The 8 Most Fascinating Things I Read This Week

Happy Friday! There are more good news articles, commentaries, and analyst reports on the Web every week than anyone could read in a month. Here are the eight most fascinating ones I read this week.

1. Pitchforks ready
Henry Blodget of Business Insider shares two facts sure to make many readers' blood boil: Corporate profits as a percentage of GDP are now at an all-time high, while workers' wages as a percentage of GDP are at a post-war low:

Source: Federal Reserve.

2. The new boom
The Wall Street Journal writes what I'm convinced will be the biggest story of the next few decades:

America will halve its reliance on Middle East oil by the end of this decade and could end it completely by 2035 due to declining demand and the rapid growth of new petroleum sources in the Western Hemisphere, energy analysts now anticipate.

3. Greedy when others are fearful
Warren Buffett famously advises to be greedy when others are fearful. With the Greek stock market down about 90% in the last five years, hedge fund manager George Elliott is getting excited. According to Bloomberg:

"When Argentina defaulted, they had incredible returns on the stock market but incredible volatility on the currency as well so it was pretty hard to start making allocations," he said. "If Greece remains in the euro, we think this is going to be an incredible investment opportunity from a risk-return perspective." Conversely, the return of the drachma, which Elliott predicts won't happen, means investors could buy stocks more cheaply. ...

"It takes time to convince [investors], but when you show them the numbers and you really do not focus on the macro but the micro of individual companies, then people start to get excited," said Elliott, who's been raising money for the Greek fund since October. "At the same time, we are extremely lonely. We are one of the few people out there feeling optimistic."

4. Fleeting influence
The day after Standard & Poor's downgraded U.S. Treasuries last summer was one of the best days for Treasuries in history. After Moody's downgraded major banks like Citigroup (NYSE: C  ) and JPMorgan Chase (NYSE: JPM  ) last week, the market again is asking why anyone pays attention to ratings agencies. Says Bloomberg:

Moody's Investors Service suffered a downgrade of its own as markets responded to the company's rating cuts of 15 of the world's largest banks by bidding up the value of their stocks and bonds. ...

"We view the Moody's downgrade as another overhyped story of 2012," David Trone, analyst at JMP Securities LLC, wrote to his clients. "The corporate market thinks for itself and credit rating agencies are often lagging indicators."

5. Seizing to prevent further seizures
Millions of homes are underwater, or worth less than the mortgages owed on them. That's a major reason the housing market is so decrepit. Yale economist Robert Shiller has an idea to clear the problem, leveraging the law of eminent domain in the mortgage market. He wrote in The New York Times:

[Eminent] domain law needn't be restricted to real estate. It could be applied to mortgages as well. Governments could seize underwater mortgages, paying investors fair market value for them. This is common sense too. The true fair market value for these mortgages is arguably far below their face value, given the likelihood of default, with its attendant costs.

Professor Hockett argues that a government, whether federal, state or local, can start doing just this right now, using large databases of information about mortgage pools and homeowner credit scores. After a market analysis, it seizes the mortgages. Then it can pay them off at fair value, or a little over that, with money from new investors, issuing new mortgages with smaller balances to the homeowners. Taxpayers are not involved, and no government deficit is incurred. Since homeowners are no longer underwater and have good credit, they are unlikely to default, so the new investors can expect to be repaid.

The original mortgage holders, the investors in the new mortgages, the homeowners and the nation as a whole will generally be better off. There will surely be some who may not agree, like the holdout farmer opposing the highway, but eminent domain ought to be able to push ahead anyway.

6. Obamacare facts
Poll after poll shows Obamacare is unpopular -- until you take the time to explain to people what it actually does. Then it becomes pretty popular. Ezra Klein in the Washington Post gives 11 important facts about the act. A few standouts:

  • By 2022, the Congressional Budget Office estimates (link opens PDF) the Affordable Care Act will have extended coverage to 33 million Americans who would otherwise be uninsured.
  • The law requires insurers to spend between 80 and 85 percent of every premium dollar on medical care (as opposed to administration, advertising, etc). If insurers exceed this threshold, they have to rebate the excess to their customers. This policy is already in effect, and insurers are expected to rebate $1.1 billion this year.
  • Families making less than 133 percent of the poverty line -- that's about $29,000 for a family of four -- will be covered through Medicaid. Between 133 percent and 400 percent of the poverty line -- $88,000 for a family of four -- families will get tax credits on a sliding scale to help pay for private insurance.

7. Help not wanted
Big, innovative, companies like Google (Nasdaq: GOOG  ) and Facebook (Nasdaq: FB  ) are hiring briskly -- if you have a good degree, a padded resume, and the applicable experience. For the other 99-some-odd percent of the world, it's tough and getting tougher. Writes The Wall Street Journal:

Between 90 and 95 million low-skill workers around the world could be without jobs by 2020 because there simply won't be enough positions available for them to apply for, according to a new report from the McKinsey Global Institute.

8. Presented without comment: Large Americans
According to a study published in Biomedical Central:

North America has 6% of the world population but 34% of biomass due to obesity. Asia has 61% of the world population but 13% of biomass. ... One tonne of human biomass corresponds to approximately 12 adults in North America and 17 adults in Asia. If all countries had the BMI distribution of the USA, the increase in human biomass of 58 million tonnes would be equivalent in mass to an extra 935 million people of average body mass, and have energy requirements equivalent to that of 473 million adults.

Enjoy your weekend.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of Facebook, JPMorgan Chase, and Citigroup. The Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of Google. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (11) | Recommend This Article (18)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 30, 2012, at 5:25 PM, Holobyte wrote:

    I was reading about "USA vs Carollo, Goldberg, & Grimm". The fall guys for the big banks & bond brokers ripping of municipalities for billions.

    AND How Oabamacare is the largest and most oppresive tax increase in US history to say nothing of the intrusion into personal rights.

    AND how Barkleys was rigging the money markets.

    How bout that for fascinating things??

  • Report this Comment On June 30, 2012, at 6:46 PM, drnonlinear wrote:

    The numbers did not make sense to me for #8 so I looked at the original article. They are saying the *extra* biomass of adults above BMI of 25 is concentrated in North America - not total human biomass but only the differential above BMI of 25. That makes sense...

  • Report this Comment On June 30, 2012, at 7:49 PM, neamakri wrote:

    #5 - siezing mortgages;

    So if a homeowner is making his payments, but his credit score is so-so and his home is worth less than the mortgage, then the governemnt should take away his home because he "might" get into foreclosure?

    Tom Cruise was in a movie about "future crime". Is this what we are talking about?

    This idea has a giant black hole for abuse and misuse.

    Banks should swallow their losses and get their owned properties on the market priced to sell.

  • Report this Comment On June 30, 2012, at 9:32 PM, Viking70 wrote:

    I'll ask this again.

    As per Ezra Klein: "Families making less than 133 percent of the poverty line -- that's about $29,000 for a family of four -- will be covered through Medicaid. Between 133 percent and 400 percent of the poverty line -- $88,000 for a family of four -- families will get tax credits on a sliding scale to help pay for private insurance."

    Where is the money coming from to pay for these subsidies? The families need insurance; this I understand. The government is going to pay for all or part of the premiums. Where is the government going to come up with the funds for these new "must-pays"; this I don't understand.

  • Report this Comment On June 30, 2012, at 9:50 PM, TMFMorgan wrote:

    ^ There are new taxes on capital gains on high-income earners, among others. Also taxes from those who refuse to buy insurance.

  • Report this Comment On June 30, 2012, at 10:13 PM, Viking70 wrote:

    Morgan, thanks for the response.

    My follow-on questions if you get bored.

    How many people are refusing to buy the insurance and how much tax is going to be raised when they pay the fines/taxes?

    What is considered a high-income earner as far a new taxes on capital gains? How much income with this generate for the government? And how long before loop holes are found (a little sarcastic on this last point, I realize, but history has made me a cynic.)

    I'm sorry, but I think the way this plan was put together, debated, and passed means we are all due for a nasty shock down the road. More and more folks are qualifying for subsidies--how many families are making $88K a year? According to the USA today (based on analysis of numbers provided by the Labor Department), the median family income in December 2011 was $51,413. That seems to mean a fairly large bill that the government has to foot for the subsidies. This means that the demarcation line for "high-income earners" will lower (including more of the upper middle class) or the amount that is subsidized will decrease meaning the middle class and lower will have to foot more of the bill themselves.

  • Report this Comment On July 01, 2012, at 10:37 AM, xetn wrote:

    This is the most fascinating thing I read this week:

    http://news.goldseek.com/UnionSecurities/1340904582.php

  • Report this Comment On July 01, 2012, at 10:53 AM, TMFMorgan wrote:

    <<How many people are refusing to buy the insurance and how much tax is going to be raised when they pay the fines/taxes?>>

    Unclear because the mandate doesn't begin until 2014.

    <<What is considered a high-income earner as far a new taxes on capital gains? >>

    $200k, or $250k for married couples. For primary residence, the cap gains tax only applies to gains over $500,000.

  • Report this Comment On July 02, 2012, at 6:58 AM, AndrewEnder wrote:

    While the Euro may provide a different level of currency stability for Greece than Argentina, the reason they crashed and their likelihood of a speedy recovery seems very different to me. Argentina needed to throw the government out. Greece's problems start much deeper, with the average Greek citizen.

  • Report this Comment On July 02, 2012, at 10:12 AM, anasianjew wrote:

    Supporters of ObamaCare are going under the assumption that employers will maintain current coverage for employees.

    I expect to see a sudden drop of private coverage as many businesses will chose to pay the fine (cheaper) rather than foot the bill for private insurance. This is going to baloon the exchange costs way above CBO estimates.

  • Report this Comment On July 05, 2012, at 10:13 PM, DrLonghorn wrote:

    Wow! What naive comments from a foolish "expert" on the subject of Obamacare. As a doctor, I would wager that most of your readers are accustomed to more comprehensive healthcare than a government program will ever supply....not to mention the huge financial liability that will accrue to the states in the expansion of Medicaid that you mentioned.

    I have been a doctor in the military, and rationing and red tape were the order of the day. Medicaid and military medicine are a preview of Obamacare when it is implemented. Good luck!

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