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FLASH: China March PMI Unexpectedly Jumps to 53.1, 11-Month High

(Reuters) – China’s official purchasing managers’ index (PMI) unexpectedly jumped in March t o an 11-month highs of 53.1, the government said on Sunday, as surprisingly firm demand boosted new orders and new export orders for factories.

Analysts had forecast the PMI, which previews China’s vast factory sector before official industrial production data, to dip at 50.5.

The new orders sub-index climbed to 55.1 in March from February’s 51 points, the National Bureau of Statistics said, while the sub-index for new export orders was up at 51.9, compared with February’s 51.1.

The latest PMI reading suggests Chinese factories are not struggling as much as some reports indicated. HSBC’s Flash PMI released last week had shown factory activity slowing for the fifth straight month in March as new orders sunk to four-month lows.

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Low IQ & Liberal Beliefs Linked To Poor Research?

Watch out Sam Harris, Gordon Hodson and Michael A. Busseri of Brock University are giving you competition for the worst use of statistics in an original paper.

Their “Bright Minds and Dark Attitudes: Lower Cognitive Ability Predicts Greater Prejudice Through Right-Wing Ideology and Low Intergroup Contact” published in Psychological Science1—headlined in the press as Low IQ & Conservative Beliefs Linked to Prejudice—is a textbook example of confused data, unrecognized bias, and ignorance of statistics.

Hodson and Busseri on are track to beat out Harris’s magnificent effort, and they might also triumph over the paper which “proved” brief exposure to the American flag turns one into a Republican and the peer-reviewed work “proving” exposure to 4th of July parade turns one into a Republican.

Let’s see how they did it.

Read the rest here.

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JAMA Forum: The Supreme Court Flunks Economics—and That’s Bad News for Patients and Physicians

By David Cutler, PhD

This week, we were treated to the spectacle of the US Supreme Court debating economics. They called it a discussion about the Affordable Care Act (ACA), but it was more economic than legal. They spent an enormous amount of time on markets for health insurance and food (broccoli, to be specific); they spent little time analyzing precedent. Between the 9 justices and the 7 lawyers, there were 16 people who took part in the debate. As best as I can tell, not one of them had any training in economics.

As a professor of economics, I can say without hesitation that the Supreme Court failed its oral exam. For the sake of patients and physicians, I hope they do better on the final.

Read the rest here.

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Groups Work to Identify Aging Trees Bent by American Indians to Mark Trails, Water Crossings

If you’ve ever spent significant time in the woods, you’ve undoubtedly run across these trees. I had always heard that they were made by the Native Americans, but didn’t know it was the truth, until now…


By Associated Press, Updated: Saturday, March 31, 6:05 PM
DALLAS — The pecan tree, more than 300 years old, stands out from the others in a forested area of Dallas, a 25-foot segment of its trunk slightly bowed and running almost parallel to the ground before jutting high up into the sky.

It, like numerous others across the country known as Indian marker trees or trail trees, was bent in its youth by American Indians to indicate such things as a trail or a low-water creek crossing.

“If they could talk, the stories they could tell,” said Steve Houser, an arborist and founding member of the Dallas Historic Tree Coalition. The trees, he said, “were like an early road map.”

Read the rest here.

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Should You Sell in May and Go Away ?


“Sell in May and go away? That might be too late, given the trend in earnings growth, reports investment weekly Barron’s.

Negative profit warnings in the first quarter outpaced positives by a wide margin. Meanwhile, earnings per share (EPS) growth is far below previous estimates, the weekly points out.

S&P Capital/IQ sees EPS growth of less than 1 percent and Thomson/Reuters is just over 3 percent. That’s compared to double-digit forecasts a year ago, Barron’s noted.

In a sign of rough waters to come, big box retailer Best Buy says it will shut 50 stores, eliminate 400 corporate-level positions and slice $800 million in costs.

The retailer has about 1,400 U.S. locations.

Best Buy lost $4.89 per share in its most recently reporting vs. a gain of $1.62 a year ago.

The weak performance is indicative of the “non-recovery” recovery Americans have faced for the past several years.

A recent Bloomberg consumer confidence survey, for instance, showed that nearly of third of households had a favorable view of the economy in terms of spending, a three-week trend.

Nevertheless, the index remains at minus 34.9, compared to its average since inception of minus 15.2.

The survey has a three-point margin of error. Falling below minus 40 indicates recession.”

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Jim Grant: Be Extremely Wary of Fed Manipulation of the Economy


“Investing in the current environment is like walking in a hall of mirrors, making it very hard for buyers and sellers of assets to properly engage, warns Jim Grant, founder and editor of Grant’s Interest Rate Observer.

The problem is the Federal Reserve, which continues to “manipulate” markets in order to artificially prop up asset values and, it hopes, fix the U.S. economy.

“The Fed got out of the central banking business many years ago and is now in the central planning business,” tells CNBC in an interview.

Much like a fixer at a horse track, the Fed’s role in the market is at best dishonest and at worst a source of great confusion, Grant asserts.

Quantitative easing, the policy of creating trillions in new money from thin air, has made it nearly impossible to judge value, he says.

“The Fed systematically overrides the price mechanism. It is in the anti-capitalism business, which is not what the founders intended,” Grant says.

“I think the Fed ought to get out of the manipulation business. It ought to begin normalizing interest rates. It ought to forswear intervention in markets with the eye toward improving the macroeconomy. Prices tell us something about the nature of value, and it ought to stop imposing itself between buyers and sellers in the marketplace.”

U.S. Federal Reserve Chairman Ben Bernanke has begun to talk up the inflation target, perhaps to jawbone the market in advance of policy changes. Several Fed voting members have warned that interest rates would have to rise before the late 2014 target now in place.

“As always, we have to look at the inflation side and be comfortable that price stability will be maintained and that inflation will be low and stable,” Bernanke told students at George Washington University this week, Reuters reports.

“Those are the things we’ll be looking at. There’s no simple formula but as the economy strengthens and becomes more self-sustaining then at some point. . . the need for so much support from the Fed will begin to diminish,” Bernanke said.”

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Will $1 Trillion Be Enough for Europe’s Woes ?

“A core piece of last week’s European newsflow was that following much pushback, Angela Merkel, who understands the underlying math all too well, finally dropped her opposition to expanding the European “firewall” in the form of a combined EFSF and ESM rescue mechanisms, to bring the total “firepower” to €800 billion (ignoring for a moment that when the true dry powder of the combined vehicle is just about €500 billion net as explained here, hardly enough to rescue Spain, let alone Italy). Yet as has been explained here repeatedly, and as Merkel has figured out, this is easily the most symbolic expansion of a rescue facility ever. Because while the ECB’s agreement to allow Eurobanks to abuse its €1 trillion discount window for three years (which is what the LTRO is), following the replacement of JC Trichet with a Goldman apparatchik, at least infused the system with $1.3 trillion in new fungible liquidity (and resulted in a stock market performance boost for the ages, one which is now unwinding), the ‘firewall” does not represent new money, nor is a “firewall” to begin with – it is merely one massive contingent liability which will remain unfunded in perpetuity. Slowly the German media is waking up, and in an article in Der Spiegel, the authors observe that “Even a 1-Trillion Euro Firewall wouldn’t be enough.” And they are correct, because the size of the firewall is completely irrelevant….”

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State of the Union: Back to Square One….Don’t Pass Go


“After more than 30 years working with autistic teens and deaf senior citizens, 53-year-old Susan Cherry, who is deaf herself, was looking for a change.

Her dream had always been to work in a medical lab, but her high school teachers had warned Cherry against it because of her hearing disability.

But when she recently learned that the National Technical Institute for the Deaf at Rochester Institute of Technology offered medical classes, Cherry decided to return to school full-time to get a second bachelor’s degree.

The only problem was that in order to fulfill her graduation requirements, she’d have to do something that’s atypical for a 50-year-old: complete a 10-week unpaid internship.

RELATED: The 10 Best Cities for Middle-Aged Workers to Find Jobs

Cherry is just one of many older people in the U.S. doing something that would’ve been largely unheard for those nearing retirement age in generations past: taking steps to reinvent herself, rather than preparing to retreat from the professional world.

“There have always been mature workers who simply enjoy work and don’t wish to fully retire ’til much later in life,” says Ryan Hunt, senior career advisor for CareerBuilder.com. “But in this economic climate, it’s clear many are applying for new jobs due to financial constraints.”

In addition, increased longevity and changing notions of aging are causing more Americans to look for new professional opportunities as they enter into their 50s, 60s, and even 70s. Plenty, like Cherry, are seeking out internships or entry-level jobs to help them get to the next stage of their lives….”

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More on the Bifurcated Recovery

“Luxury retailers are smiling. So are the owners of high-end restaurants, sellers of upscale cars, vacation planners, financial advisors, and personal coaches. For them and their customers and clients the recession is over. The recovery is now full speed.

But the rest of America isn’t enjoying an recovery. It’s still sick. Many Americans remain in critical condition.

The Commerce Department reported Thursday that the economy grew at a 3 percent annual rate last quarter (far better than the measly 1.8 percent third quarter growth). Personal income also jumped. Americans raked in over $13 trillion, $3.3 billion more than previously thought.

Yet it’s almost a certainly that all the gains went to the top 10 percent, and the lion’s share to the top 1 percent. Over a third of the gains went to 15,600 super-rich households in the top one-tenth of one percent.

We don’t know this for sure because all the data aren’t in for 2011. But this is what happened in 2010, the most recent year for which we have reliable data, and there’s no reason to believe the trajectory changed in 2011 or that it will change this year.

In fact, recoveries are becoming more and more lopsided.

The top 1 percent got 45 percent of Clinton-era economic growth, and 65 percent of the economic growth during the Bush era.

According to an analysis of tax returns by Emmanuel Saez and Thomas Pikkety, the top 1 percent pocketed 93 percent of the gains in 2010. 37 percent of the gains went to the top one-tenth of one percent. No one below the richest 10 percent saw any gain at all.

In fact, most of the bottom 90 percent have lost ground. Their average adjusted gross income was $29,840 in 2010. That’s down $127 from 2009, and down $4,843 from 2000 (all adjusted for inflation).

Meanwhile, employer-provided benefits continue to decline among the bottom 90 percent, according to the Commerce Department. The share of people with health insurance from their employers dropped from 59.8 percent in 2007 to 55.3 percent in 2010. And the share of private-sector workers with retirement plans dropped from 42 percent in 2007 to 39.5 percent in 2010.

If you’re among the richest 10 percent, a big chunk of your savings are in the stock market where you’ve had nice gains over the last two years. The value of financial assets held by Americans surged by $1.46 trillion in the fourth quarter of 2011.

But if you’re in the bottom 90 percent, you own few if any shares of stock. Your biggest asset is your home. Home prices are down over a third from their 2006 peak, and they’re still dropping. The median house price in February was 6.2 percent lower than a year ago.

Official Washington doesn’t want to talk about this lopsided recovery. The Obama administration is touting the recovery, period, without mentioning how narrow it is.

Republicans would rather not talk about widening inequality to begin with. The reverse-Robin Hood budget plan just announced by Paul Ryan and House Republicans (and endorsed by Mitt Romney) would make the lopsidedness far worse – dramatically cutting taxes on the rich and slashing public services everyone else depends on…”

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JAMES ALTUCHER: A New Patent-Infringement Lawsuit Could Totally Demolish Google’s Stock

“Investor and writer James Altucher has an interesting post up at TechCrunch about a patent-infringement lawsuit that might soon be lobbed at Google.

The post is called, in typically bold Altucher fashion, “Why Google Might Be Going To $0.”

Here’s the story in a nutshell.

Way back in the 1990s, a computer scientist at Carnegie Mellon created and patented the technology that became Lycos. The patents covered several aspects of monetizing search, such as using algorithms and click rates to determine which search ads are most revelant.

Later, when a company called Overture applied for patents on search monetization, Overture was granted several patents but refused others–on the grounds that Lycos had already patented them.

Still later, Yahoo used the search patents Overture was granted to sue Google for hundreds of millions of dollars.

Meanwhile, Lycos cratered….”

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Pile Up: See How Calamity Converges to Create a Looming Fiscal Crisis

“Nobody wants much to think about it yet, but it’s well understood by everyone in Washington and on Wall Street, that a potentially massive fiscal problem is looming for the economy next year.

The issue is divided into three parts:

  • Sometime in late 2012 or early 2013, Congress will have to approve another debt ceiling hike.
  • At the same time, all of the Bush tax cuts are set to expire — not just the tax cuts for the rich.
  • Thanks to the last debt ceiling deal, some big time spending cuts are due to go into effect starting in 2013. In theory, these could be reversed by Congress, but in the context of everything else it will be challenging.

Trying to figure out how it will shake down is especially difficult since it’s an election year.

But in the worst case scenario we could have bracing austerity (tax hikes and spending cuts) coupled with another heart-stopping debt ceiling fight. Or we could have some kind of reversal of the spending cuts and a debt ceiling fight, and perhaps another downgrade from ratings agencies, another potential confidence blast.

Just in terms of the drag on growth, recent analysis by Barclays (according to BW) puts the hit at around 3% of GDP.

Furthermore, whereas in the last debt ceiling fight, Obama was eager to ensure that there would be no cuts in 2012 (an election year), it’s not clear that he’d make the same bet this time, as a lame duck (if he wins, or even just in the lame duck session), as he’s apparently open to the idea of seeing all the Bush tax cuts expire on everyone.

All this was already known.

You’ll probably feel even worse about things after you read the latest cover story by Matt Bai in The New York Times Magazine on the failure of Obama and Boehner to strike a “Grand Bargain” in the summer of 2010.

It’s a very long, and detailed story, but one key point is that yes, Obama and Boehner, for whatever reason, did think they could work with each other, and were tantalizingly close at times to a real deal. Obama was willing to concede on spending and entitlements, and Boehner was actually willing to concede on raising revenue, a decision that could prompt a revolt within a GOP that had just been swept to power with the exact opposite mandate.

What’s also clear is that all the cliches about Boehner not really being in command of his ship, and Eric Cantor wanting to undermine him seem to be true….”

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Get Ready: Taxpayers May Have to Finance Another Round for FHA

“The Federal Housing Administration won’t be able to earn its way to financial health this year, increasing the chance it will need a taxpayer bailout, based on an updated forecast from Moody’s Analytics, which provides the agency’s housing-market analysis.

The U.S. government mortgage-insurer, which guarantees $1.1 trillion in home loans, had been counting on “robust growth” in home prices to help rebuild its insurance fund after paying out $37 billion to cover defaults the past three years, according to its annual report to Congress, filed in November.

It won’t get that growth until 2014, according to the latest outlook from Moody’s Analytics. One measure of the market, the S&P Case-Shiller Home Price Index, will decline 2 percent in fiscal 2012, said Celia Chen, a Moody’s Analytics housing economist who updated her estimate after providing the housing-market forecast for the FHA’s annual actuarial report. Moody’s Analytics hasn’t taken a position on the FHA’s future solvency, said Mark Zandi, the company’s chief economist, in an e-mail.

“The FHA’s economic projections are surreal,” said Andrew Caplin, a New York University economics professor who has testified to Congress on the agency’s finances. “They must believe there will be very few readers in Congress able to critically review such a complex report.”

Actuaries’ Projections

In their annual review, the FHA’s actuaries — risk analysts who specialize in insurance — used earlier projections that called for increases of 1.2 percent in 2012 and 3.8 percent in 2013. The agency, which backs mortgages that cover as much as 96.5 percent of a home’s value, is sensitive to changes in home prices. While the insurance fund’s 2012 outlook called for net growth of about $9 billion, that will drop if home prices decline, according to the FHA’s November report.

By law, the fund is supposed to hold 2 percent of its portfolio in reserve; as of Sept. 30, it held only 0.24 percent, or $2.6 billion, according to the report….”

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