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What We Read Today 24 August 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:

  • Mylan Price Gouges with EpiPen

  • Stock Prices Justified by Bond Interest Rates is Flawed

  • Fallacious Assumption of Ergodicity of Stock Prices Won a Nobel Prize

  • Recent Earnings Decline has had 17 of 18 Record of Predicting a Recession

  • Huge U.S. Crude Inventory Jump Slams Oil Prices

  • Oil Rebound Seen for 2017

  • Latest Campaign Finance Reports

  • Calls Increase for Shutdown of Clinton Foundation

  • Does Trump have 'Undercover' Voters?

  • U.S. Miles Driven is Up, But Not on a Per Capita Basis

  • EU Says Greece Did Not Manipulate Debt Stats 2010-2015

  • UK Housing Market Poised for Contraction

  • Latest on Italy's Deadly Earthquake

  • Turkish Tanks Roll into Syria

  • Rare Shooting Deaths in Vietnam

  • And More

Articles about events, conflicts and disease around the world

Global

  • Brent crude and West Texas Intermediate oil prices fall on huge surprise increase in US crude stocks (City A.M.)  Global oil prices are headed lower, at least for several hours and maybe a day or two.  The price of US oil fell by more than 2% this afternoon after an unexpected increase in crude stocks in the country reinvigorated worries about a global supply glut.  Today the US Energy Information Administration (EIA) released figures showing domestic crude supplies rose by 2.5 million barrels in the week ended 19 August to a total of 523.6 million barrels.  This was a mammoth increase compared to the the 455,000 barrel decline that had been expected.  The rise was driven to a fall in gasoline production and a decrease in refiner inputs, the EIA said.  See also U.S. crude down 3 percent after big stockpile build report (Reuters, Investing.com)

wti.crude.2016.aug.18.24

  • Forget The Pullbacks – Oil To See Strong Rebound In 2017 (Oil Pro)  August 11, 2016 may be the point in this oil price cycle that will mark the start of a sustained increase in crude oil prices. That’s the date that the International Energy Agency (IEA) published their forecast that demand for oil would exceed supply in the 3rd quarter. Shortly after the IEA’s Oil Market Report came out, the Saudi Energy Minister Khalid al-Falih said the kingdom would work with other producers to stabilize the market. Tighter supply and OPEC willing to curb production growth is a recipe for higher oil prices.

U.S.

  1. Trump is running the most skeletal operation in recent memory

  2. Clinton is monopolizing the airwaves

  3. Trump is stepping up his digital investment

  4. Clinton is the favorite of mega-donors and Wall Street

  5. Trump is gaining with small donors 

  • Chorus grows for Clintons to shutter charitable foundation (Reuters)  The Clinton Foundation, the family philanthropy of Democratic U.S. presidential candidate Hillary Clinton, should shut down or transfer operations to another charity despite its good work to avoid perceptions of "pay-for-play", The Washington Post and USA Today said in editorials on Wednesday.  Despite plans announced earlier this week to reorganize the Clinton Foundation if Hillary Clinton wins the Nov. 8 election, USA Today said the global charity must close for the Democratic candidate to avoid any appearance of unethical ties.

  • Campaign manager: 'Undercover' voters give Trump the edge (The Hill)  Polls are misleading because Trump is winning with people who don't usually vote and therefore are not being sampled, according to campaign manager and pollster Kellyanne Conway.  Conway says the numbers being published are "cherry picked" by media outlets bent on destroying Donald Trump.

 

vehicle.miles.us.1970.2016

vehicle.miles.us.pop.adj.1970.2016

EU

  • EU says Greek debt statistics not manipulated in 2010-2015 (Reuters, CNBC)  The European Union's Employment Commissioner Marianne Thyssen said on Wednesday the Greek statistics office did not manipulate data on the country's debt in 2010-2015 and that she had sent a letter to Athens asking it to refute any such suggestions.

  • Germany, France, Italy say Europe must move forward after Brexit vote (ReutersCNBC)  The leaders of the euro zone's biggest economies held talks on Monday in the aftermath of Britain's shock decision to leave the European Union and said Europe had to turn its back on populists who blamed Brussels for all its problems.  Econintersect:  This is essentially current governments saying 'don't vote against us'.  Their rationale contains a bit of denial about the EU's problems.

UK

  • UK mortgage approvals fell to their lowest level in 18 months in July - meaning house prices could fall (City A.M.)  This slump may not be due to Brexit.  The number of mortgages given the rubber stamp of approval fell to their lowest level in 18 months in July, suggesting house prices could fall considerably by the end of 2017.  Figures by the British Bankers' Association (BBA) showed 37,622 mortgages were approved in July, down from 39,763 in June and 41,620 in May. It's an impressive slide since January's 23-month high of 46,386.  The BBA put the slide down to new stamp duty rules on buy-to-let homes - specifically, the rush to push transactions through before the three per cent hike came to effect in April, and the ensuing quiet period.

France

  • France 'burkini ban': Images of police on beach fuel debate (BBC News)  Pictures have emerged of French police appearing to enforce the controversial "burkini ban" on a woman on a beach in the southern city of Nice.  Police appear to issue a fine to the woman, who is then seen removing a veil and baring her arms.  Nice's deputy mayor said the removal of burkinis was a "necessity" after the deadly jihadist attack last month.  More than 20 municipalities in France have imposed beach attire rules.  Here are the provisions of the Nice ordinance:

  • "Access to beaches and for swimming is banned to any person wearing improper clothes that are not respectful of good morals and secularism"

  • "Beachwear which ostentatiously displays religious affiliation, when France and places of worship are currently the target of terrorist attacks, is liable to create risks of disrupting public order"

  • The infringement is punishable with a fine of €38 (£33)

  • The ban remains in place until 31 August 2016

birkini.arrest

Italy

  • Earthquake in central Italy leaves dozens dead (BBC News)  At least 73 people have been killed in an earthquake that hit a mountainous area of central Italy, authorities say.  The magnitude 6.2 quake struck at 03:36 (01:36 GMT), 100km (65 miles) north-east of Rome, not far from Perugia.  Many of the dead were in Accumoli, close to the epicenter, and a short distance away in Amatrice, where three-quarters of houses were destroyed.  Many people are still believed buried under the rubble, and the death toll is expected to rise.  The earthquake was extremely shallow with an epicenter depth of only 10km (6 miles).  Shallow earthquakes cause much more surface damage than do deeper ones.

Turkey

  • Turkish tanks roll into Syria, pushing Islamic State out of key border town (Reuters)   Syrian rebels backed by Turkish special forces, tanks and warplanes entered one of Islamic State's last strongholds on the Turkish-Syrian border on Wednesday, in Turkey's first major U.S.-backed incursion into its southern neighbor.  A column of at least nine Turkish tanks crossed into Syria with the group of largely Arab and Turkmen rebels to drive Islamic State out of Jarablus and surrounding villages. A Reuters reporter at the border witnessed intense bombardments, with palls of black smoke rising around the town.  President Tayyip Erdogan said the operation was targeting both Islamic State and the Kurdish PYD party, whose gains in northern Syria have alarmed Turkey. Ankara views the PYD as an extension of Kurdish militants fighting an insurgency on its own soil, putting it at odds with Washington, which sees the group as an ally in the fight against Islamic State.

Vietnam

  • 2 Officials in Vietnam Are Killed in Rare Shooting (The New York Times)  Hat tip to Rob Carter.  Two provincial officials in Vietnam’s governing Communist Party died on Thursday after being shot in their offices by a forest ranger, who later shot himself, the country’s state-controlled news media reported.  The shootings, a rarity in Vietnam, occurred early Thursday in the northern province of Yen Bai, just before a meeting of the People’s Council, a lawmaking body, the official Vietnam News Agency said. It identified the gunman as Do Cuong Minh, the leader of Yen Bai’s forest ranger unit, who then shot himself.  Vietnam reported 1.51 intentional homicides per 100,000 people in 2011, up from 1.25 in 2008, according to a World Bank database that cites figures from the United Nations. But that was still below the average of two per 100,000 people reported across the Asia-Pacific region in 2012, the closest year for which data was available.  In 2012 the rate for the U.S. was 6.2 per 100,000.

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

  • The Senator’s Daughter Who Raised Prices on the EpiPen (Bloomberg)   Members of Congress are in an unusual position as they demand an explanation for Mylan NV’s 400% price hike for the EpiPen and focus attention squarely on its CEO: Heather Bresch.  If lawmakers follow the usual script, Bresch could get called up to Capitol Hill next month to explain her company’s justification for raising the price on the life-saving allergy shot. But that could be awkward, since she’s the daughter of Democratic Senator Joe Manchin of West Virginia.  While Bresch’s family ties may mute the ire of some lawmakers, others are already asking the company about taxpayers having to foot the bill for these price increases -- particularly after Bresch and the company successfully pushed legislation to encourage use of the EpiPen in schools nationwide.  Econintersect:  When Mylan took over distribution of the EpiPen in 2007, the price was $57 for a 2-pack.  The latest price is $600, up from a prior price of $150.  So the total increase in price by Mylan has been over 1,050%.  See also next article.

  • How Mylan ended up with an EpiPen monopoly (BioPharmaDive)  An attempt to provide competition to the EpiPen marketed by Mylan Labs failed.  Sanofi brought a competing product to market in 2012, another epinephrine auto-injector called Auvi-Q, which was later recalled because of safety concerns.  There may be a new competitor on the horizon:  there is potential for a generic version of the product to come to market later this year form Teva Pharmaceuticals.

  • S&P 500 Trailing Earnings Yield vs. 10-Year Treasury Yield (Walter Kurtz, Sober Look)  SL has published a letter from Archibald Rusk.  Rusk criticizes the argument that stock valuations are consistent with long-term interest rates (first graph below). He says that the correlation is dependent "comparably few outliers on the top-right corner (all from years 1975-1985, "Volcker Years", "Rates Peak")".  (Econintersect:  We would point out that the correlation is only 62% (R-squared = 0.38) which is 'weak' in our estimation.)  When the data reported by Shiller using CAPE and log scale coordinates is viewed the total absence of time independent correlation is evident (second graph below).  Econintersect:  This is a demonstration of non-ergodicity for the relationship between stock valuations and long-term interest rates.  The assumption of ergodicity in studying stock price history is one of the major flaws in analysis.  And, in spite of this being a fallacious assumption, at least one Nobel prize in economics has been awarded for using it.  Click on second graph for larger image.

  • S&P 500 inflation-adjusted earnings (Chart of the Day)  Econintersect:  Since 1900 there have been 18 S&P 500 inflation-adjusted earnings declines equal to or greater than the current one.  Over the same 116 years there have been 22 recessions.  Only one of the declines (1983-84) was not followed by a recession within 2 years, usually within one.  So we can say that a significant S&P 500 inflation-adjusted earnings decline is not necessary (4 out of 22 recessions were not preceeded by a decline) but almost sufficient (17 out of 18 declines preceeded a recession) to indicate an iminnent recession.


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