading up with junk assets at high prices to bail out negligent governments. While he might never convince more vocal opponents such as Bundesbank President Jens Weidmann, he can strengthen his position by crafting a program that addresses the concerns of doubters.

The US Dollar and the Cone of Uncertainty (John Mauldin)  John Mauldin is a regular contributor to GEI.  There is a lot in this article as every week in Thoughts from the Frontline, but one graph (and it's title) provides a strong connection to the thoughts discussed in the article immediately preceding this one.


Gasoline Volume Sales, Demographics and our Changing Culture (Doug Short, Advisor Perspectives  Doug Short is a regular contributor to GEI.  This is a great illustration of a changing nation which change was really accelerated by The Great Recession.


Keep an eye on these emerging market cities (Elizabeth MacBride, CNBC)  Hat tip to Marvin Clark.  The places to watch for emerging market action are probably not on your geographic lexicon.  But they should be.


Why Saudis Decided Not to Prop Up Oil (Jay Solomon and Summer Said, The Wall Street Journal)  The authors argue that the target for the Saudi price war is only North American fracking production and that Russia, Iran, Venezuela and others who are suffering economic distress are merely collateral damage.  But what if the American fracking technology is evolving to a $40 or even lower profit point for production.  Could the Saudis actually lose the price war they so confidently started?  The conclusion of this rather long article:

There remains a risk prices don’t quickly recover. Some in the Saudi media have criticized Mr. Naimi for a policy they say could be disastrous for the kingdom’s economy. Riyadh depends on oil for 90% of its budget.

All OPEC and non-OPEC officials are in a state of shock,” said Muhammad al-Sabban, a former adviser to Mr. Naimi, adding that a “ ‘wait and see’ is their only option.”

China Money Incredibly Tight (Walter Kurtz, The Daily Shot email, no url)  The 7-day repo rate, which Kurtz says is "one of the more liquid short-term markets", has risen close to 6.5%.  As Kurtz points out, this is a real rate around +5% since China's CPI is currently 1.3%.  Such high rates have been imposed to "try to reduce leverage in China’s high yield bond markets".  Such tight monetary restraints are likely to put more downward pressure on 2015 GDP.  See next article.


Lower Estimates for China's GDP in 2015 (Walter Kurtz, The Daily Shot email, no url)  Projections for 2015 have been and remain below 7% for China's GDP.  It has been reported that the government may reluctantly lower its target to 7% for next year.


Other Economics and Business Items of Note and Miscellanea

Economics at the North Pole: Are Santa’s Elves Slaves? (Pacific Standard)

Bitcoin books shed light on the politics and economics of cryptocurrency (

Saudi Arabia says won't cut oil output (Reuters)

Dollar Matches Two-Year High Versus Euro on Fed as Kiwi Weakens (Bloomberg)

Friend or Foe: The Great e-Cigarette Debate (Medscape)  Free subscription may be required to access.

Why didn't Einstein's descendants inherit Einstein's IQ? (Quora)

Are Low Mortgage Rates Keeping People in Their Homes? (The Wall Street Journal)  See GEI Analysis for detailed examination of yesterday's home sales data.

Fitch: Oil Drop May Slow U.S. LNG, Weaken Economics (MarketWatch)

SA’s nuclear project: politics, not economics, will determine winners (Business Day)

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