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What We Read Today 02 July 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


  • Why a Puerto Rican Default is More Dangerous Than You Think (The Street)  Much of Puerto Rico's debt holders don't even realize they own it because it is held in mutual funds.  If Puerto Rico's desired rstructuring of debt takes paklce the NAV (net asset values) of mutual funds will take a hit and investors will seel those funds, leaving them hit by a double whammy.
  • What BP’s $18.7 Billion Spill Settlement Means for the Environment (Bloomberg)  This is part of the $53.8 billion BP has reserved for total liability for the 2010 Deepwater Horizon drilling platform blowout that resulted in the death of 11 rig workers and spewed millions of barrels of crude into Gulf waters.  The $18,7 billion in this settlement will be paid out over the next 18 years which will help control boondoggles.  But it won't eleiminate them, according to this article, because local communities are already diverting BP moneys from environmental clean-up to building things like parks and ballfields.
  • Why Shale Oil's Safety Net Is About to Expire (Bloomberg)  Hedges against lower prices that were bought over a year ago are reaching maturity and being cashed in.  Then one of the supports for shale production at current prices will be removed and it will be seen if that will cause U.S. oil production to stop increasing.



  • Germany says new reports of US spying harm security ties (Reuters)  Germany is taking seriously the latest reports about U.S. spying on senior government ministers and they are putting strains on vital security cooperation between the two countries, Chancellor Angela Merkel's spokesman said on Thursday.  German media have reported that the U.S. National Security Agency (NSA) bugged several senior government members, including the economy and finance ministers, as well as Merkel. Econintersect:  Do we have a new version of the gang that couldn't shoot straight.


  • Who is really being bailed out in Greece? (Al Jazeera)  We have covered this story before:  An estimated 90 percent of bailout funds have gone to financial institutions – not to help Greek residents.  This is not a bailout of Greece, but a bailout of banks. 
  • Greek Drama Won’t End With Vote as Polls Indicate a Tight Race (Bloomberg)  Germany and the rest of the euro region are bracing for more Greek political upheaval followed by tortuous negotiations even if the country votes for more austerity in Sunday’s referendum.  There is no quick fix to the crisis because European Union rules make negotiations on financial aid difficult to re-start, according to an official in Chancellor Angela Merkel’s government. Adding to the murky landscape are polls showing the outcome of Sunday’s referendum on austerity too close to call, so nearly half the Greeks won't support what is the nominal winner anyway.
  • Varoufakis Says he Will Quit if Greeks Vote 'Yes' (Bloomberg)  Greek Finance Minister Yanis Varoufakis said he’ll quit if Greece votes to accept creditors’ bailout proposals in Sunday’s referendum. He said he would "rather cut my arm off" than sign a new accord that doesn’t restructure Greece’s outstanding debt. Varoufakis expects Greeks to follow the government’s recommendation to reject the bailout proposals, which would require further tax increases and spending cuts in exchange for continued aid. He spoke to Guy Johnson on "The Pulse."



  • Boko Haram guns down 97 people praying in mosques in Nigeria (Associated Press, MSN News)  The attack Wednesday night on the town of Kukawa came as people were praying ahead of breaking their fast during the Muslim holy month of Ramadan. They say 97 people, mainly men, were killed.  In addition self-defense fighters in Kukawa said some militants broke into people's homes, killing women and children.


  • RBI says willing to let foreigners hold more govt debt (Reuters)   The Reserve Bank of India (RBI) is committed to steadily increasing how much government debt foreign investors can buy, but will proceed cautiously to avoid becoming too reliant on overseas capital, Governor Raghuram Rajan said on Thursday.  India's current limit of $25 billion for ownership of government bonds by foreign institutional investors (FIIs) is fully utilised, leading to calls for increasing it. The country has also set aside another $5 billion for long-term foreign investors.  India recognises overseas capital as critical to financing its current account deficit, but it worries that high levels of foreign inflows can be followed by destabilising outflows.  In 2013, intense selling of stocks and bonds by overseas funds sent the rupee to a record low and ushered in the worst market turmoil since a 1991 balance of payments crisis.

North Korea

Jim Carrey Just Went on an Epic Twitter Rant Denouncing Mandatory Vaccination Laws (News.Mic)  Anti-vaxxers are having an effect.  Thye data in the graphic is a year old - we will look for current data.


A Simply Outrageous Call On Gold (Ben Lockhart, Seeking Alpha)  Lockhart interviews Ari Gilburt who has made the "outrageous" call of $25,000 for gold.  Before you dismiss the prediction, recognize that is a 50-year call and an increase in value of 20x.  Over 50 years $25,000 would result from an average annual appreciation of 6.2%, compounded.  That is far less than the return for stocks in the past over every 50-year period since 1928.  From the records tabulated by the Stern School of Business at NYU (New York University), the average annual total return for the S&P 500 from 1928 to 2014 has been 11.5%.  The total return at 11.5% for 50 years is 230x.  Some of the numbers of interest for 50-year periods:  (1) from the market top in 1929, the total return for 1930 through 1979 was 45x; (2) from the market bottom in 1932 through 1982, 179x; (3) from 1950 through 1999, 446x; (4) 1953 through 2002, 188x; and  (5) 1959 through 2008, 70x.  Even when we start from a generational market peak, (1), or end with generational market lows, (4) and (5), stocks have returned far more than 20x in 50 years.  So the $25,000 call is not so outrageous after all.  Gilburt bases his projection of the chart pattern since 1982 continuing, with at least two more price spikes followed by consolidations by 2065.  Note:  Avi Gilburt has contributed to GEI.



2015 Milliman Medical Index (  The four year down trend in the growth rate of employer provided health insurance premiums has been broken in 2015.  The reason for the change is primarily prescription drug costs.  In 2015 the monthly health care costs for a "typical family of four" (health plan administrative costs and insurer profit are not included) is $2,056 per month.  (Econintersect:  Adding administrative costs and insurance provider profit load will likely raise this cost at least to $2,300 - $2,400 per month.)  These costs are increasingly shared by employers and employees.

Prescription drug costs spiked significantly, growing by 13.6% from 2014 to 2015. Growth over the previous five years averaged 6.8%. The 2015 spike resulted from the introduction of new specialty drugs as well as price increases in both brand and generic name drugs, increases in use of compound medicines, and other causes. Since the MMI’s inception in 2001, prescription drugs have increased by 9.4% on average, exceeding the 7.7% average trend for all other services. Prescription drug costs now comprise 15.9% of total healthcare spending for our family of four, up from 13.2% in 2001.



Other Economics and Business Items of Note and Miscellanea

  • Grand Central: Jobs Report Seen Confirming Fed’s Growth Narrative (The Wall Street Journal)   The non-farm payrolls increase of 223,000 for June suggests the U.S. economy finished the first half of the year with a solid foundation to weather turbulence from overseas. Fed officials will then need to spend the coming weeks assessing whether spillovers actually materialize and with how much force.  For detailed analysis on the data released today, see GEI Feature:  BLS Jobs Situation Mixed in June 2015. Growth Rate of Employment Slowing.
  • What Physics Should Learn From Economics (Forbes)  Nature News published an opinion piece by Jan Conrad that’s been getting some social-media play today. Titled Reproducibility: Don’t cry wolf, it argues that physicists need to be less eager to announce possible breakthroughs, insisting on higher statistical standards and delaying the public sharing of papers until after “peer review” is complete. The last is somewhat ironic, as such an occurrence would be very much self-serving the interests of Nature, one of the leading peer reviewed scientific journal publishers.
  • Is Puerto Rico Another Greece? 10 Questions (The Wall Street Journal)   There are some clear similarities. Tax evasion is rampant in both countries. A report last year estimated that as many as 44% of certain sales tax revenues in Puerto Rico went uncollected.  Neither Greece nor Puerto Rico can devalue its currency. And both appear to have lost the confidence of bond investors after amassing debt, including large unfunded pension liabilities, that helped paper over deeper economic problems.  But the two are by no means identical. Greece’s debt burden is much bigger. Its economy has been in a much deeper slump and accounts for a greater share of the eurozone than Puerto Rico’s does relative to the U.S.
  • Krueger on Clinton economics (American Enterprise Institute)
  • We're not alone, but the universe may be less crowded than we think (Michigan State University)  There may be far fewer galaxies further out in the universe then might be expected, according to a new study led by Michigan State University.  The new research, using data collected by the Hubble Space Telescope (current issue of the Astrophysical Journal Letters), offers a theory that reduces the estimated number of the most distant galaxies by 10 to 100 times.
  • Drinking Too Much Water Can Be Deadly: Study (MSN Health & Fitness)  Consuming too much water, especially during exercise, can lead to exercise-associated hyponatremia (EAH), in which the kidneys become overwhelmed by the large quantity of liquid it’s forced to process. The body's naturally occuring sodium can’t keep up with the amount of water, leading to swelling in the cells and in severe cases, death. The panel recommends preventing hyponatremia by being in tune with your body and drinking when you’re thirsty — no more, no less.

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