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What We Read Today 30 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.

Missing AirAsia Flight: Indonesian Officials Spot Several Bodies Floating In Waters (Associated Press, The World Post)  Indonesian officials on Tuesday spotted debris and six bodies from the AirAsia flight that disappeared two days earlier, and recovered three of them, in a painful end to the aviation mystery off the coast of Borneo Island.  More articles on reading list below.

Stakes are high as US plays the oil card against Iran and Russia (Larry Elliott, The Guardian)  Hat tip to Dig Deep. This article is nearly two months old but remains a valuable part of the debate about who is driving the oil price collapse.  Elliott thinks it is the U.S. trying to establish improved positions vis a vis Iran and Russia.  Some others have expressed a similar opinion, but a larger cohort suggests it is Saudi Arabia trying to reduce U.S. fracking.  Still another group thinks the price decline is against Russia and Iran but is instigated by Saudi Arabia rather than the U.S.  Not seen anywhere by us would be the argument that the U.S. and Saudi Arabia are in a secret alliance.  And if we are going to open conspiracy theories what about the U.S. government somehow getting money to the oil patch to keep unprofitable drilling underway at some level to try to keep the price of oil below $60 in a price war aimed at all of the above.  With ideas like these maybe we should write a novel. :-)

The Oil Price Opportunity (Kemal Dervis, Project Syndicate)  The author is former Minister of Economic Affairs of Turkey and former Administrator for the United Nations Development Program (UNDP), is a vice president of the Brookings Institution.  He says, If fossil fuels are becoming cheaper, tax them more.  See also next article.

Please Steal Our Fossil Fuels (Adair Turner, Project Syndicate)  Based on Econintersect review of research, The Lord Turner of Ecchinswell is understating the position of the optimists, some of whom say solar is already the cheapest in many utility markets and will be so virtually everywhere within two years.  See also preceding article.

Turner concludes:
Optimists say that solar energy will become economical without subsidies later this decade, while pessimists put the break-even point in the 2020s. The question is when – not whether – this will occur.

Articles about events, conflicts and disease around the world

AirAsia 8501

Race Relations and Related News








Household Incomes Across Time: The Divergence at the Top (Doug Short, Advisor Perspectives  Doug Short contributes to GEI.  This is a different dissection of income data compared to all else we have seen previously.  There are several excellent graphics, one of which is below.  The article does not discuss top marginal tax brackets but the deviation of the top 5% income growth from the middle 20% starts in the year 1982 when the top marginal personal income tax rate was cut from 70% to 50%.  See the next article.


Taxation history of the United States (Wikipedia)  The shape of the top personal income tax bracket plot below is correlated to the inverse of the personal income distribution curve from the next article.  Without further testing we cannot prove causation but we think it is certainly acceptable to suggest a possibility in that regard. 

Econintersect hypothesis:  The greater the confiscatory power of income taxes the more those with the economic power to earn high incomes will chose instead to derive compensation in ways that do not involve the recognition of taxable income.

Note the year-by-year correlation does not hold up in some cases.  For example, for 1988, 1989 and 1990 the top bracket was at a post-WW II low of 28%.  The top 5% saw income surges for 1988 and 1989 but then a slump in 1990 which continued in 1991 when the top bracket rose modestly to 31%.  The 1991 income decline was probably due as much (or more) to the recession that struck that year and the First Gulf War which also was waged then.  The in 1993 personal income saw the largest one -year climb in history but also saw the top tax bracket increase to 39.6%.  That argues against the top tax bracket level having the dominate influence over compensation (at least in all cases).  One pattern that we suggest for interpreting the data is to visualize an extension of the trend line (not shown) for the years 1983-1990 all the way to the year 2000; the extension would fall right on top of the 1993 - 2000 data points trend line (also not shown).  With such a visualization the data points for 1991 and 1992 could be attributed to the recession of 1991 and therefore not part of the same data set population as all the non-recession associated years 1983-1990 and 1993-2000.

Click for larger image at Wikipedia.

Snap Election Risks Greek Lifeline; Nation's Stocks and Bonds Plunge on Government Defeat (Eleni Chrepa and Paul Tugwell, Bloomberg)  Leading in public opinion polls is the extreme left wing Syriza party which has strongly opposed austerity imposed on Greece as the condition for bailout of the country's unsupportable debt.

These elections will be a struggle between fear for euro exit and anger against austerity,” George Pagoulatos, professor of European politics and economy at the Athens University of Economics and Business, said by phone. “The government will be emphasizing the risks associated with Syriza’s anti-bailout stance and Syriza will try to convince voters that it can offer a viable alternative, without endangering the country’s euro membership.”

2015: Make or break year for ‘Abenomics’? (Tomoyuki Tachikawa, The Japan Times) Economists say Abe needs to revise his economic policies because their side effects, such as higher import prices caused by the Bank of Japan’s weakening of the yen, have taken a toll on smaller firms and people with low incomes.  Just like the U.S. QE (quantitative easing), the Abenomics benefits have gone exclusively to the top few percent of the wealth and income distributions.

A major downside risk might be Abe’s failure to satisfy global investors calling for drastic structural reforms, such as deregulation of Japan’s traditionally protected health care and farm sectors, as well as steps to promote female empowerment and more immigrants.

Unless Abe gives the impression that he can generate new demand and raise productivity, hopes for sustainable economic growth would recede, sparking a sell-off in the stock market, some analysts say.

Russian Economy Shrank in November for First Time Since 2009 (Olga Tanas)  Gross domestic product shrank 0.5% year-over-year in November 2014, the first decline in more than five years.  Month-over-month the seasonally adjusted  GDP change was -0.2% (-2.4% annualized).  But that is a better number than is expected for the coming year if oil prices do not recover. If oil prices were to remain at $60 a barrel, the economy could shrink about 4%, according to a statement by Russian Finance Minister Anton Siluanov.   Econintersect has seen bigger contraction estimates from others.

Treasury Snapshot: Where Are Yields Headed in 2015? (Doug Short, Advisor Perspectives  Doug Short contributes to GEI.  There are several technical resistance levels that could be used to suggest the 35-year bull market in U.S. treasury securities has ended.  Econintersect suggests that only the resistance line defined from the 2007 peak has any chance of being exceeded in 2015.  That would be just above 2.8% yield and is certainly within easy reach.  We will be very surprised if the other two points (just below and just above 4%) were approached in the next year.  Note:  The 35-year support line drawn is around 1.3% for 2015.  If that line is reached in 2015 it will most likely only have been realized because of serious economic dislocation(s).  See next article.


U.S. Bond Sentiment Is Worst Since Disastrous ’09 (Liz Capo McCormick and Susanne Wa, Bloomberg)  There are many calls for record losses in U.S. treasuries in 2015 but that is a repeat of what was forecast for 2010 and again in 2011, 2012, 2013 and 2014.  While many bond gurus like Bill Gross had very sub-par performance in some of the last five years because of these bad calls, a few have had outstanding returns by making the correct forecasts.  Among such winners you will find Jeff Gundlach (DoubleLine Capital) and GEI contributors Jim Welsh (Forward Investing) , as well as Van Hoisington and Lacy Hunt (Hoisington Investment Management).  See preceding article for further discussion about the 2015 treasury securities outlook.

Will Higher Physical Demand For Silver Drive Up SLV? (Lior Cohen, Seeking Alpha)  Gold was little changed for 2014 and silver was down more than 15%.  That has driven the gold/silver ratio much abpve its 35-year average value around 60.  See graph below for 2014 values of the ETF ratios (divided by 10 on the y-axis).  The author suggests that slow global economic growth, especially from China will reduce demand for silver more than mining cutbacks will slow production.. His conclusion?  Silver will not be going up much, if at all, in 2015.  But there may be much higher demand on the horizon.  If 2017 plans by several manufacturers to market hydrogen fuel cell powered automobiles materialize, silver could well be alloyed with palladium to significantly bring down cost of the reaction catalyst in the cells.


The following articles on hydrogen fuel cells is repeated from 'behind the wall' 20 December 2014.

The World's Biggest Car Company Wants to Get Rid of Gasoline ( Brian Bremner, Craig Trudell, and Yuki Hagiwara (Bloomberg Businessweek)  Toyota is starting to sell cars powered by hydrogen fuel cells this month in Japan.  Roll outs are planned for Europe and the U.S. is about one year.  The first model offered is a $62,000 four-door family sedan, the Mirai.  It has a driving range of 300 miles between refuelings and can double as an emergency electrical supply for a typical Japanese home for about one week.  Toyota says its goal is to create the first mass-produced hydrogen car from the Mirai. 


Hydrogen and Fuel Cells: European bus manufacturers and leading mayors sign fuel cell electric buses LoU (21.11.2014) (Press Release, ITM Power GmbH,  A volume rollout of hydrogen powered busses is underway in Europe.

"... representatives of five major European bus manufacturers (Daimler Buses (EvoBus), MAN, Solaris, Van Hool and VDL Bus & Coach) signed a joint Letter of Understanding at the Fuel Cells and Hydrogen Joint Undertaking's (FCH JU) Stakeholders Forum in Brussels.
This commercialization initiative for fuel cell buses launched by the FCH JU and supported by the signing manufacturers and bus operators from major European cities such as Hamburg and London, aims at deploying a total volume of 500 – 1,000 fuel cell buses in Europe until 2020

Hydrogen Fuel Cell (  This is a comprehensive summary of the state of fuel cell development and use for automotive applications.  This article states that hydrogen fuel costs will be comparable to the current level of gasoline fuels costs.



Hydrogen Fueling Stations in North America (Google)  This map is outdated, at last for California.  See next article.  For worldwide hydrogen filling station status go to Hydrogen Filling Stations Worldwide (,

Click for large map image and legend at Google.

Station Map (California Fuel Cell Partnership)  California has 9 hydrogen fueling stations in operation, two only for buses and seven open to the public.  Another 11 public stations are scheduled to be open by the rnd of this month (December 2014).  In 2015 an additional 38 stations will open and so far two more are planned for 2016.

Click for full listing of all 60 California hydrogen fueling stations.

Don’t Buy a Car Until 2017 (Stephen Petranek, Daily Reckoning)  Stephen Petranek has contributed to GEI.  Petranek says that by 2017 we will have choices of cars that will use gasoline but get 100 mpg or more, longer range electric cars and hydrogen powered cars using fuel cells.  He says we are about to see a "real revolution" coming in cars that is "about two years away".  See also next article.

Why Fuel Cells Are the Biggest Threat to the U.S. Oil Industry (Stephen Petranek, Daily Reckoning)  Stephen Petranek has contributed to GEI.  Petranek writes about a car expected to be available on the market in two years:  The Honda FCEV.


Other references to check:

Other Economics and Business Items of Note and Miscellanea

How to debunk false beliefs without having it backfire (Vox)

The Big Economic Unknowns of 2015, From Unemployment to Oil (The New Yrk Times)

5 Reasons to Choose a Credit Union Over a Bank (Wall Street Cheat Sheet)

Universities Increasing Programs for Data Scientists (Information Week)

'Shadow banking' set for breakout year in 2015 (CNBC)

Meredith Whitney Fund Sued by Billionaire Platt’s BlueCrest (Bloomberg)

Pope Francis’s edict on climate change will anger deniers and US churches (The Guardian)

This Is the Stupidest Anti-Science Bullshit of 2014 (Mother Jones)

Top 10 Infamous Women of Pleasure (List Verse)

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