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What We Read Today 01 January 2015

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.

U.S. Easing of Oil Exports Challenges OPEC's Strategy (Heesu Lee, Bloomberg Businessweek)  The Obama administration’s move to allow exports of ultralight crude without government approval may encourage shale drilling.  This could thwart Saudi Arabia’s strategy to curb U.S. output, further weakening oil markets, according to Citigroup Inc.  A type of crude known as condensate can be exported if it is run through a distillation tower, which separates the hydrocarbons that make up the oil, a much simpler (and cheaper) process than going through a refinery. That may boost supplies ready to be sold overseas to as much as 1 million barrels a day by the end of 2015.

happy-new-year-fireworks-380x170


Health Insurance Enrollment Strongest in Federal Marketplace (Robert  Pear, The New York Times)  The first month of open enrollment for 2015 health insurance coverage under Obamacare produced more than 4 million signing up for the first time of re-enrollment .  Most of these (3.4 million or nearly 85%) were from the 37 states using the Federal website Healthcare.gov.  About 90% (1.8 million) of those signing up for first-time coverage used Healthcare.gov.  States with the largest first-time enrollments were Florida (330,000), Texas (205,000), North Carolina (110,000) and Georgia (103,000); these states were "not the most enthusiastic supporters of the health care law" last year.  States that were supporting the law in 2014 have much lower first-time enrollemnts this year:  California, by a wide margin the most populous state (38 million), has 144,000 new enrollments and New York, the fourth most populous state (20 million) has 83,000.  For comparison, the states cited previously with larger first-time enrollments, populations are Texas, 27 million, Florida, 20 million and Georgia and North Carolina each 10 million.

The data reported is for 15 November to 15 December 2014, for coverage to start 01 January 2015.  Open enrollment continues for another two months until 15 February 2015 for coverage starting after the first of the year.  The numbers reported do not include those who renewed their 2014 plans for 2015.

Articles about events, conflicts and disease around the world

AirAsia Flight 8501

Race Relations and Related News

Ebola

Somalia

Yemen

Palestine

Iraq

Russia

India

Cuba

What Is Economics Good For? (Alex Rosenberg and Tyler Curtain, The New York Times)  This column was written almost a year and a half ago.  No Matter - the topic is timeless.  The authors point out that economics , like the sciences, uses extensive and complex mathematics.  Since that is the case then why the title question and why is the status of economics as a science under frequent question.  Those are the tasks the authors set themselves.  And they come up with a generalization:

The trouble with economics is that it lacks the most important of science’s characteristics — a record of improvement in predictive range and accuracy.

But when they use the word "never" in their characterization of economics (later, after the above excerpt) they overreach.  Most economists, in spite of many shortcomings, are aware of the adage that it is advisable to "never say never".  After all one cannot say a stopped clock is never correct, because that is false twice a day.  And Noah Smith has challenged them on the proposition that "never" applies.  See the next article.

But Econintersect thinks there is more merit than demerit in this article.  And the illustrative graphic displayed could well have been replaced with any number of similarly appearing real data graphs from economic modeling.

predicting-economy-jumble


Here's What Economics Gets Right (Noah Smith, Bloomberg View)  Smith takes exception to the previous article's authors contention that economists cannot predict anything correctly (and gives examples).  But then he gets (in the final paragraph) to mention macroeconomics.  And there Smith acknowledges the obvious.  But he rationalizes the fact that economics can't make accurate predictions about the overall economy by saying that's not economics' "only mission in life".  Econintersect questions that dismissal of importance.  How well can parts of a building function if the framing structure is defective and the roof leaks?


Getting Started With Small Cap Stocks (Chad Fraser, Investing Daily)  Chad Fraser has contributed to GEI.  This is a nice general article about the rewards of investing in small cap (small company) stocks.  Fraser mentions that small caps have outperformed larger company stocks since 2009 - and that is true of most bull market periods.  But they also can lose more in down markets, which he doesn't mention.  Over many decades, however, through many market cycles small caps (and mid caps also) have provided better returns than large company stocks.  There may be more individual company risk with small companies so diversification is important (and stock selection as well).


Who Are the Biggest Emerging-Market Dollar Borrowers? (Ian Talley, The Wall Street Journal)  Emerging markets have far more exposure than the euro zone or the UK.  Go to article for interactive graphic that give all the individual country numbers.

us-dollar-credit-abroad


Gold Beat All Other World Currencies in 2014 (Frank Holmes, US Global Investors)  Frank Holmes has contributed to GEI.  Every currency lost vs. the US dollar in 2014.  Gold also declined but less than all the currencies.  The only problem with the entire discussion is that there is no place in the world where gold is universally accepted in place of money. Holmes discusses why gold is indeed money - but we ask:  What can you buy with it?  What taxes can be paid with it?  How easily will you be able to get someone to accept it if you owe them money?

gold-currency-2014


Will Indexers (and ETFs) Falter in 2015? (David Fabian, FMD Capital)  Fabian suggests that "2015 may well usher in a new era in the markets where things like risk management, trend following, and asset allocation are key to a successful outcome."  We think that risk management is always wise, but isn't if a little late for trend following,  Fabian provides a reference chart (below).  Hasn't trend following been the key for at lest the last three years?  So that part of his advice seems off base.  In investing, what is successful for one period of time often is exactly the wrong tactic in the next following time period.

spy-2012-2014


Other Economics and Business Items of Note and Miscellanea

Dollar surges in 2014 on rate rise hopes (Financial Times)

Our favorite economics paper of 2014 has four authors with the same surname (Quartz)

Exploring Gary Marshall's $100,000 Economics Challenge (Forbes)  This is ridiculous!

The Failure of Republican Economics (Truthdig)  We feel the arguments are basically true, but incomplete.

Fitch: Oil drop may slow US LNG, weaken economics (PennEnergy)

What Others Say: Economics working against Russia's Putin (The Augusta Chronicle, Online Athens)

Simple Economic Growth Won't Fix the Middle Class (Real Clear Markets)



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