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What We Read Today 01 May 2016

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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The rest of this post is available only the GEI Members.  Membership is FREE -  click here

Topics today include:

  • Most Billionaire Wealth is Unearned

  • Hedge Funds are a Rip Off According to Warren Buffett

  • Do the Laws of Aggregation Make Antitrust Laws Obsolete?

  • Forget the "Rock that Burns"; We Now Have "Water that Burns"

  • Is Tesla a Generational Short?

  • Haliburton - Baker Hughes Merger Cancelled

  • Dead-end Jobs, Crap Wages and Moving from Middle Class to Homeless

  • Cruz Keeps the Inside Game Going While Trump Fumes

  • Bernie Sanders Still Firing Away

  • Clinton Backer Warren Buffet Okay with Either Clinton of Trump as President

  • A New 'Final Solution' in Germany?

  • 'Occupy Baghdad' Ends with ISIS Attacks

  • Russia Has Its Own 'River of No Return'

  • AIG the latest Western Financial Company to Back Out of China

  • And More

Articles about events, conflicts and disease around the world


  • Halliburton, Baker Hughes Said to Call Off $28 Billion Merger (Bloomberg)  Halliburton Co. and Baker Hughes Inc. are preparing to call off their $28 billion merger, which has met stiff antitrust resistance from regulators in the U.S. and Europe, a person familiar with the situation said.  The companies, the second- and third-largest oil-service firms, may announce as soon as Monday morning that they have terminated the combination, said the person, who asked not to be identified.   The companies had set a deadline for the end of April to complete the deal or walk away. Halliburton will have to pay Baker Hughes a $3.5 billion termination fee.

Jo-Ann was a child prodigy who went to college at age 14. She graduated and landed a coveted job at Citigroup.

Soon she was flying around the world leading meetings. Then she jumped to a management role at a financial printer. She was middle class, maybe even on her way to the upper middle class ... until the tech bubble burst. And September 11th hit.

The U.S. fell into a recession and companies cut back. In 2002, Jo-Ann was forced to train the Indian workers that would replace her.

After she was laid off, she struggled to find a good paying job. She melted down her savings and 401k. She got into the trap of working "dead-end crap jobs with crap wages," including a stint at Walmart.

Her life went from American Dream to Bust. Today she's in her mid-40s and makes $11 an hour processing payments at a financial firm despite being college educated.  

Her story is exactly what so many Americans fear -- that they are one step away from financial ruin. It's why they are drawn to Donald Trump and Bernie Sanders in the 2016 election.

  • How I went from middle class to homeless (CNN Money)  Joe's worked all his life, starting at age 11 pushing a broom around an uncle's shop. He earned two associate's degrees in electrical engineering technology and mechanical engineering technology and built a "blue collar" career as a technician, tester and machine operator. He loves factories and figuring out how things work.  After his mother got sick, he moved back to Pennsylvania in 1999 to care for her. Never married, Joe bought a trailer home with his mother. He managed to get jobs through temp agencies, but the work was never steady. He never earned $15 again.  Since being laid off in April 2013 from a manufacturing job, he's worked on and off a total of only seven months. He has drained his savings and retirement accounts and his mother is now in a nursing home, funded by what remains of her life savings and Medicaid.  His story:

  • As Cruz Dominates Delegate Contests, Trump Says Race is 'Over' (Bloomberg)   Even as his campaign struggles for survival, Senator Ted Cruz dominated weekend delegate selection contests that he and other Republicans hope could block Donald Trump from winning the party's nomination at their national convention.  From Virginia in the east to Arizona in the west, the Texan nearly ran the tables at state party conventions where delegates were picked to attend the July meeting in Cleveland. Trump, meanwhile, said the nominating race is already "over".  Trump has won the most state primaries, including a sweep of five northeastern states on April 26, and has gained over 10 million votes from primary and caucus voters so far, to Cruz's 6.9 million. Yet Cruz's campaign has repeatedly shown superior organization and understanding when it comes to the arcane delegate-selection process and his quest to secure people loyal to him at a possible contested convention.  In state after state where Trump defeated Cruz by huge margins, the Texas senator is virtually sweeping up all the party-selected delegates as the GOP scramb;es to try to stop the Trump runaway train.  For a GEI Op Ed this weekend see Indiana: Mike Pence vs. Bobby Knight.

  • Bernie Sanders Vows Contested Convention, Makes Case for Superdelegate Flips (Bloomberg)  Bernie Sanders has vowed to take his fight for thr Democratic nomination all thr way to the convention, saying that Hilklary Clinton "cannot achieve a majority of convention delegates by June 14 with pledged delegates alone"  and that he "would be the stronger candidate to defeat Trump or any other Republican". 

  • Buffett says Berkshire 'fine' with Trump or Clinton (Reuters)   Warren Buffett said on Saturday that Berkshire Hathaway Inc is poised to do well no matter who wins the White House in November, and the billionaire investor defended the performance and tactics of the conglomerate's several large investments.  Buffett presided over his 51st Berkshire annual meeting in Omaha, Nebraska, where he and Vice Chairman Charlie Munger fielded five hours of questions on such matters as Coca-Cola's sugary drinks, lower shipping volumes on the BNSF railroad, risks from derivatives, and who might succeed Buffett as chief executive.  Buffett, a staunch supporter of Democrat Hillary Clinton for president, was asked about the regulatory impact on Berkshire if Republican front-runner Donald Trump wins the 2016 U.S. presidential election.

"That won't be the main problem.  If either Donald Trump or Hillary Clinton becomes president, and one of them is very likely to be, I think Berkshire will continue to do fine."


  • Germany AfD conference: party adopts anti-Islam policy (BBC News)  The German right-wing party Alternative fur Deutschland (AfD) has adopted an explicitly anti-Islam policy.  Delegates at a party conference adopted a ban on minarets, the call to prayer and the full-face veil, saying Islam was "not part of Germany".  A delegate who called for more local dialogue with Muslim groups was booed.  Econintersect:  Should we start watching for a new leader whi calls for a "final solution"?


  • US once again forced to turn to Russia for help on Syria (Associated Press)  Scrambling to resuscitate a nearly dead truce in Syria, the Obama administration has again been forced to turn to Russia for help, with little hope for the desired U.S. outcome.  At stake are thousands of lives and the fate of a feeble peace process essential to the fight against the Islamic State group, and Secretary of State John Kerry has appealed once more to his Russian counterpart for assistance in containing and reducing the violence, particularly around city of Aleppo.


  • Protests disband after IS group carries out 2nd Iraq bombing (Associated Press)  Security forces may have had problems controlling anti-government demonstrations but ISIS has, at least temporarily, put an end to 'Occupy Baghdad'.  Protesters disbanded at least temporarily Sunday from the heavily fortified Green Zone they had stormed a day earlier after the Islamic State group carried out its second major attack in Iraq in as many days — a pair of car bombs that killed more than 30 people.  The country's political crisis intensified Saturday when hundreds of supporters of Shiite cleric Muqtada al-Sadr tore down walls and poured into the zone that is home to the seat of the Iraqi government and most foreign embassies. Loudspeaker announcements on Sunday evening urged protesters to leave peacefully. When the call came, hundreds calmly packed up and left, carrying flags and overnight bags away with them.  Supporters of al-Sadr have been holding demonstrations and sit-ins for months to demand an overhaul of the political system put in place by the U.S. following the overthrow of Saddam Hussein in 2003. Last summer, demonstrations demanding better government services mobilized millions across Iraq and pressured Prime Minister Haider al-Abadi to submit his first package of reform proposals. However, months of stalled progress followed, and in recent months al-Sadr's well organized supporters took over the protest movement.  Despite the subdued end to the latest protest, Iraqi officials fear the precedent set by the Green Zone breach will continue to undermine the country's security.


  • Russia's nuclear nightmare flows down radioactive river (Associated Press)   At first glance, Gilani Dambaev looks like a healthy 60-year-old man and the river flowing past his rural family home appears pristine. But Dambaev is riddled with diseases that his doctors link to a lifetime's exposure to excessive radiation, and the Geiger counter beeps loudly as a reporter strolls down to the muddy riverbank.  Some 50 kilometers (30 miles) upstream from Dambaev's crumbling village lies Mayak, a nuclear complex that has been responsible for at least two of the country's biggest radioactive accidents. Worse, environmentalists say, is the facility's decades-old record of using the Arctic-bound waters of the Techa River to dump waste from reprocessing spent nuclear fuel, hundreds of tons of which is imported annually from neighboring nations.  The results can be felt in every aching household along the Techa, where doctors record rates of chromosomal abnormalities, birth defects and cancers vastly higher than the Russian average — and citizens such as Dambaev are left to rue the government's failure over four decades to admit the danger.  Econintersect:  This is literally Russia's 'River of No Return'.


  • AIG raises $1.25B by selling a stake in China insurer PICC (CNBC)    American International Group (NYSE:AIG) has raised HK$9.68 billion ($1.25 billion) by selling a large chunk of its stake in China's PICC Property and Casualty Co. Ltd. in a block deal, IFR reported on Sunday.  AIG sold about 740 million shares at HK$13.08 each, or near the bottom end of a marketing range, IFR said, citing sources close to the deal. Most of the shares were bought by institutional investors, it added.  With this, AIG has raised about $2.6 billion by selling PICC P&C shares since last year, after investing in the company ahead of its IPO in 2003.  AIG's stake sale is among the biggest block deals in Asia this year and comes at a time when several European and U.S. financial institutions have been trimming their exposure to Chinese banks and insurers.  Econintersect:  Rats?  Sinking ship?

Other Scientific, Health, Political, Economics and Business Items of Note - plus Miscellanea

The 62 richest people in the world own as much wealth as half of humanity. Such extreme wealth conjures images of both fat cats and deserving entrepreneurs. So where did so much money come from?

It turns out, three-fourths of extreme wealth in the US falls on the fat cat side.

A key empirical question in the inequality debate is to what extent rich people derive their wealth from “rents”, which is windfall income they did not produce, as opposed to activities creating true economic benefit.

  • Buffett Says Hedge Funds Get ‘Unbelievable’ Fees for Bad Results (Bloomberg)  Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said large investors should be frustrated with fees they’re paying hedge fund managers who fail to match the returns of index funds. Hedge funds traditionally charge a management fee that’s 2% percent of assets, plus 20% on any profits. That’s “a compensation scheme that is unbelievable to me,” Buffett said. He added that some pension funds have disregarded his advice, and gone ahead and hired consultants.  Buffett said Saturday during Berkshire’s annual meeting in Omaha, Nebraska:

    “There’s been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities,” .

  • Antitrust and Aggregation (Stratecher)  Ben Thompson raises interesting questions about the differences between monopoly power (where a provider of a good or service has no effective competition thus depriving consumer choice) and aggregation power (where the provider of a good or service achieves overwhelming domiance because of consumer selection and no deprivation of consumer choice is involved).  In the latter case, Thompson argues, classical antitrust laws have no effective role because by the time a "monopolistic" position is established the product has probably peaked in market penetration (or soon will) and new competitors will arise, succeeding in gaining market share based on superior performance.  This is especially true for cases where  aggregation occurs is a world with essentially no transaction costs and near zero distribution costs,  Examples discussed include Microsoft Windows, Facebook, Amazon and Google Search.  (For another recent discussion on this see Talking Out Of One's Orifices at GEI Analysis.)  (Econintersect: In light of the following discussion by Thompson, recall that a massive antitrust action was started against IBM as the outgoing shot by Lyndon Johnson's Departmemnt of Justice in 1968,  By the time that action was settled with a dismissal in 1982 IBM had already lost any chance for dominance in computers, even though they were about to give credibility to the emerging desktop machine with the IBM PC.  It was that emerging wave of distributed computing, storage and data communication (which continues to this day) which almost pushed Big Blue into bankruptcy by 1992, forcing the company to downsize and retrench to about half its size in order to survive.)  Here is Thompson's conclusion (which looks at the history that developed since IBM's existential challenge):

[P]erhaps the biggest question is whether or not we will look back in 15 years and wonder what the point was [of antitrust action against Microsoft and more recently Google]. Microsoft’s revenue may have had a long ways to grow back in 1998, but the truth is the company’s relevance to the industry had already peaked; that year their successor on top of the industry and — via the browser, on top of Windows — was founded in Palo Alto. It was named Google.

Similar, I have made the case that while Google may still grow, the company has peaked in relevance as well, eclipsed by Facebook. So sure, the European Commission can prosecute Google, but it won’t dent Android’s dominance, and it won’t deter whoever else has the problematic monopoly in the future.

 The incentives and feedback loops that drive towards domination are simply too strong (one could make the case that the most effective monopoly killer is the next monopoly).

To that end, there is no question that the broader point underlying Aggregation Theory holds: the (metaphorical) rules have changed, and it’s fair to believe that at some point the laws may have to as well. It won’t be easy, though, and the possibility of unintended consequences will be strong, particularly given the self-corrective resiliency tech has shown to date that provides a compelling argument for leaving well enough alone.

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