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What We Read Today 04 May 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".).


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Some of the articles cited and discussed today include the latest on space exploration, a potentially bigger problem for the Eurozone than Greece, the latest on bubbles, breakthroughs on Lyme disease and a gruesome discovery in Nepal.

Articles about events, conflicts and disease around the world




  • U.K. Election Kindles Economic Worries (ThinkAdvisor)  Many investors are worried that the United Kingdom’s stellar economic run over the last few years may be coming to an end—last week’s GDP reading was the weakest since 2012—and that one of the strongest performing economies in Europe could possibly start to head the other way post elections this week.  Econintersect:  Uncertainty is the enemy of economic strength and this election is the most uncertain in recent UK history. 


  • Austria is fast becoming Europe's latest debt nightmare (The Telegraph)  Hat tip to Roger Erickson. Another Greece-like crisis is about to go off in Europe's heartlands, and markets don't even know it.  Last week no-one would thought a new euro crisis was sparked when Austria’s Hypo Alpe-Adria Bank International failed.  The Telegraph says that is exactly what has happened because the Austrian government ha announce it has had enough of funding the bank’s losses, and announced plans to “bail-in” external creditors to the tune of €7.6bn instead.  This marks a test case of new European rules to make creditors pay for failing banks.  A serious complication arises because the bonds are notionally guaranteed by the Austrian state of Carinthia, which now theoretically becomes liable for the bail-in.  The Telegraph says there is no way Carinthia can avoid bankruptcy.  So this is a case where Austria is essentially "cutting loose an entire region, rather in the way the federal authorities in the US allowed Detroit to go bust a number of years ago".  Move over Greece, you are about to become small potatoes:

All this is just the tip of the iceberg; Europe is awash with interlinked banking and public liabilities, many of which will never be repaid and basically need to be written off.

Massive creditor losses are in prospect. The European authorities had us all half convinced that Europe’s debt crisis was over. In truth, it may have barely begun.


  • Iraq's Sunni fighting force still months away (Al Monitor)  Iraq's battle against ISIS in Sunni areas is hindered by the absence of a significant Sunni participation in the country's military.  Forces fighting in Sunni tribal regions comprised of Shi'ite militias and Iran forces are distrusted by the Sunnis.  The central government in Baghdad which is dominated by Shiites is still debating the formation of Sunni region national guard units putting any effective fighting force more than six months away.



Chinese citizens are now moving beyond being able to only afford the basics of life, and their discretionary spending is taking off. Growth in spending on annual discretionary categories in China is forecast to exceed 7 percent between 2010 and 2020, and growth of 6 to 7 percent annually is expected in a second category of “seminecessities.” Both of these categories are growing faster than spending on actual necessities, which are expected to grow around 5 percent a year, about the same as expected GDP growth


  • About 100 bodies found in Nepal trekking village (Reuters)  About 100 bodies found but dozens more are missing.  An avalanche set off by the quake nine days ago buried the village, one of many hundreds in remote regions not previously visited.  Climbers on peaks (other than Everest) had reported last week that they could see from their vantage points many villages that simply had disappeared.

The US Equity Bubble Depends On Corporate Buybacks; Here's The Proof (Zero Hedge)  Hat tip to TalkMarkets.  Without corporate buybacks there would have been a net equity outflow from U.S. stocks of more than $600 billion dollars 2012-2014, and the projection is that 2015 will see an additional $230 billion to bring the four-year total well above $800 billion.  But over the four years there will have been $1.6 trillion in stock buybacks to make the net inflow to U.S. stocks around $800 billion.  The opinion at Zero Hedge is that investors need not be concerned with the divergence between equity flows (negative) and the S&P 500 Index (positive) so far in 2015.  The negative equity flow will be soon be reversed by a post-earning-season flood of buybacks.

The Political One Percent of the One Percent: Megadonors fuel rising cost of elections in 2014  (Peter Olsen-Phillips, Russ Choma,Sarah Bryner and Doug Webe, Sunlight Foundation)  Hat tip to Roger Erickson.  Almost 1/3 of all political giving in 2014 was by 32,000 taxpayers (the top 1% of the top 1% - that's the top 0.01%).  The Sunlight Foundations says that almost all was given exclusively to one party and both major parties were significant beneficiaries.  See next article.

Are the 1% of the 1% pulling politics in a conservative direction? (Lee Drutman, Sunlight Foundation)  Both parties benefit from the very partisan donations by the top 0.01% of Americans.  The split is roughly 60:40 in favor of Republicans.  Only 4% of the donors split their money between the two major parties, and the average of those splits also favored Republicans by 1.5 to 1.

Canadian Housing Market The Most Overvalued In World (ValueWalk)  Hat tip to TalkMarkets. Hat tip to TalkMarkets.  See the next article - the headline here is not quite true.  Here is a graph comparing Canada to the U.S.


Global House Prices:  Location, Location, Location (The Economist)  The Economist has an interactive graphic that allows for the selection from among 26 countries and comparison start dates ay any point back to 1970.  The graphic below shows comparisons of the indicated markets from a starting point at the beginning of this century.  It is possible to find starting points where Canada has one of the largest appreciations but for many other comparison periods Canada has a less inflated market that several others.

Click to go to interactive graphic at The Economist.

Other Economics and Business Items of Note and Miscellanea

Future looks brighter for Lyme disease care (Poughkeepsie Journal)  The Centers for Disease Control and Prevention (CDC) has revised their estimates for the number of Lyme disease cases, saying there are 10 times as many.  New York state has a new law protecting doctors who prescribe longer courses of antibiotics to Lyme disease patients which has gained increasing scientific support:  Studies in animals and humans show that Lyme can persist in the body after the short-course antibiotic treatment that is commonly prescribed.  Research is underway to improve the testing for presence of the disease which has been very inaccurate.  Doctors experienced with treating the disease, who have maintained that many with symtoms diagnosed as arthritis, Chronic Fatigue Syndrome and a number of seroius neurological diseases, are now gaining credibility among auhtorities with no experience with the disease.  Econintersect:  The CDC is still underestimating the potential number of cases because of the variable expressions of the disease some infected may never show sufficient symptoms to ever seek treatment.  Most people living in Lyme endemic areas are likely to have been infected at one point or another during their lives.  See Lyme Wars and  Lyme Disease: Risk Areas Mapped for significant review summaries.  Disclosure:  GEI Managing Editor John Lounsbury has been successfully treated several times for crippling Lyme disease symptoms over the last 27 years following treatments that the CDC has maintained are not warranted.

Astronomers Seek Super-Size Hubble Successor to Search for Alien Life (Scientific American) Controversy swirls around a bold proposal for a bigger, better—and expensive—replacement.

M-Dwarfs Could Be the Best—or Worst—Extraterrestrial Homes (Scientific American)  These are easy to find and very numerous but could lack the climate stabilty to support life.

Bill Gross: Bull market ending with a 'whimper' (CNBC)  A glum Bill Gross sees both himself and the bull market facing the same long road to oblivion. 

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