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What We Read Today 25 July 2017

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:

  • Monopoly was invented to demonstrate the evils of capitalism

  • How the private exchange model has become more ‘refined’

  • The geekiest (and most important) number nobody is discussing

  • Technically Speaking:  I Bought It for the Dividend

  • Senate Votes to Debate Health-Care Plan After Pence Breaks Tie

  • House votes to repeal consumer arbitration rule

  • Democrats and the Single-Payer Trap

  • One Insurer Is Making Obamacare Work

  • Failing or Doing Fine?  How Obamacare’s Marketplaces Are Shaping Up for 2018

  • House passes Russia sanctions deal

  • Japanese stock market has wind at its back

  • The U.S. is Banning All Travel to North Korea

  • And More

Articles about events, conflicts and disease around the world

U.S.

  • Senate Votes to Debate Health-Care Plan After Pence Breaks Tie (Bloomberg)  Senate Republicans agreed to begin floor debate on health-care legislation, a hard-fought step amid uncertainty about exactly what plan senators will ultimately be asked to vote on.  The drama of Tuesday’s 51-50 vote -- with Vice President Mike Pence providing the tie-breaker -- was heightened by the arrival from Arizona of Senator John McCain to help the GOP try to repeal Obamacare following his brain-cancer diagnosis last week.

  • House votes to repeal consumer arbitration rule (The Hill)  The House voted Tuesday to repeal a controversial new rule from the Consumer Financial Protection Bureau (CFPB) that would have protected consumers’ rights to sue banks in class-action lawsuits.  Lawmakers voted 231-190 to repeal the rule using the Congressional Review Act, a law that allows Congress to eliminate regulations within 60 days of their release and bars agencies from issuing similar rules in the future. Only one Republican, Rep. Walter Jones (N.C.), joined Democrats in voting against repeal.

  • Democrats and the Single-Payer Trap (Bloomberg)  Democrats relish the Republicans' inability to pass even a pathetic alternative to Obamacare.  When given a real chance at success, with governing control, the GOP was impeded by a president who's ignorant on the issue. Then, after Republican senators slipped behind closed doors to come up with their own plans, they provided products that voters, even some Trump supporters, overwhelmingly spotted as frauds.

Turning to a single-payer system, instead of trying to improve the Affordable Care Act, maybe with a public option, is a loser on the politics and policy -- "a fool's errand," says Ezekiel Emanuel, a leading Democratic health-care expert who helped craft Obamacare.

  • One Insurer Is Making Obamacare Work (Bloomberg)  Just hours before Senate Republicans are expected to take a crucial first vote on repealing Obamacare, one health insurer is saying that its big bet on the health insurance law has been paying off.  Centene Corp. beat Wall Street’s earnings estimates for the second quarter, and said that much of its strength came from the company’s Affordable Care Act marketplace health plans, where the insurer has about 1.1 million of its 12.2 million customers. 

centene.aca.footprint

  • Failing or Doing Fine?  How Obamacare’s Marketplaces Are Shaping Up for 2018 (Bloomberg)  A few multistate companies have announced that they won’t be returning next year. Humana is exiting the individual market in the 11 states where it currently sells plans. Aetna is also leaving the few states where it sold marketplace plans in 2017, but will begin selling marketplace plans in parts of Nevada.  Anthem, which sells under the Blue Cross Blue Shield brand, is exiting the marketplace in OhioIndiana, Wisconsin and most of Nevada but will continue to sell marketplace plans in several other states.  Still, some companies plan to expand their coverage next year. Centene, which sells under brands including Ambetter, Celtic and Health Net, announced in June that it would sell Affordable Care Act plans in three additional states: Kansas, Missouri and Nevada. The company also said it will expand in six states where it already offers Obamacare plans: Florida, Georgia, Indiana, Ohio, Texas and Washington. Centene will be exiting Massachusetts, however, citing low enrollment.

  • House passes Russia sanctions deal (The Hill)   The GOP-controlled House easily passed bipartisan legislation on Tuesday to limit the Trump administration’s ability to lift sanctions on Russia.  Three Republicans --Reps. Justin Amash (Mich.), Jimmy Duncan (Tenn.) and Thomas Massie (Ky.) -- voted against the bill, which passed 419-3.  Tuesday’s vote amounted to a rebuke of President Trump, whose administration had pushed to water down the bill’s provisions giving Congress the power to veto the lifting of sanctions.

Japan

  • Japanese stock market has wind at its back (BlackRock Blog)  The author believes that the rally in Japanese stocks in recent months is likely to continue, supported by an encouraging earnings outlook, low valuations and the ongoing ultra-easy monetary policy.

japanese.stocks.1990.2017

North Korea

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

  • Monopoly was invented to demonstrate the evils of capitalism (Aeon)  The game of Monopoly (original name was "The Landlord's Game") was invented and patented in 1904 by Elizabeth Magie with two sets of rules:  (1)  Monopolist rules - similar to today's Parker Brothers' game; and (2) Prosperity rules - each time someone acquired a new property every player received a payment, the equivalent of a land tax as proposed by economist Henry George.  In game (1) the winner was declared when all other players were bankrupt; in game (2) there were few bankruptcies and the winner was the first player to double his money.

  • How the private exchange model has become more ‘refined’ (Employee Benefit News)  When private benefit exchanges first came into the mainstream as replacemnts for employer sponsored group plans, there were hopes they would be a silver bullet to cut costs and increase choice.  But as enrollment has lagged behind initial estimates, according to consultancy Accenture, advisers are learning the true strengths of an exchange.

private.benefit.exchanges.satisfaction

  • The geekiest (and most important) number nobody is discussing (BlackRock Blog)  Russ Koesterich (who has contributed to GEI) explains why investors should pay more attention to the stock-bond correlation coefficient and understand its impact on investment portfolios.  While the lack of independent economic cycles argues against too strong of a conclusion, stock-bond correlations have tended to co-move with inflation and monetary conditions. During the past 25 years, there has been a tendency for correlations to be higher when Fed policy is tighter. With the Fed tightening monetary conditions for the first time since the crisis, stock-bond correlations may be heading higher.

When stock-bond correlations are presumed to be negative, portfolio construction favors traditional Treasury bonds—particularly long-dated ones—as a good source of both carry and diversification. When stock-bond correlations are positive, other hedges—notably cash—may be preferable.

stock.bond.correlation

  • Technically Speaking:  I Bought It for the Dividend (Lance Roberts, Real Investment Advice)  LR contributes to GEI weekly.  The bear markets in 2000 and 2007 were not just reversions to the mean, but rather a massive reversion to 2-standard deviations below the mean. Like stretching a rubber band as far as possible in one direction, the snapback resulted in devastating bear markets.

While these bear markets did result in subsequent bull markets, as they should, at the peak of each cycle it was believed that somehow “this time was different.” As discussed previously, the current bull market, which is also believed to be different, is likely not given the lack of economic dynamics required to foster an extended secular period.

The chart below brings this idea of reversion into a bit clearer focus. I have overlaid the 3-year average annual real return of the S&P 500 against the inflation-adjusted price index itself. 

reversion.to.the.mean 


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