EconVue Spotlight

I know some people abhor social media.  The sector has certainly taken a beating lately in the markets, but I really love Twitter. It gives me the ability to hear the (curated) voices of people I know, don’t know, and in some cases hope I never know, but who make me think.  I follow the newspapers and journals I used to have to login to separately, read other media from all around the world I didn’t even know existed, and get into impromptu conversations with real experts. 

Last week, Toronto economist Joe Atikian posted a chart on Twitter that really surprised me about a sudden fall in FDI into the US.  You can follow the thread here. I asked if this was a trend in other countries, and Joe created a chart on the spot that showed that the UK was also impacted by the same decline starting in 2016.

[Source: Joe Atikian]
 

Then Adam Posen, president of the Peterson Institute for International Economics jumped into the conversation and added his very useful perspective-as did 46 others. Getting everyone together in a room to have that discussion would have been so much more difficult. With events moving so fast, frictionless, flat communications seem increasingly valuable to me.  

For longer form in-depth articles, if you are looking for a postprandial read this Thanksgiving weekend, Foreign Affairs has opened its entire library until November 26th.  https://www.foreignaffairs.com to download for later reading  too.

Investors might be wondering what they have to be thankful for right now, as both global equity markets and cryptoassets continue to disappoint. The Wall Street Journal has called for a Fed pause, and seasoned observers like Jim Grant say the Fed will definitely blink. As Benn Steil writes in his blog,  the Fed might have underestimated the effects of the wind down of quantitative easing and needs to reassess.  Anyone looking for relief from US China negotiations in Argentina at the end of this month will I am afraid be disappointed.  The Trump Administration is asking not just for trade concessions, but for structural changes in the Chinese economy that cannot be delivered quickly in the context of China’s overall slowdown.

Below please find a smorgasbord of commentary on health, China, Fintech, and the macroeconomy including some data-rich  political commentary that might prove useful for conversations-- and debate-- over turkey this coming holiday weekend.

RESEARCH BY ECONVUE EXPERTS

Left and Right Both Hate It -- a Good Sign for the Amazon HQ Deal
Michael Lewis 

When Socialist flavor-of-the-month Representative-elect Alexandra Ocasio-Cortez and conservative Fox host Sean Hannity both denounce a policy as an outrage, it must be truly outrageous. Or they must both be very confused. In the case of the incentives given Amazon for its new headquarters, it is the latter.

Brand-Heavy and Asset-Light: Moving Beyond the Acute-Care Mindset
David W. Johnson

For health systems, the day of reckoning is near. A recent Morgan Stanley report states that over 1,000 of the nation’s 5,000+ hospitals are currently weak or at risk of closing. This is the beginning of a larger wave.

The pressure is top down and bottom up. Payers are unwilling to continue unadulterated fee-for-service (FFS) payment formularies. Consumers increasingly expect convenience, lower costs, better outcomes and improved customer experience.

Chinese Money, Institutional Weaknesses, and Populism: A Recipe for Disaster?
R. Evan Ellis 

The risk posed by the interaction between the Chinese style of engagement and the vulnerabilities of their Latin American counterparts in the short term is magnified by the renewed struggle between PRC and Taiwan. Insofar as PRC’s establishment of diplomatic relations with countries in the region involves a flood of new loan-based infrastructure projects and other forms of cooperation, it is particularly worrisome that the nine states in the region that still recognize Taiwan are relatively small, with imperfect institutions and particularly vulnerable to the corrupting effects of such engagement.

Amplifying Transformation: Addressing Medicare Advantage's Disadvantages
David W. Johnson 

The U.S. healthcare system will not change the way it delivers care until it changes the way it pays for care. Perverse incentives riddle fee-for-service payment (FFS) and lead to overtreatment, fragmented delivery and runaway medical inflation. Incremental attempts to reform care delivery through value-based payment reform and provider education (e.g. the “Choosing Wisely” initiative) have not changed practice patterns in meaningful ways.

STORIES IN OUR SPOTLIGHT

U.S.

The Fed is Tightening more than it realizes
Benn Steil and Benjamin Della Rocca 11/20/2018 Council on Foreign Relations

We believe, however, that rate hikes understate the degree of tightening the Fed has imposed over the past year. The reason is that the Fed appears to be underestimating the impact of its balance-sheet reduction. Here is why.

The dangerously Unified States of America
David French 11/9/2018 National Review

American states are cleaving along partisan and regional lines, creating culturally distinct zones of total partisan control...Consequently, there is now exactly one state with divided legislative control — Minnesota.

Gun regulation is costly—and not the only option
Jennifer Doleac 11/9/2018 The Regulatory Review

Thought-provoking piece on the pros and cons of gun regulation & effective policies to reduce violence. And equally intriguing analysis of the article by Mark Febrizio. A call for evidence-based, rather than belief-based policymaking.

Millennial men leave perplexing hole in hot U.S. job market
Jeanna Smialek 11/1/2018 Bloomberg

Some trends that first appear in economic data unmask major sociological change. The replies to this tweet run a gamet of explanations.

40% of the American middle class face poverty in retirement, study concludes
Elliot Dinkin 10/12/2018 CNBC

Depressed earnings, lower asset values, and higher health care costs mean 40% of older Americans face poverty. And that’s just Boomers. Will Millennials, saddled with high student debt and lower home & equity ownership, become the Impoverished Generation?

The hidden life of modal verbs
Chin Luu 11/14/2018 Jstor Daily

Unlike political rhetoric, scientific and academic writing contains linguistic hedging that weakens the intended message.

Saving regret
Axel H. Börsch-Supan, Tabea Bucher-Koenen, Michael D. Hurd, Susann Rohwedder 11/2018 the National Bureau of Economic Research

Many older people regret not saving more when they were young. However the reasons they didn't weren't due to procrastination, but adverse life events such as divorce, job loss, and ill health.

Fed's No.2 Clarida says there are signs global growth is slowing but doesn't think rate hikes are too rapid
Mark DeCambre 11/16/2018 Market Watch

At the Fed, it’s still all about jobs.

Trump’s tax cut was supposed to change corporate behavior. here’s what happened
Jim Tankersley and Matt Phillips 11/12/2018 New York Times

This is no surprise. It has been true for years that small and medium size companies are where jobs are created- especially growing companies that then join the 1000 largest.

Will the Fed figure out that a massive recession is coming and change policy before it arrives?
11/12/2018 Twitter Thread @peterschiff

Who still thinks that China is causing this level of market volatility?

FinTech

Digesting ‘Quantification of energy and carbon costs for mining cryptocurrencies’
Nic Carter 11/13/2018 Medium

A complex but critical subject critically examined.

Payments changes far more important than bitcoin, Carstens says
11/2/2018 Central Banking

So Bitcoin is having a salutary effect on global payment systems even if it is not being used itself it seems.

Banks employ more chefs than cryptocurrency experts
Yolanda Bobeldijk and Becky Pritchard 11/19/2018 Financial News

Lack of regulation and concerns of an overheated market have dissuaded big institutions from hiring specialists.

Key highlights of our new cryptoasset study in Chicago
Michael Rauchs 11/19/2018 University of Cambridge

Healthcare

Global burden of disease
11/10/2018 Lancet

Eight incredible studies on the global burden of disease. One finding: 1/2 of all nations face population decline. Women had average of 4.7 children in 1950, now 2.4 But huge variances between countries.

Donors pledge $1 bln for maternal and child health fund
11/6/2018 Reuters

An investment of $200 per woman and child to save lives unnecessarily lost. The benefits would surely go beyond that timeframe.

Anti-smoking advocates fuming over China’s tobacco sales target
Liang Chenyu 11/15/2018 Sixth Tone

A classic example of misaligned incentives: public health vs public profits.

China

Selling U.S. China policy
Elizabeth Economy 11/9/2018 Council on Foreign Relations

China has been laser focused on selling their narrative. The US -not so much.

Chinese envoy gives Taiwan Hawk Bolton a warning on U.S. ties
Karen Leigh 11/7/2018 Bloomberg

This is the issue that could stop US-China negotiations cold.

A Chinese recession is inevitable - don't think it won't affect you
Kenneth Rogoff 11/7/2018 Guardian

If it stumbles, China is simply too big and too integrated-though imperfectly-into the global financial system not to matter.

China's middle class tightens its belt
Coco Liu and Naoki Matsuda Nikkei Asian Review

Definitely not positive for Chinese consumption.

Rest of World

Is major realignment taking place in the Middle East?
Colin P. Clarke and Ariane M. Tabatabai 10/31/2018 Foreign Affairs

Why do recent events in the Middle East need to be seen as a realignment away from the US and toward Russia? Perhaps it is actually a rebalancing toward regional autonomy.

Japan cybersecurity and Olympics minister: 'I've never used a computer'
11/14/2018 Reuters

Reuter’s. Not The Onion.

Womenomics: The importance of female workforce participation in Japan
Sean Creehan and Cindy Li 11/5/2018 Federal Reserve Bank of San Francisco

Japan needs to do two things: make secondary education free, at least for the second child so there are second children, and provide viable daycare. The overall demographic downtrend is Japan’s greatest long term challenge.

The euro and Steve Bannon’s Fascist International – Oxford Union address, 16th November 2018
Yanis Varoufakis 11/16/2018

Did the creation of the euro unleash political forces that threaten the European Union?

Building a shared future
IMF Annual Report 2018

Exactly! North Korea's threat is about arms AND intent
Devin T. Stewart 11/14/2018 National Review

Have a happy Thanksgiving!