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What We Read Today 09 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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  • Greece Draws Up Proposal in Last-Ditch Effort to Keep Euro (Bloomberg)  Greece has drafted a package of economic reforms and spending cuts, put together with help from France.  The package was approved by a majority of the country’s cabinet ministers and is due to be submitted by midnight Brussels time (09 July). The proposals are set to be discussed at a summit of European Union leaders Sunday to determine whether the country will get a new bailout, or be forced to leave the single currency.


  • The Ponzi scheme that's trapping Israel’s ultra-Orthodox (Al Monitor)  It is actually an ongoing pattern that is plaguing ultra-conservative Jews in Israel.  In the past few years, check-cashing scams and other ruses have become a real plague on the community. Every few months, the ultra-Orthodox press reports on some ultra-Orthodox con man or another who allegedly bilked yeshiva students out of tens of millions of shekels and fled, leaving young couples and families with children penniless and burdened with debt. The scams themselves straddled the border between speculative and irresponsible investments and malicious con jobs devised to rob investors of their money.



  • Iranian negotiators determined to reach nuclear deal (Al Monitor)  Negotiators at the Vienna talks on Iran's nuclear program are close to an agreement, but have run into problems concerning implementation. The main sticking points are not singular problems, but linked issues that to each party appear to be incompatible. Iranian negotiators have indicated a willingness to talk as long as necessary as long as there is progress and an agreement appears to be within reach.  This report says that Iran does not feel bound by a time limit, such as the 09 July deadline for an agreement set by the U.S. led western negotiators.


  • Three charts explaining China's strange stock market (CNBC)  Econintersect:  The most informative of the three is shown below.  Remember the 59% decline in the S&P 500 associated with the Great Financial Crisis?  Well that looks like a pimple compared to the moves in Shanghai stocks (up 5x the S&P 500 2005-2007, followed by a decline over 70%).

How crony capitalism is slowing global economic growth (James Pethokoukas, American Enterprise Institute)  The creative destruction of iconic economist Joseph Schumpeter is noit very destructive today, nor is it all that creative.  Too many firms are entrenched and not easily moved by new developments.  There is too much of 'I've got your back if you've got mine, crony.'   Pethokoukas writes:

... productivity growth has slowed in most OECD countries over the past decade. A new OECD research note doesn’t think the problem is a lack of innovation, so much as an inability to spread innovation broadly throughout advanced economies. “A breakdown of the diffusion machine” is what the OECD calls it. The gap between high productivity firms and low productivity firms is increasing.


Why Beijing’s Efforts Have Failed to Tame China’s Stock Market (The Wall Street Journal)  The more the government intervenes, the jumpier investors get - $3.5 trillion in value gone so far.  And listed companies are not helping confidence either.  Half have stopped trading of their shares.

Ten Years in Shanghai (Chart of the Day)

This market isn't volatilie - it's violent!


Payments-tech companies like PayPal and Square are moving aggressively into lending and disrupting banks (John Heggestein, Business Insider)   Following the 2008 financial crisis, banks severely restricted access to capital, disproportionately affecting fledgling and medium-sized businesses. Annual loan originations to businesses with $1 million or less in revenue fell dramatically between 2007 and 2013.  For payments companies like Square and PayPal this created an opportunity. They are now offering loans and advances to their small-business clients and charging a fixed fee for the capital advance.

Other Economics and Business Items of Note and Miscellanea

  • People substitute marijuana for alcohol at age 21, study says (The Washington Post)  An article in the Journal of Health Economics, reports that alcohol consumption spikes among people just over the age of 21. But it also found that marijuana use experienced a substantial drop at the same age.  The study found the probability of having consumed alcohol in the past 30 days increases by about 16% just as young people have legal access, whereas marijuana decreases by 10%t at the same time, indicating that marijuana has in fact acted as a substitute for alcohol before the 21st birthday for some people.

It's been a really bad week for major U.S. coal companies as we head into the July 4th holiday weekend.   St. Louis-based Peabody Energy (NYSE: BTU) closed today at $1.87 a share, down from a high of $84 per share in mid-2008. The company's chief financial officer Michael C. Crews resigned abruptly on June 28 amidst the freefall.  Another major U.S. coal company, Alpha Natural Resources (NYSE: ANR) hit a new all-time low yesterday at just 27 cents per share, and sank as low as 24 cents that morning.   Arch Coal (NYSE: ACI) also hit its all-time low of 33 cents per share as well, down from its all-time high of $73.42 in 2008.  

All three companies' stock values are down roughly 80% from the beginning of 2015.

  • Bill Gross recommended shorting China stocks but didn't pull the trigger (Bloomberg NewsInvestment News)  For the second time this year investment guru Bill Gross missed a "big short".  Earlier this year he called a top for Germun bunds and they crashed within a month.  In early June he recommended shorting the Chinese stock market and it is down 30% since.  Substantial positions in either of those would have made huge gains.  Since they occurred sequentially he could have made big plays in both.   He hasn't been losing money though, according to this article he has profited from bets against the S&P 500 and emerging market currencies.  But he might have made a lot more only if .... 
  • What does Marriage Equality have to do with Dred Scott? (The New Yorker)  Econintersect:  In our opinion there is little of value in this article relating to the recent SCOTUS decision legaling gay marriage.  But it is a fascinatingly clear and detailed review of the case (Dredd Scott, 1857) representing perhaps the worst ever decision handed down by the Supreme Court.
  • Another disturbing article about climate change. Fortunately we have the IPCC! (Fabius Maximus)  FM contributes to GEI.  FM agrees that the data indicates global warming is occurring and the evidence indicates that it is to a significant degree the result of mankind's activities.  But he draws a line when it comes to apocolyptic predictions based on the data and evidence he accepts.  Here is the start of today's discussion:

Today’s reading is “When the End of Human Civilization Is Your Day Job” by John H. Richardson in Esquire — “Among many climate scientists, gloom has set in. Things are worse than we think, but they can’t really talk about it.”

It’s a sad story, but not the one Richardson thinks he’s telling. Glaciologist Jason Box has an apocalyptic forecast for climate change. This has taken a psychological toll on him and his family. Richardson misrepresents the story, however, by neglecting to mention that Box’s views are outside the consensus of climate scientists as seen in the reports of the IPCC.

  • Restored High Bridge Offers a New View of NYC (New York - New Jersey Trail Council)  The oldest extant bridge in New York City, the High Bridge connecting the Highbridge section of The Bronx with Washington Heights in Manhattan across the Harlem River, has been reopened after complete restoration.  The pedestrain-only bridge, which sits atop the Old Croton Aqueduct, was built in 1848 had been closed since 1970.  The quarter-mile-long High Bridge, a city and federal landmark built on Roman-style granite arches, has a unique story to tell. It was built to carry Croton water, the city’s first pure water supply, from the mainland to Manhattan Island in pipes beneath the walkway. The bridge quickly became a popular destination for tourists and eventually a part of life in the two neighborhoods it connects.  Many historic, scenic and other points of interest can be accessed via walkways connecting to the bridge.  If you visit New York and are any kind of hiker or walker, don't miss this.  It is a unique way to see New York City in an entirely different light.

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