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What We Read Today 23 February 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.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).


Every day most of this column ("What We Read Today") is available only to GEI members.

To become a GEI Member simply subscribe to our FREE daily newsletter.

What It Costs to Opt Out of Obamacare (Louis DeNicola, MSN Money) All Americans are required to have health care insurance coverage. Failure to so provide subjects an individual to a tax penalty equivalent to the cost of basic insurance coverage. However, there are a number of exemptions to this mandate. From this article:

For example, if you belong to a recognized religious sect that objects to insurance coverage; if the cost of insurance is more than 8 percent of the household's income; if you are a member of a Native American tribe; on so on. (The full list of allowed exemptions is available at There are also hardship exemptions that can last for up to a year, depending on the circumstances. Use this free exemption-check tool posted by Turbo Tax to see if you qualify.

A word of caution if you're looking for a free pass. Some exemptions are granted when you fill out your tax return, but others require an application. If you plan to apply for one for the 2014 tax year, do so ASAP. The petitions are reviewed by people, not computers, and the approval process can take weeks. Your tax return must include the unique certificate number assigned when your appeal is approved.

This article includes some specific examples of the amount of tax penalty. To do some quick calculations for various income parameters, see the next article.

How Big is the ACA Tax Penalty? (Calculator, Tax Policy Center) This makes very easy the determination of the tax penalty for any specific situation. The tax penalty caps for 2014, 2015 and 2016 are given on the form as well.

Articles about events, conflicts and disease around the world









Market demand surged at the 13-week Treasury bill auction (David Ashworth, Market Realist, Yahoo! Finance) Last week U.S. Treasury yields were pushed higher in recent weeks as auctions of new issuance saw increased demand in the face of higher amounts on offer. Bid-to-cover ratios have been very strong (4 or more) and trending higher. See graphic below. However there has been a reversal of interest rate direction today (Monday 23 February). See next article.

Treasury Bonds Boosted by U.S. Housing Data (Dow Jones Business News, Concern about weak U.S. housing market data and doubts about how the euro and Greece will eventually resolve the Greek debt crisis produced a surge in U.S. Treasury prices Monday. The 10-year was trading at 2.07% yield in the afternoon, down from 2.14% on Friday. Adding to the demand for U.S. debt is the looming QE (quantitative easing) by the ECB which will be buying large amounts of Eurozone sovereign debt reducing available supply of "risk free" securities. For the latest on the U.S. housing market see today's GEI Feature: January 2015 Existing Home Sales Were Disappointing. Weather Blamed As a Potential Factor. See also next article for deeper troubles in the housing and mortgage space.

As this is being posted, U.S. markets closed with the 10-year at 2.06%: Daily Treasury Yield Curve Rates (U.S. Department of the Treasury)

Dick Bove: There's a new mortgage crisis brewing (Richard X. Bove, MSN News) Mortgage funds appear to be drying up. Bove says that banks are not finding it profitable to originate mortgages with record low interest rates. The FHFA (Federal Housing Finance Agency), which operates the government mortgage banks Fannie Mae and Freddie Mac, has been weakening the mortgage underwriting rules imposed in 2010 and the years following. This includes reversing the plan to reduce Fannie and Freddie participation in the mortgage market with the goal of reducing their activity to zero by 2018 and easing the qualification requirements for mortgages to accept lower credit scores and reduce down payments to 3%.

Bove says the following about the possible return to losses for Fannie and Freddie or, alternatively, tightening of the underwriting rules for mortgages and the return to the plan for Fannie and Freddie to withdraw from the mortgage market:

Now some people are beginning to get concerned. They are worried that taxpayers may be forced to provide Fannie and Freddie with more cash. They fear more large losses could be reported by these companies.

Moreover, the people who take a close look at the balance sheets of Fannie and Freddie see that their equity is disappearing in payments to the U.S. Treasury while their guaranteed book of loans is growing. These people are beginning to understand that Fannie and Freddie are building the debt obligations of the United States government and no one is stopping them; certainly not Congress who is looking benignly on.

The dilemma is: If the policymakers stop the growth of Fannie and Freddie, they will stop the growth of housing. If they do not stop the growth, Fannie and Freddie will increase the debt obligations of the United States.

Whatever happens the housing market for the U.S. is headed for trouble again, according to Bove, and the mortgage market (or actually the lack of a mortgage market) will be at the bottom of it. For the past 2-3 years Keith Jurow has been tracking local housing markets throughout the U.S. and has repeatedly warned that the housing "recovery" was actually no such thing. In fact he is concerned about all aspects of real estate. See here, here and here.

Health Care Costs (Walter Kurtz, Sober Look) This data makes us ask why we are seeing indications that healthcare costs are escalating again. See next article. What isn't adding up?


Health Care Costs Expected to Rise in 2015: Are You Ready? (Elizabeth Renter, U.S. News & World Report) According to this article, costs are not rising so much as people are getting more healthcare services and therefore spending more money. Putting it another way, healthcare costs are not rising but more money is being spent to get additional services which may be pretty much at the same prices they were in the past. From the article there is an indication that some costs may also be rising:

Health care costs are expected to grow 6.8 percent overall next year, according to a report from PricewaterhouseCooper's Health Research Institute. While not all this growth will be passed on to consumers, it's likely you'll see some increases, particularly when it comes to your health insurance.

The report points to economic improvements as part of the driving force behind the increase, as people are now seeking medical care for things they put off when times were tough. Investments in technology, specialty drugs and increased physician employment are also spurring the growth.

Other Economics and Business Items of Note and Miscellanea

America Has Been At War 93% of the Time - 222 Out of 239 Years - Since 1776 (Washington's Blog) Washington's Blog contributes to GEI.

The Cold Facts for Aircraft Maintenance Teams in Extreme Weather (Aviation Week)

US crude settles down $1.36, at $49.45 a barrel (Reuters, CNBC) Up to almost $51 in the morning and then reversed.

HSBC CEO: My Pay Was so Outrageous I Had to Use Tax Havens to Hide it from My Peers (New Economic Perspectives) Another good one from William K. Black (a GEI contributor).

Star Buzzed Our Solar System during Human Prehistory (Scientific American) A faint star with an even fainter companion came close enough some 70,000 years ago to perturb distant comets in our solar system. Early human ancestors may have observed it.

Why "Citizen Four" Deserved Its Oscar (The New Yorker)

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