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What We Read Today 07 June 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".).

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Topics today include:

  • Weird Facts about Health Savings Accounts

  • Jeffrey Gundlach has Grown his Bond Investing Firm to $100 Billion in 7 Years

  • The GAAP GAP is not a Leading Indicator of Recession

  • Renewables Grow since 2004 and also Grow Cheaper

  • U.S. Productivity is Falling and Wage Growth Accelerating

  • Two Diverging Opinions on Junk Bonds

  • 225 Years of U.S. Inflation

  • EU Refuses to Extend Permission for Glyphosate (Active Ingredient in Roundup)

  • Pound Rebounds and Brexit Polls Weaken

  • Rousseff Still Has a Chance

  • And More

Articles about events, conflicts and disease around the world

Global

  • 7 Charts Show How Renewables Broke Records Globally in 2015 (EcoWatch)  There may have been a new record for investment in renewable energy in 2015 but the details show green energy investment is slowing in dollar terms (graph below).  From 2004 to 2011 the average growth in money invested was 21.5% compunded annually.  from 2011 to 2015 the average growth rate was 0.66% compounded annually.  But that is only part of the story - see next article.

  • 2014 Renewable Energy Data Book (U.S. Department of Energy)  Data in the previous article shows that global investment in renewable energy fell by 2% from 2011 to 2014.  But (graph below) installed capacity increased by more than 18%.  This reflects the rapidly eclining cost curve for renewable energy.

global.electricity.from.renewables.2004.2014

U.S.

  • Trump: Judge comments 'misconstrued' (The Hill)  Donald Trump's statement doesn't amount to a repudiation of his earlier comments, but it shows a tacit acknowledgment that he should tamp down his rhetoric.  He said in the statement that he will stop his talk of the judge's impartiality.

  • US worker productivity slumped again in Q1 (Associated Press, Yahoo! News)  Hat tip to Sig Silber.  American workers were less productive again in the January-March quarter, although the decline wasn't as severe as first thought. Meanwhile, labor costs climbed at a faster pace than initially estimated.  The Labor Department said Tuesday that productivity declined at an annual rate of 0.6% in the first quarter after a 1.7% drop in the fourth quarter. Labor costs for employers rose at a 4.5% rate in the first quarter.  See also Weak U.S. productivity likely to remain a drag on profits (Reuters

  • Junk Risk Spikes as Recession Odds at Post-Crisis High, UBS Says (Bloomberg)  The chance of a U.S. recession next year is the highest it’s been since the credit crisis and that could spark record defaults among high-yield companies, according to UBS Group AG.  UBS forecasts default rates will climb to 5.5% by mid-2017, from the current 4.4%.  See also next article.

  • Prudential's Peters says sticking with junk bonds post-rally (Reuters)  Gregory Peters, a senior investment officer at Prudential Fixed Income, said Monday he favors higher-quality high-yield junk bonds even after the sector's rally.  He is looking for pullback this summer for another buying opportunity.

  • 20 Best Cities to Start a Career (ThinkAdvisor)  Bankrate.com has checked 100 cities across the country, drawn from metropolitan statistical areas (MSAs) with populations above 250,000 and per capita GDP levels of above $40,000, looking for the ones that provide that sweet spot for the beginning of a career.  The two coasts dominate the list, with 6 each for west coast and east coast.

EU

  • EU Fails to Approve ‘Technical Extension’ for Weed-Killer Glyphosate (EcoWatch)  With the current approval of glyphosate (active ingredient in Monsanto's Roundup herbicide) set to expire at the end of June and insufficient support from EU governments for re-approval, the European Commission had proposed a “technical extension” of the current approval until after the European Chemicals Agency delivers its opinion on glyphosate (12-18 months). European Chemicals Agency is expected to deliver its opinion by autumn 2017. The “technical extension” means the commission has dropped the proposal for a longer term re-approval. The failure to agree on this today means the future for glyphosate is uncertain. The European Commission could try to force the proposal through an “appeals committee”.

UK

  • Pound rebounds as ‘Brexit’ polls show support to remain in EU (MarketWatch)  A series of new polls showed narrow support for the U.K. to remain in the European Union, pushing the pound higher on Tuesday.  A spate of conflicting polls released over the past week have led to gyrations in the pound as the outcome of the referendum appeared too close to call.

Iraq

  • Spats among Iraq's security forces delay advance on Fallujah (Associated Press)  After securing the southern edge of militant-held Fallujah, seven battalions of Iraqi special forces units have been unable to advance for two days — a delay that commanders say isn't due to counterattacks or difficult terrain, but rather to disagreements about battlefield strategy among the disparate Iraqi forces fighting the Islamic State group.

Russia

  • Russia deploys troops westward as standoff with NATO deepens (Reuters)   Russia is building an army base near its border with Ukraine, the latest in a chain of new military sites along what the Kremlin sees as its frontline in a growing confrontation with NATO.  While there have been no clashes between the former Cold War rivals, Russia is building up forces on its western frontiers at a time when the NATO alliance is staging major military exercises and increasing deployments on its eastern flank.

India

  • U.S., India finalize text of military logistics deal: U.S. official (Reuters)  The United States and India have finalized the text of an agreement to share military logistics, and it will be signed very soon, a senior U.S. official said on Tuesday.  India Prime Minister Nerendra Modi met with President Obama today in Washington and address a joint session of Congress tomorrow.

Brazil

  • Scandals in new Brazil government offer Rousseff hope of survival (Reuters)  A wave of scandals buffeting Brazil's interim government is weakening the resolve of some senators to oust suspended President Dilma Rousseff, offering the leftist leader hope of surviving an impeachment trial in the upper house.  Soccer-star-turned-Senator Romario shocked the government last week when he announced he was no longer certain to vote in favor of removing Rousseff. Brazil's first female leader was placed on trial by the Senate last month on charges of breaking budget rules.

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

  • 10 weird HSA FAQs  (LifeHealthPro)  Health savings accounts help employees sock away money for health care costs. They’re used along with a high deductible health insurance plan, and they offer some great tax benefits.  Contributions made to HSAs lower one’s taxable income, and payments made from an HSA aren’t taxed. Plus, the funds can be invested and interest can accrue in an HSA - tax free.  Used with care, HSAs can be a smart financial tool. But they’re also potentially complex.  Here are two of the FAQs:

No. 7: Can HSA owners wait to contribute until they have a known medical expense?

Answer: Yes, provided that the HSA owner has opened the HSA (to set the establishment date), remains eligible for an HSA (necessary to put more money into an HSA), and has not yet contributed the maximum limit for the year.

Some HSA owners prefer to keep their HSA balance low and only fund the HSA when they know they will need the money. This approach may result in lost tax benefits as individuals have a limited period of time to contribute to an HSA for a particular tax year.

Also this approach will not result in the building of a balance in the HSA over time to cover larger expenses. However, for individuals tight on funds, this approach will allow for minimizing the HSA cost while still getting the tax benefits.

No. 10: Should HSA owners show their health insurance cards for medical services even if they are paying the full expense themselves with their HSA?

Answer: Yes. Some HSA owners make a logical but potentially expensive error in not using their medical insurance cards for HSA purchases.

Even though HSA owners have to pay for the full medical expense when they are still below their deductible, they should show their insurance card to benefit from any discount the insurance carrier may have negotiated with the provider. Also, if an HSA owner shows an insurance card, the insurance carrier can track the expense against the deductible.

Neither of these reasons may apply in a particular circumstance, but it’s relative easy to show the card and the worst case scenario in showing the card is that the providers says it does not need it or want it.

  • Gundlach's DoubleLine Hits $100 Billion In AUM (Reuters, Financial Advisor)  Jeffrey Gundlach's DoubleLine Capital reached $100 billion in assets under management last month, the Los Angeles-based firm said this week.  DoubleLine, founded in December 2009 and considered one of the fastest-growing asset managers in the United States, benefited from inflows last month. The DoubleLine open-end mutual funds collectively posted a net inflow of $1.48 billion in May, bringing its year-to-date net inflow to $9.05 billion.  Gundlach has remained a bond bull through much of the last seven years when many managers were too pessimistic.  He has managed to cut back significantly during a couple of bond market declines and reinvested near the bottom of those dips.

  • A Look At The GAAP GAP (Financial Advisor)  Another analyst takes a look at the wide gap which exists between reported earnings and operating earnings for S&P 500 companies.  Here the author points out that some have tried to make a cause-effect relationship between this earnings divergence and bear markets, a connection we find extremely weak. Here we dig a little deeper into this issue and make the case that it should not be of much concern to investors.  The biggest reason for the latest gap, which reached 27% in 2015, has been the energy downturn, which led to significant downward adjustments to valuations of oil and gas assets. The drop in energy sector earnings had nothing to do with accounting or earnings quality, and everything to do with the sharp drop in oil prices.  Similar gaps were observed during the tech crash in the early 2000s and the financial crisis during 2008–09.  But these gaps occurred during the crises.  The gap has not been a leading indicator.

Click for larger image at Visualizing Economics.


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