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What We Read Today 06 October 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:

  • Category 4 Matthew Takes Aim on Florida

  • Forward PE Not of Much Value Predicting Future Returns

  • Humans Short of Sleep Have Trouble with Facial Recognition

  • Twitter Struggles Continue

  • Fiduciary Rule Could Triple Electronic Investment Products within 4 Years

  • Fiduciary Rule Could Introduce New, Unexpected Risks

  • The Election Maps Have Reversed over Last 100 Years

  • Multinational Firms Use of Tax havens Can be Controlled

  • How Lobbyists Got Control of Washington (It Was Cheap!)

  • Texas Voter Registration Laws are Jim Crow

  • Natural Gas Futures Bounce Around

  • The EU is Refusing to Adopt Stricter Rules for Derivatives

  • British Pound in Free-Fall

  • UK Used More Solar than Coal this Summer

  • Inequality in India is Still Bad

  • And More

Articles about events, conflicts and disease around the world


  • Multinational firms and tax havens (  Multinational firms may invest in tax havens to avoid taxation in non-haven countries, but other motives, such as business opportunities in these countries, may also drive such investment. This column uses data on German firms to investigate the motives for tax haven investment. Tax avoidance does appear to be a motive, particularly for manufacturing firms. Policies that raise the costs of reallocating profits maybe be effective in attenuating firms’ use of tax havens.


With Campaign 2016 America passes into new hands. It’s a capstone to the slow political revolution by the 1% since 1970 (the Boomers’ legacy). Before we vote, let’s remember the steps that brought us here. Such as the growth of corporate lobbying, whose success shows that our government is for sale at discount prices.

  • The Fed Is Running Low on Ammo (Alan Binder, The Wall Street Journal)  The former Fed Vice Chair says the Fed still has options if more monetary easing is needed. But they're not very effective, in his opinion.  Econintersect:  How long can the illusion that pouring money into the financial economy is the solution for lack of money and too much debt in the real economy?  History will not judge this era well.

  • Clinton and Trump Are Shuffling the Electoral Map (The Atlantic)  Democrats are increasingly looking toward Sunbelt states rather than Rustbelt states for victory in 2016 and beyond. Not long ago that would have been unthinkable.  Donald Trumps rustbelt appeal is contributing to that shift.

  • Texas’s Voter-Registration Laws Are Straight Out of the Jim Crow Playbook (The Nation)   Texas has draconian voter-registration laws, beginning with a special course for anyone who wants to register voters. The state has no online registration, and anyone who registers voters must be deputized by the county at a training session that typically occurs once a month, sometimes less. The volunteer deputy registrars (VDRs), as they’re known, must be deputized on a county-by-county basis, and they can only be deputized in counties adjacent to their own, which makes statewide drives practically impossible in a massive state like Texas, with its 254 counties.  In most states, anyone can distribute and collect voter registration forms, but not in Texas.

  • Natural-gas futures fall as EIA reports 80 billion-cubic-foot rise in U.S. supplies (MarketWatch)   (Econintersect:  This report is from 10:40 am.  By 2 pm the price had recovered above $3.04 - see chart below.)  Natural-gas futures fell Thursday after the U.S. Energy Information Administration reported that supplies of the commodity rose 80 billion cubic feet for the week ended Sept. 30. That was above the average rise of 69 billion cubic feet expected by analysts polled by S&P Global Platts. Total stocks now stand at 3.68 trillion cubic feet, up 74 billion cubic feet from a year ago and 205 billion cubic feet above the five-year average, the government said. November natural gas NGX16, +0.59% was down 3.8 cents, or 1.3%, from Wednesday's settlement to $3.004 per million British thermal units. It traded at $3.022 before the data.  Note:  Insert in chart shows yesterday evening price.



  • Europe adopts final swap margin rules (Reuters)  The EU is refusing to adopt more strict rules for margins on derivatives. The European Commission has adopted new rules that will force swaps participants from January 2017 to post collateral against over-the-counter derivatives exposures that are not cleared through central counterparties.  Just over a month after the new risk mitigation requirements were implemented across the US, Canada and Japan, the European Commission today endorsed regulatory technical standards submitted by three European Supervisory Agencies.  The final rules, which form part of the European Market Infrastructures Regulation, incorporate certain amendments to the RTS, including the removal of concentration limits for pension funds and an updated implementation timeline.  The final pillar of the G20 agreement, which aims to reduce risk by increasing the amount of collateral backing derivatives and incentivizing the shift to central clearing, was put on hold by the EC in the summer, throwing the globally agreed implementation timeline into disarray.


  • Pound in Freefall Hurts U.K. Bonds as Goldman Sees More Losses (Bloomberg)  The shadow of a hard Brexit is spreading across Britain’s financial markets, with the pound’s drop to a 31-year low versus the dollar leading the way.  Government bonds also slid as the weaker currency boosted the market’s inflation expectations. Even stocks, which have thus far been buoyed by sterling’s drop, couldn’t escape the selloff, with the FTSE 100 Index dropping for a second day.



  • Inequality in India: what's the real story? (World Economic Forum)  India is suddenly in the news for all the wrong reasons. It is now hitting the headlines as one of the most unequal countries in the world, whether one measures inequality on the basis of income or wealth.  So how unequal is India? As the economist Branko Milanovic says: “The question is simple, the answer is not.” Based on the new India Human Development Survey (IHDS), which provides data on income inequality for the first time, India scores a level of income equality lower than Russia, the United States, China and Brazil, and more egalitarian than only South Africa.

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

  • Forward P/E and Equity Returns (J.P. Morgan Guide to the Markets, September 30, 2016)  Forward P/E has little correlation to subsequent 1-year returns (R-squared = 0.10 is poor  correlation - see Correlation Concepts.), even though there is a downward sloping best-fit line.  The correlation improves to weak for subsequent 5-year returns.  Econintersect:  We clearly see two data groupings that have been forced to fit one distribution analysis.  These should be separately analyzed (and identified as to year for each data point.  We expect much better correlation coefficients for each of the two separate data groups.

Click for larger image.

  • Face Identification Accuracy Impaired by Poor Sleep (R&D)   It is often necessary to identify unfamiliar people by comparing face images: for example a CCTV image to a mugshot, or a passport photograph to a traveler.  Now researchers have shown, in a new study published in Royal Society Open Science, that the accuracy of these decisions is impaired by poor sleep. However the study also found that poor sleepers were just as confident in their decisions, highlighting possible implications for security and policing.  The study, which was led by the University of New South Wales in collaboration with the University of Glasgow, set out to examine how sleep would affect the accuracy of facial identification. Participants were asked to decide whether two images, presented on a computer monitor at the same time, pictured the same person or two different people.

  • Jack Dorsey hasn’t been the savior Twitter hoped for (Business Insider)  It’s been one year since Jack Dorsey took back the reignsat the company he cofounded, and things haven’t exactly gone according to plan. Though Dorsey has made moves toward streamlining Twitter, the popular social media company struggled to grow its earnings and user base, and some of the users it does have still aren't model citizens.

Click for larger image.

  • New rule may create a $10 trillion ETF juggernaut by 2020 (MarketWatch)  The Labor Department’s “fiduciary rule” was designed to help retirement savers, but one of the biggest beneficiaries might be exchange-traded products, including ETFs and ETNs.  The new rules take effect April 10, 2017 and according to one estimate, the market could triple within a few years as a result of its implementation.  Because these products have very low costs and fees they will be "safe harbors" for advisors anxious to avoid accusations of self-dealing for higher fees and commissions.  But some new risks may be the unintended consequence.  Hitting $10 trillion would require the market for exchange-traded products (including both ETFs and exchange-traded notes (ETNs), a product category used for trading unsecured and unsubordinated debt) to roughly triple over the next three years.  The risk inherent in unsecured debt may be the landmine that is hidden until it blows up.

  • Map shows two-party presidential shifts since 1920 (Flowing Data)  Political scientist David Sparks shows the evolution of the two-party system across the country, since 1920. Red and blue. Keeps on moving.  Watch as the solid Democratic South melts away and turns into a Republican stronghold, and as the party of Lincoln leaves the Land of Lincoln. 

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