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What We Read Today 17 April 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.

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Top 10 Affordable Cities for Starting a Business (MSN Money)  Interesting slide show with a mystery.  When Econintersect viewed this there were only 9 cities, there was no number 3.  Number 4 was Denver and number 2 was Austin.  Will the mystery be solved by the time you visit?

Articles about events, conflicts and disease around the world


  • G20 more upbeat on growth, but officials fret over Greece (Reuters)
  • This Has Been the Hottest Start to a Year on Record (Bloomberg)  March was the hottest month on record, and the past three months were the warmest start to a year on record, according to new data released by the National Oceanic and Atmospheric Administration. It's a continuation of trends that made 2014 the most blistering year for the surface of the planet, in to records going back to 1880.  See more about global warming and the global warming "pause" below.



  • Greece's Main Creditors Said to Be Unwilling to Allow Euro Exit (Bloomberg)  Greece’s major creditors are not ready to let the country drop out of the euro as long as Prime Minister Alexis Tsipras shows willingness to meet at least some key demands.  Chancellor Angela Merkel will go a long way to prevent a Greek exit from the single currency, though only so far. Every possibility is being considered in Berlin to pull Greece back from the brink and keep it in the 19-nation euro.  There still seems to be some flexibility available in spite of the posturing by some of the prominent Troika spokespersons.





  • Argentina launches lawsuit against Falkland oil drillers (BBC News)  Argentina has begun legal proceedings against three British and two US companies for drilling oil near the Falkland Islands.  UK Foreign Secretary Philip Hammond accused the Argentines of "outrageous bullying" of the self-governing British protectorate which lies about 300 miles south off the southern tip of Agentinian Patagonia.  BBC:  "Analysts suggested Argentina would have little joy in the courts."

Will Oil Prices Rise as Expected? (Jim Welsh, Forward Thinking Blog)  Jim Welsh is a monthly contributor to GEI.  Jim discusses why he sees the uncertainty in oil prices for the rest of the year is focused on whether the year will end at current levels or higher (possibly into the $60s) or current levels or lower (possibly down to the 2008 low around $32).  When we look at the chart provided (and which we annotated) we suggest that a lower price from here would break the support line for oil starting from 1999.  That would be a significant technical event indicating that higher prices might be very much slower to develop.


Dollar Dump Sends Oil, Bonds & Stocks Surging (Tyler Durden, Zero Hedge) Hat tip to TalkMarkets. Thursday 16 April was a day when everything was moving in concert with everything else.  This graphic display below shows the correlations:

Click for large image at Zero Hedge.

Who Created the Global Warming "Pause"? (Chris Mooney, Mother Jones)  This article says it is the IPCC (United Nations' Intergovernmental Panel on Climate Change) which has provided insufficient clarity to an unsophisticated media which looks for any occasion to be sensational.  The sceptics love to point out that most years during recent decades temperatures are in a short-term down trend (see second graph below).  But the data shows that the overall effect over the past 40 years reveals mean global temperatures have risen almost 1 degree celsius (almost 1.8 degrees fahrenheit).


The indomitable benchmarks (Salil Mehta, Statistical Ideas)  Salil Mehta has contributed to GEI.  Mehta says that fund managers seem to be much abused about their performance.  He has been investigating and reports the data below for all active fund managers in each of 17 benchmarked asset classes.  The data is 10-year, equal-weighted list of the 17 fund categories' returns and their respective benchmarks.  All units shown are in annualized percent.

Mehta points out that if active management added nothing to returns we should expect that 50% would exceed benchmarks and 50% would fall short just be random variation around zero effect.  That is the same as saying each group would have a probability of matching or exceeding the benchmark of 1/2.  The fact that all 17 underperform would have a probability of of (½)^17, or 1 chance in 130,000.  This can be taken as a proof that the result demonstrates that active management performance is not distributed around the appropriate benchmark but offset from it.

Econintersect has done a few hypotheticals.

1.  What if you had used a manager who was on the average of his group which underperformed the benchmark by 1%?  Consider the Large Core category.  If you invested $10,000, after 10 years you would have had $18,950; the benchmark would have produced $20,010, 5.6% more than the active manager.

2.  What if you were in the category Mid Core with a 2% differential?  After 10 years the active manager would have produced (from $10,000) $20,010 and for the benchmark, $25,239 (20% more).

3.  What if you were invested for 50 years with the 10 year 1% difference numbers of Large Core?  The active manager would produce $244,260 vs. 408,117 (67% more).

4.  And 50 years with the Mid Core numbers?  $408,117 actively managed and $1.024 million (150% more).

Mehta estimates the probability that an individual manager could exceed his peers sufficiently to overlap the benchmark returns.  He doesn't put a specific number on this but indicates the probablity is small.  So good luck finding that one manager that will match or beat the benchmark for the next ten years.

Other Economics and Business Items of Note and Miscellanea

Moving to Mars (The New Yorker)  Will anyone alive today see humans on Mars?  We are already preparing for it.

Alien Supercivilizations Absent from 100,000 Nearby Galaxies (Scientific American)  The most far-seeing search ever performed for “Dyson spheres” and other artifacts of “astroengineering” comes up empty. Where is everybody?

Note on Laffer Curves (Stumbling and Mumbling)  There are at least two Laffer Curves:  One is for top tax rates vs. GDP and the other is for top tax rates vs. tax revenues.  Among other things, the idea that higher taxes disincentivize things that will grow GDP is addressed here:

Even if high top tax rate do reduce incentives, this needn't be a bad thing. They disincentivize rent-seeking, office politics, exploitation and negative externalities such as risk pollution as well as productive activities - maybe more so, given that the intrinsic motivations to engage in the latter are greater.

GAO warns FAA of internet-connected systems (SC Magazine)  The GAO (General Accounting Office) has charged that the FAA (Federal Aviation Administration) is lacking proper cyber security protocols and warned the agency that its on-flight Wi-Fi, among other things, could put aircrafts and passengers at-risk.  The GAO report:  Air Traffic Control:  FAA Needs a More Comprehensive Approach to Address Cybersecurity As Agency Transitions to NextGen.   See also next article.

Pilot: US Government Claims Of Plane Wi-Fi Hacking Wrong And Irresponsible (Forbes)  According to Dr Phil Polstra, a qualified pilot and professor of digital forensics at Bloomsburg University, the report (preceding article) contained much erroneous information.  The article claims that the GAO presumes the operations of aircraft control systems to be a state that does not actually exist.  This article says "avionics networks, which deal with flight controls and coordination, were simply not connected to the internet like Wi-Fi services."  Further, the article states:  "Polstra believes the US Government Accountability Office (GAO) report was put together by people who didn’t understand how modern aircraft actually work. "

Ayn Rand Reviews Children's Movies (The New Yorker)  Do children really benefit from learning that a rat is commendable because it knows how to "extract value" form its environment?  If money is not exchanged nothing of value occurs?  PS:  Some of the reviews are for movies made long after Rand's death, giving away the author's masquerade.

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