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What We Read Today 23 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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Articles about events, conflicts and disease around the world



“The senior bankers have obviously decided that it is in their financial interest to repeatedly violate the law.”


  • Greek PM says on final stretch towards deal with lenders (Reuters)  Greek Prime Minister Alexis Tsipras said on Saturday his government was on the final stretch of negotiations with its international lenders on a cash-for-reforms deal that would not involve further pension cuts and harsh austerity.



Dollar Reversal? (Walter Kurtz, Sober Look)  In the past 10 days there has been a sharp upturn in the US Dollar Index, following a two-month decline from a multi-year high in February.  Will this last/  It could present some economic headwinds and earnings headwinds for global companies if it does.


The Great Beta Hoax: Not an Accurate Measure of Risk After All (F.A.S.T. Graphs)  Hat tip to TalkMarkets.  Academics in finance love to utilize and present fancy and complex mathematical formulas applied to comprehensive statistical analysis in order to present and support their theories on investing.  This approach was even honored with a Nobel Prize for Eugene Fama in 2013 for his development of modern portfolio theory.  In this theory a parameter beta is deemed to be primary measurement of investment risk.  In fact it is a measure of price volatility and correlation to reference prices, usually the S&P 5oo Index.  It has always had the shortcoming of being based on the parameters obeying normal bell curve Gaussian distributions (they don't).  But the author here, Chuck Carnevale, shows how time variation of beta makes its application in optimizing portfolio construction "a fraud".

Click for large image.

Chart Of The Day: The Relentless 65-Year Decline In The Labor Force Participation Of Men (David Stockman)  Hat tip to John O'Donnell.  Econintersect is wondering what is the value of the Stockman Chart of the Day without further information, such as the second graph supplied by Econintersect.  In addition, Stockman attributes cause for the observations "welfare state policy impacts—-such as the huge increase in Social Security disability and food stamp recipients".  He offers no proof of what is cause and what is effect.  Yes, there is correlation, but then what?


Giant Black Holes May Be on a Collision Course (Scientific American)  Most galaxies have a supermassive black hole lurking at their centers, but a galaxy 10.5 billion light-years away looks like it might have two—and the pair may be set to crash together in just 21 years. If the observations are confirmed, the duo would be the closest known set of binary black holes, and their imminent collision would offer scientists an unprecedented chance to watch extreme physics in action.  The two black holes cannot actually be seen (after all, they are "black" embedded in a black space).  The existence of the twins is inferred from the periodic nature of the light emitted in the region.

Other Economics and Business Items of Note and Miscellanea

  • UPDATE 4-Benjamin Lawsky to step down as top NY financial regulator (Reuters)  Benjamin Lawsky is stepping down as New York state's financial regulator in June, after four years of running the newly created agency and gaining a reputation as a maverick in bringing cases against global banks over misconduct.  The news was announced on Wednesday just hours after Lawsky and other U.S. authorities announced a near-$6 billion settlement with major global banks over manipulation of foreign exchange rates.
  • PayPal Credit Deception Exposes a Larger Problem (U.S. News & World Report)  PayPal may have to pay up.  The online payment company reportedly enrolled customers in its credit service without their knowledge and even hit some with fees when a missed payment was its own website's fault.  This may be an example of a wider practice involving other companies.  Disclosure:  Econintersect uses Pay Pal for financial transactions.
  • Better Than Raising the Minimum Wage (Warren Buffett, The Wall Street Journal)  The Sage of Omaha says we should help Americans who need it with a major, carefully crafted expansion of the Earned Income Tax Credit (EITC).  Econintersect:  Mr. Buffett does not discuss the "moral hazard" issues directly, but what he proposes has the obvious moral hazard for companies which have large numbers of minimum wage positions.  These companies have their labor costs subsidized by everybody rather than those who benefit from the lowered costs (themselves and their customers).  This is a form of corporate welfare.  The "improved" EITC may be an efficient way to address improvement for poverty level wages; but it it also creates a pattern of winners and losers across American society (as will any action or inaction) and the structure of that pattern needs to be understood and balanced against alternatives and everything else going on.
  • New class of "non-Joulian magnets" have potential to revolutionize electronics (gizmag)  About 175 years ago, physicist James Prescott Joule (the same person after which the unit of work energy, the joule, is named) discovered magnetostriction, where iron-based magnetic materials minutely distort in shape, but not in volume, when placed in a magnetic field. Since then, it has been pretty much accepted that this was the way all magnetic materials behaved.  Now scientists at Temple University and the University of Maryland have discovered a new class of magnetic alloys which go through a large change in volume when magnetized.
  • What a Body Built to Last 100 Years Would Look Like (Scientific American)  It would look pretty ugly but bulging disks, fragile bones, fractured hips, torn ligaments, varicose veins, cataracts, hearing loss, hernias and hemorrhoids and other wearout defects of aging would be greatly reduced.


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